From Chinese Press

Banks create credit-card chaos

(China Daily)
Updated: 2010-07-14 07:55

The credit-card boom has lured Chinese people into over-spending. The failure to repay the amount they overdraw is primarily the result of banks' poor supervision, says an article in Beijing Times. Excerpts:

Debts of overdrawing credit-card holders have risen sharply recently. The Dongcheng district court in Beijing alone has heard 792 cases of credit-card dispute of just one bank in a year. The court has opined that debt collection should be regulated and supervised properly.

The rising number of overdrafts poses immediate risk to banks. The loss of profit and increase in bad debts are like time bombs for the financial system. They threaten banks' stability and compel them to hire debt-collection agencies that use "soft violence" to force defaulters into paying their debts. Since credit-card holders are victims of "soft violence", they usually find it difficult to provide evidence in court to protect their legal rights.

Banks need to raise their criteria of offering credit cards to people and plug the loopholes in their supervisory system. It would save huge amounts of money for both parties if banks determine how much overdraft they would allow a particular credit-card holder.

(China Daily 07/14/2010 page9)