Essentially Tightening Consumer Credit

Consumer credit operations have developed very strongly in Vietnam. Compared with borrowing documents filed to commercial banks, consumer credit providers do not require strict proofs of financial health, consumer demand substantiation or other related procedures. The time of disbursement is also shorter than banks. In many cases, disbursement is carried out immediately after the credit contract is signed. These pluses of consumer credit companies encourage many people to use consumer credit services, thus making consumer lending a fast-growing lucrative sector.

 

Nonetheless, many acts of annoying infringements of consumer rights and interests have been found. The Consumer Protection Committee under the Vietnam Competition Authority (VCA), the Ministry of Industry and Trade recently received a lot of complaints about consumer credit services from consumers.

 

Speaking at the Workshop on "Consumer rights protection in consumer credit field” held in Hanoi on July 13, 2016, Mr Trinh Anh Tuan, Deputy General Director of the Vietnam Competition Authority (VCA), said, complaints about consumer credit account for over 80 per cent of complaints of the financial and banking sectors.

 

Mr Ho Tung Bach, specialist at the Consumer Rights Protection Committee, said that 16 finance companies are providing consumer lending services in Vietnam. In 2014, the sector growth reached 18 per cent and consumer lending amounted to US$10.4 billion, or 6.6 per cent of GDP. According to surveys, interest rate is exorbitant, ranging from 60 per cent to 70 per cent, or even higher, per annum.

 

Ms Pham Que Anh, a specialist at the German International Cooperation Agency (GIZ), said that “The underlying cause of global financial crisis in 2008 and the housing bubble burst in the United States was partly resulted from abnormally overheating consumer credit growth. 50 per cent of complaints in the financial sector belong to this segment. Therefore, tightening control of consumer lending in Vietnam is essential.”

 

Ms Dinh Thi Thanh Nhan, Faculty of Economics and Law, University of Commerce in Hanoi, said that the above cases are quite popular but we lack solutions to deal with and prevent. Currently, the law does not have specific regulations on consumer loans and all issues related to consumer loans are governed by general provisions of the Law on Credit Institutions.

 

Meanwhile, provisions relating to limit, value and procedures are too backward for current consumer loans. “In 2014, the State Bank of Vietnam drafted the circular on consumer lending in financial companies. However, this ruling has not yet been adopted," she said.

 

Many cases of consumer lending in Vietnam are seriously infringing on consumer rights and interests. Most acts of infringements on consumer rights and interests relate to inaccurate and insufficient information provision, unclear purpose of information collection, harassment and use of threat in debt recovery, said Pham Que Anh.

 

According to experts, the legal system on consumer credit always has loopholes for companies to employ no matter how perfect it has made and hardly protects consumers absolutely. Hence, the most important is consumers have to be aware of their rights and interests and act as intelligent consumers.