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FSC cautions on `illegal creditors'

Inundated by alluring advertisement slogans like "Earning NT$20,000 a month can get you a NT$2.5 million loan" or "NT$3 million liabilities become zero in 24 hours," few debt-ridden people would find it easy to resist these offers provided by private credit brokers.

But despite their names involving "bank," "international" or "marketing company," most are free from existing regulations and therefore free to do their best to reap profits from the lucrative consumer financial market.

In the middle of March, the non-profit Consumers' Foundation (消基會) held a press conference to raise public awareness about such brokers, following a series of reports about excessive borrowing and increased personal debts, as well as concerns over some brokers resorting to violence when collecting debts.

Representatives of the consumer advocacy group called on financial authorities to supervise the fast-growing profession of credit brokers and loan sharks.

Confusing

In particular, the foundation said these private companies either apply the word "bank" on company logos to confuse consumers, or launch massive ads via handouts, e-mails or advertisements with celebrity endorsements to trumpet their ability to help borrowers secure bank loans at lower interest rates.

Well-known examples are some credit brokers who even adopt names such as OK Bank (忠訓國際) and K-Bank (長昇國際), for instance, the foundation said.

Still, disputes abound. Victims have complained to the foundation that they were either charged exorbitant handling fees, had their personal confidential information leaked through these brokers, or for other loans without their knowledge.

Some victims said they even faced lawsuits as brokers forged required documents to help these people secure loans, according to the foundation chairman Jason Lee (李鳳翱).

"They are like lean cows being skinned several times," Lee said.

Misleading

Responding to the foundation's call, the Cabinet-level Financial Supervisory Commission (FSC) ruled on March 23 that banks should not authorize or work with private brokers that advertise under names similar to financial institutions.

"These brokers mislead consumers into believing that they are [genuine] financial establishments or having secured contract relations with banks?severely harming consumer rights and interests," the Cabinet-level commission said in a statement issued at the time.

Gary Tseng (曾國烈), director general of the FSC's Bureau of Monetary Affairs, advised banks to sign contracts with trustworthy credit brokers to protect their own reputation.

The Bankers Association of the ROC (銀行公會) will publish on its Web site a detailed list of the brokers legally commissioned by banks, Tseng said, urging consumers to carefully choose the companies they hand over their information to.

However, this means that the government will only oversee the brokers entrusted by banks, while the remaining majority could go unsupervised as authorities pass the buck.

Consumer advocates remain unsatisfied.

Lee said Acts 33 to 37 of the Consumer Protection Law (消保法) endow local governments with administrative supervision rights to govern any business whose products or services are suspected of harming consumers' life, body, health or property.

Lu Hsin-chang (盧信昌), professor of international business at National Taiwan University, pointed his finger at profit-oriented banking institutions, noting that they should take responsibility for this social problem while pursuing economic efficiency.

"To drive up profits, banks contract out a great quantity of retail financial business to extend tentacles to as many consumers as possible," which fosters proliferation of legal or illegal credit intermediators, Lu said.

Banks are guilty of covering up underground trading if they fail to understand the backgrounds of the brokers they deal with, Lu added.

Some argue that the emergence of private credit brokers is just a natural outcome of market demand versus supply. But both Lee and Lu believe that easy access to cash-advance cards and credit cards also plays a role in the rampant development of private credit brokers.

According to the commission's statistics, as of the end of February, cash cardholders have borrowed over NT$253 billion while credit card users have over NT$468 billion in revolving credit.

In a nation of 23 million people, 44.6 million credit cards and 6.1 million cash cards were in circulation by February.

Chaotic

To rectify the chaotic phenomenon, the Consumers' Foundation is urging the commission to help draft legislation that would more closely regulate the authorization of bank loan applications (委託申請金融機構貸款定型化契約範本).

Additional regulations should be mapped out to ensure that bank-commissioned credit brokers are not allowed to exaggerate their loan-securing ability, make them clearly state loan items and pricing policies, and keep clients' personal information confidential.

"Banks have established standardized scoring systems to decide what interest rates are applied to consumers. Don't foolishly fall for exaggerated advertising," Tseng said.
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