Students unable to repay debts fear for their limbs
Binh left his home in a nearby province and came to Ho Chi Minh City with dreams of a degree.
Struggling with the high costs of living in the city, he failed to pay his university fees in October and ended up borrowing VND5 million (US$256) from a friend.
When the friend asked him to return the money, Binh reluctantly went to one of the many loan sharks that lend money to cash-strapped students in the city.
"I had no choice. Banks and legal loan services won't give me loans because I have no assets [to mortgage]," he said.
At a money lender's in an alley off Tran Hung Dao Street in District 1, just steps away from the dormitories of the HCMC University of Economics and the HCMC University of Natural Sciences, Binh was "approved" for a loan at an interest rate of 21 percent per month.
To legalize the loan, Binh was made to sign a document saying he received the money as a deposit for a laptop he would deliver later.
Before he left, the lender warned the student with dire consequences if he failed to pay his debts. "They threatened to contact my family and cut off my limbs," he said. Thankfully, he was able to pay off his debts within ten days.
But another student, Tu, was not that lucky. He was threatened and seriously bullied all November after failing to pay interest on a loan of VND11 million ($564). Fearing for his limbs and life, Tu borrowed money from his sister to pay off the interest. But he is still mired in debt.
According to Tu, hundreds of students have borrowed money from the same lender, identified only as C.
The 47 universities in HCMC attract thousands of students every year from around the country, especially the southern provinces. Loan sharks lurk around the universities and thrive on ripping off broke students.
Students get mired in extortionate interest rates, often ending up struggling to pay off just the interest, without any hope of getting out of debt.
Following a complaint from a victim student, Thanh Nien conducted an investigation and found hundreds of students who have seen their hardships turn into horrors.
Disguised as a relative repaying a student's debt, a Thanh Nien reporter found that the loan shark popularly known as C. belongs to a ring with at least three unlicensed lenders around universities in HCMC.
He was told that he could pay the interest at any of the other "branches" in the city - at Street No. 2 near University of Technology in District 10, at D5 Street near a branch of Foreign Trade University in Binh Thanh District, and in the Thu Duc university area in Thu Duc District.
The service on D5 Street appears to be a pawn shop with a board advertising "low-interest loans with easy procedures." A man called H. directed the "customer" to a nearby service on D2 Street to discuss the loan. However, he refused to lend money when the reporter presented an invalid student card.
Another loan shark in H.'s racket said many other loan sharks in Thu Duc university area charged even higher interest rates, of VND40,000 per day on a VND1 million loan, which works out to be 120 percent per month.
H. also claimed that the ring has tight connections with government and police officials who protect the illegal services.
According to state regulations, interest rates should be no more than 150 percent of the benchmark interest rate set by the State Bank of Vietnam. At the moment, the benchmark rate is 9 percent per annum, and the maximum interest rates charged by money lenders should not exceed 13.5 percent. Violating lenders can be punished by jail terms of up to three years and fines up to ten times the involved interest amount.
Following Thanh Nien's report published Monday (December 6), the police in District 1 summoned 28-year-old Nguyen Manh Cuong, previously identified as C., for interrogation.
Cuong, who operates the money-lending service on Tran Hung Dao Street confessed he had lent money to students at a monthly interest of 21 percent. He also admitted that he had forced borrowers to sign false documents saying they received the money as a deposit for laptops.
However, he failed to say how many students had borrowed money from him. A subsequent police raid of his facility found records of 29 students who had borrowed a total of VND185 million. The police also found several leaflets introducing his services.
Police said Cuong has so far not revealed any connections with other loansharks' services in Binh Thanh District or elsewhere in the city.
A District 1 police officer said they are investigating the case and are determined to crack down on the loan sharks.
Meanwhile, several students who had borrowed money from Cuong told Thanh Nien that they received anonymous phone calls instructing them to pay their debt at a facility in Binh Thanh District.
The Binh Thanh District police told Thanh Nien they would verify the information about the loan sharks operating in their jurisdiction.