Competition authority warns of online loan scams

15:45 | 10/12/2019

The Ministry of Industry and Trade’s Vietnam Competition Authority (VCA) has warned local consumers to be cautious about taking out online loans amid rampant scams.

competition authority warns of online loan scams
Consumers should know the interest rates and fees of online loans, which tend to be high, and store relevant information, to be used as evidence in case of disputes. - Photo vietnammoi.vn

According to VCA, online loans are available in Viet Nam, but the legal framework for this kind of lending hasn’t been issued yet. As a result, this model puts borrowers at risk.

VCA said it has received multiple complaints about these scams, advising that when taking out online loans, consumers should choose service providers that have published their business information, including their names, business codes, addresses and telephone numbers, on their websites or apps.

In addition, their websites or apps must feature information on transactions, including information security policies, sample contracts, fees and the roles of parties.

Lenders whose websites or apps do not include this information may be involved in fraud.

According to VCA, legitimate lenders send loan agreements to borrowers for reference before entering into transactions.

After signing a loan agreement, if the lender does not send a copy of the agreement or instruct the borrower to download it, the borrower should immediately ask them to do so.

Consumers should know the interest rates and fees of these loans, which tend to be high, and store relevant information, to be used as evidence in case of disputes.

Borrowers should lodge complaints with lenders in writing, instead of by telephone, to keep a record of the lender’s commitments made while handling the dispute.

In a move to prevent loan scams, the Government is scrutinising to issue a decision to allow a pilot implementation of peer-to-peer (P2P) lending in the country before officially developing laws for the new lending model.

According to the SBV, the fourth industrial revolution has promoted the development of many new products and services, including P2P lending, which is designed and developed on the basis of digital technology to directly connect borrowers with lenders without going through financial intermediaries such as credit institutions or foreign bank branches.

According to Pham Chi Quang, Deputy Director of the State Bank of Vietnam (SBV)’s Monetary Policy Department, if P2P lending is well managed, it would facilitate inclusive finance, especially in remote areas where the banking sector remains underdeveloped. The lending will also help customers, especially household businesses and small- and medium-sized enterprises access banking and finance services at low costs.

The development of P2P lending will also create a new capital supply channel. Research conducted by Transparency Market Research showed that P2P lending would surge by 48.2 per cent annually in the 2016-24 period, while Morgan Stanley forecast the business model would reach a growth rate of 53.5 per cent globally by 2020.

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