In China, an industry of scammers has defrauded banks by purposely defaulting on fraudulently obtained bank loans and pocketing the money among themselves, according to involved parties who have spoken to The Epoch Times under pseudonyms.
The scam involves bank personnel colluding with intermediaries and a “debt carrier.”
The “debt carriers” are individuals who knowingly take out loans they cannot repay due to financial circumstances. They must work with an intermediary who has a direct connection to bank employees and whose role is to fabricate personal and financial information so that they can meet the criteria for large loans.
Once the loans are approved and deposited, the funds are split, leaving the debt carriers with substantial debts ranging from millions to tens of millions of yuan. Unable to repay, they end up on the bank’s blacklist as delinquent debtors, a consequence most of these willful defaulters don’t care about.
Debt Carriers
39-year-old Zhao Fei (pseudonym) told The Epoch Times Chinese-language edition on April 22 that the three-year pandemic combined with China’s economic downturn had led to many shop closures and poor business prospects, resulting in fewer job opportunities. As an ordinary citizen with no special skills, he had hoped to open a small shop with his wife to support his family but lacked the funds. Attracted by numerous online advertisements from the middlemen, he decided to risk becoming a “debt carrier.”
In July last year, Mr. Zhao found an intermediary who designed a 4 million yuan (about $553,000) corporate loan for him. The whole process was complicated.
Because Mr. Zhao had bad credit, the intermediary helped him create a set of fake documents and even had him spend over 100,000 yuan (about $13,814) to buy a set of corporate qualifications. Since the scrutiny in Jiangsu Province was stringent at the time, the intermediary had him relocate to Chengdu, Sichuan Province, where he applied for a loan from the Agricultural Bank of China.
During the process, Mr. Zhao’s living expenses in Chengdu were all covered by the intermediary.
Six months later, the bank deposited the 4 million yuan (about $553,000) loan into his account. After Mr. Zhao withdrew cash in installments, he himself kept 1.6 million yuan (about $221,028), while the rest was taken by the intermediary.
His two friends, who undertook similar schemes to defraud banks with corporate loans, managed to secure 1.8 million yuan (about $248,660) and 1.2 million yuan (about $165,771), respectively.
During the process, Mr. Zhao said he learned that the intermediaries in the industry had close ties with the banks, and they would coordinate and advise intermediaries on how to apply to ensure approval.
The middleman told Mr. Zhao that it has become a generally accepted practice for bank employees to take the greatest risks and, therefore, receive the greatest share of the profits from the scam. And bank insiders would never meet with loan applicants as it was too risky.
“The bank insiders said that if you use corporate loans, those with good qualifications can borrow up to 5 million yuan, while those with lesser qualifications can get one million to two million yuan,” Mr. Zhao claimed.
According to the bank’s instructions to the intermediary, Mr. Zhao was tasked to initially make a few hundred yuan in monthly repayments, then declare bankruptcy due to poor health and mismanagement after a year to stop repayments. “People in the bank said that no matter how much you pay back, if you start paying back a little every month, the bank can suppress the matter, and it will become nothing over time.”
Today, Mr. Zhao and his wife have opened a shop, earning over 10,000 yuan (about $1,381) a month.
He discourages young people from following this path and advises, “If you can make a decent living by any other means, then live properly. If you really consider becoming a debt carrier, think it over because you will be blacklisted.”
Another debt carrier, 31-year-old Chen Li (pseudonym), was unemployed when he decided to partake in the defaulting scam in late 2023 through an intermediary in Xuzhou, Jiangsu.
On April 22, he told the Chinese-language edition of The Epoch Times that initially, the intermediary agents helped him create a complete set of fake documents and proof of identity, meeting the loan eligibility criteria and securing a car loan of 300,000 yuan ($41,443).
Months later, when the bank released the funds to his account, the intermediary agents instructed Mr. Chen to withdraw the cash and give it to them for distribution. Believing their words, Mr. Chen did so, only for the intermediary to disappear with the 300,000 yuan, leaving him with the debt.
After realizing he had been scammed, Mr. Chen immediately reported the incident to the police, but months have passed with no resolution.
Mr. Chen explained his motives for becoming a willful defaulter: “Ordinary people can’t earn one or two million yuan in a lifetime from regular jobs. Becoming a defaulter doesn’t lead to jail. It’s the banks that are left with the problems.”
Intermediaries and Bank Employees’ Involvement
The Chinese-language edition of The Epoch Times spoke to a couple of intermediaries in China.Wang Jun (pseudonym), a resident of Heilongjiang Province, claims to be a specialist who maintains direct contact with banks and prepares paperwork for debt carriers to appear as credible borrowers to banks.
According to Mr. Wang, the industry of “debt carriers” has been around for seven to eight years but has really taken off in the last year or two.
“Because of three years of pandemic-related restrictions, businesses have struggled, and many people have gone bankrupt. Now that the economy is also in bad shape, many people are considering becoming debt carriers,” he explained.
Li Qi (pseudonym), a Wuhan-based intermediary specializing in fraudulent paperwork for borrowers as brick-and-mortar stores to secure bank loans, said that the industry has seen high demand recently.
“As soon as we post advertisements, a large number of people inquire about it,” he said.
Zheng Xiang (pseudonym), a lawyer in China, told The Epoch Times’ Chinese language edition on April 23 that he knew of many such cases.
“In previous years, when the economy was good, many ordinary people took on significant debts to buy houses or start businesses and had to work hard to repay them. Now, with the economy in a slump and businesses not making profits, it’s impossible to make money and sustain operations, so people are turning to this method. Being a debt carrier means you can default without worrying about the consequences,” Mr. Zheng said.
“In rural and lower social classes, there are many people with no loans to their name and good credit records, a favorable condition for them to present themselves as qualified borrowers, so this market is thriving,” he added.
Today, professional debt carriers, intermediaries, and banks have formed a profit chain. Mr. Wang is aware that bank insiders play a crucial role in these operations.
He claims that the industry exploits banking loopholes to secure client loans, with debt carriers and intermediaries focusing on “free money” from the bank, while bank employees are motivated by performance metrics.
Scammers Arrested
The Chinese police have already dealt with a number of cases of willful non-payment of debts involving bank employees’ collusion.On Jan. 26, the Ningbo Xiangshan Rural Credit Cooperative in Zhejiang Province experienced a collective downfall, from the chairman of the cooperative to managers of various business departments and then to ordinary employees, when 11 employees were found to have been involved in illegally granting and defrauding loans totaling 425 million yuan (about $58.65 million).
The court found that, in some cases, borrowers applied for loans using false loan documents. In other cases, the business unit’s general manager and two other employees approved loans even when applicants did not meet the criteria and successfully secured loans for them.
Between 2014 and 2017, these three individuals were involved in approximately 60 illegal loan issuances totaling 425 million yuan (about $58.7 million), causing economic losses of 294.8 million yuan (about $40.68 million ).
In December 2023, Shanghai police uncovered a mortgage fraud case involving 60 million yuan (about 8.3 million), orchestrated by debt carriers, real estate agents, loan agents, and bank staff, leading to the arrest of 34 suspects.
Current affairs commentator Li Linyi told The Epoch Times on April 23 that he believes the significant emergence of “debt carriers” will accelerate financial instability, exacerbating the already severe issue of bad debts within Chinese banks.
