New Rule on Credit-Card Defaults Unveiled

(Beijing) - A rise in credit card default rates has prompted prosecutors and law-enforcers to issue new regulations on minimum amounts for filing criminal charges. On May 18, the Supreme People's Procuratorate and the Ministry of Public Security set the minimum amount a borrower defaults on bad faith for a criminal case at 10,000 yuan, filling a vacuum in laws related to credit card default.

The new rule states that a borrower can be charged or investigated if he or she borrows with intention to possess the money illegally and fails to pay the loan within three months, after two notifications from the bank. If the balance of the credit card is below 100,000 yuan and the borrower pays back the principal and interest during a certain time, the borrower can be exempt from criminal charges.

At the end of March, the money related to credit card defaults reached 8.8 billion yuan, up by 1.1 billion yuan or 14.4 percent from the fourth quarter of 2009, according to a report released by the People's Bank of China, the central bank, on May 19.

However, some analysts are not optimistic about the enforcement of the regulation. Dong Zeng, a credit card marketing consultant, said credit card defaults are hard to trace. "It can be difficult to locate the borrowers as their applications are often false," he added.