Special Notice: This article is an original article by Attorney Shao Shiwei and represents only the personal views of the author. It does not constitute legal consultation or legal advice on any specific matter. To repost the article, seek legal consultation, or engage in peer exchange, please add: sswls66.
Helping borrowers carry out "debt restructuring" and "debt optimization" and charging service fees for it, inthe perspective of loan facilitation companies and loan intermediaries, may be an entirely ordinary business.
Even if they learn through their own searches that such business carries certain risks, they often dismiss it, until one day they suddenly receive a call from the economic crime investigation police asking them to cooperate with an investigation...
So for loan facilitation companies and loan intermediaries, what legal risks might this business involve?
1
"Debt restructuring" and "debt optimization"
What kind of business is this?
For example:
Xiao Wang is a civil servant. He previously spent money on in-game purchases of equipment in online games and took out more than 30 online loans that he needed to repay, with total outstanding debt of 600,000 yuan. Xiao Wang's credit record had also been damaged, and he could no longer obtain a loan from a bank. Just as he was at his wit's end, Xiao Wang came across a post on Xiaohongshu saying that his situation could be addressed through debt optimization. So Xiao Wang sent a private message asking the other party how to proceed and added the other party on WeChat.
It turned out that the other party was a salesperson at a loan facilitation company. The other party said that they could advance funds for Xiao Wang to pay off all the online loans, and then help Xiao Wang improve his credit record. Once Xiao Wang's credit record met the bank's requirements, they would assist Xiao Wang in obtaining one or more unsecured personal loans from the bank. At that point, Xiao Wang could use the loan proceeds to repay the advanced funds to the loan facilitation company and pay the corresponding service fee.
Xiao Wang found the plan quite reasonable, as it would also give him temporary relief in front of his parents and his wife, so he agreed.
Several months later, following the loan facilitation company's guidance, Xiao Wang submitted genuine application materials and obtained a RMB 1 million loan from a bank.
To repay the loan facilitation company's advance funds and service fees, Xiao Wang contacted a POS card-swiping party (using the contact information provided by the loan facilitation company) and withdrew cash against the renovation loan he had applied for.
Through the above arrangements, the borrower Xiao Wang addressed his urgent need, and the loan facilitation company obtained corresponding service fees for providing that service. It seemed to be a rather good thing, andit also appeared compliant:
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the loan facilitation company did not, taking advantage of the information asymmetry with the borrower, help Xiao Wang find a third-party online lending platform with a higher interest rate and higher service fees, but instead found a regular bank financial institution;
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the submission of application materials to the bank was entirely handled by Xiao Wang himself, and the materials related to Xiao Wang's salary flow and housing provident fund, among others, and no false materials were provided;
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how much could be lent was also determined by the bank's own approval, and the loan facilitation company could not interfere;
However, this type of ostensibly regular business is in fact suspected ofthe crime of illegal business operations。
2
"debt restructuring" and "debt optimization" business
Why is it suspected of the crime of illegal business operations?
Let us look at a case from a Shanghai court [(2022) Hu 0106 Criminal Initial No. 9]:
Xin established a technology company and assisted clients in obtaining bank loans with high limits and low interest rates. After a client successfully obtained a loan, if the bank disbursed the funds by means of a credit loan, consumer loan, credit card or other method, Xin would provide a POS machine to fabricate transactions in order to cash out the funds for the client and would charge a corresponding handling fee. According to the audit, Xin used POS machines to process card transactions and cash out RMB 4.8 million for others.
Ultimately, the court sentenced Xin for committingthe crime of illegal business operations and imposed a fixed-term imprisonment of four years and three months.
[Analysis by Lawyer Shao Shiwei]:
In the above case, the reason Xin was convicted of the crime of illegal business operations is that using POS machines to process card transactions and cash out funds falls within the third circumstance listed in Article 225 of the Criminal Law of the People's Republic of China for the crime of illegal business operations: "illegally engaging in fund payment and settlement business."
Moreover, according to the provisions of the judicial interpretation, if the amount of card transactions isRMB 5 millionor more, this constitutesa particularly serious circumstance of the crime of illegal business operations, and a sentence of five years or more shall be imposed。
Relevant legal provisions:
Criminal Law of the People's Republic of China
Article 225 [Crime of Illegal Business Operations] Whoever, in violation of State regulations, commits any of the following illegal business acts, disrupts market order and the circumstances are serious, shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention, and shall also, or shall only, be fined not less than one time but not more than five times the illegal gains; if the circumstances are especially serious, shall be sentenced to fixed-term imprisonment of not less than five years, and shall also be fined not less than one time but not more than five times the illegal gains or have property confiscated:
1. operating, without permission, goods subject to exclusive sale or monopoly sale as prescribed by laws and administrative regulations, or other goods the trading of which is restricted;
2. buying or selling import and export licenses, certificates of origin for import and export, or other operating licenses or approval documents prescribed by laws and administrative regulations;
3. illegally operating securities, futures or insurance business without approval from the relevant competent State authorities, or illegally engaging in fund payment and settlement business;
4. other illegal business acts that seriously disrupt market order
Article 12 of the 2018 Interpretation of the Supreme People's Court and the Supreme People's Procuratorate on Several Issues Concerning the Specific Application of Law in the Handling of Criminal Cases of Impairing Credit Card Administration
Whoever, in violation of State regulations, uses point-of-sale terminal devices (POS machines) or other methods to pay cash directly to credit card holders by such means as fabricating transactions, falsely issuing prices or cash refunds, and the circumstances are serious, shall be convicted and punished for the crime of illegal business operations in accordance with Article 225 of the Criminal Law.
Where a person commits the acts in the preceding paragraph, and the amount is not less than one million yuan, or causes funds of a financial institution of not less than 200,000 yuan to be overdue and unrepaid, or causes economic losses to a financial institution of not less than 100,000 yuan, it shall be determined as "serious circumstances" as prescribed in Article 225 of the Criminal Law;
where the amount is not less than five million yuan, or causes funds of a financial institution of not less than one million yuan to be overdue and unrepaid, or causes economic losses to a financial institution of not less than 500,000 yuan, it shall be determined as "especially serious circumstances" as prescribed in Article 225 of the Criminal Law;
where a card holder, for the purpose of illegal possession, maliciously overdraws by the above means and criminal responsibility shall be pursued, it shall be convicted and punished for the crime of credit card fraud in accordance with Article 196 of the Criminal Law.
3
How extensive is the criminal liability of loan-assistance intermediaries?
Some people may say that in the above cases, it was because Xin both engaged in loan assistance and used POS machines to cash out cards for clients, and what the crime of illegal business operations regulates is the act of cashing out by card, so if one only assists borrowers in "debt restructuring" or "debt optimization,"If the borrower arranges for a third party to carry out cash withdrawal by card swiping, and this has nothing to do with the borrower, can the borrower then avoid the legal risk of the crime of illegal business operations?？
However, we must be aware that there is another concept in criminal law, namely, “aiding offender.”
In other words, in the process of the POS card-swiping party withdrawing cash by card swiping for the borrower, from a legal perspective, the extent of the aiding conduct of the loan facilitation institution determines the magnitude of the criminal liability of the loan facilitation intermediary in such cases, as well as whether it can seek a suspended sentence or even a non-prosecution decision on the ground that the circumstances are minor.
For example:
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When applying for a loan, did the intermediary give priority to applying for the borrower for types of loans that are convenient for cash withdrawal by POS card swiping, such as renovation loans? Or did it handle the loan business entirely in accordance with the borrower’s wishes and the bank’s requirements?
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After the loan funds were obtained, was it the borrower who found the third party to carry out cash withdrawal by card swiping, or was it the loan facilitation intermediary who found the third party for the client?
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Did the loan facilitation intermediary cooperate on a fixed basis with a particular POS card-swiping cash-withdrawal team and charge an introduction fee from it, or did it introduce the client free of charge?
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Were the funds obtained by the third party through cash withdrawal for the borrower transferred directly by the POS card-swiping cash-withdrawal personnel to the borrower, or did the cash-withdrawal personnel first deduct their own service fees and then transfer the funds to the loan facilitation company, which then deducted the advance funding and service fees before transferring the remainder to the borrower?
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Was the source of the borrower’s repayment of the advance funding to the loan facilitation institution the cash withdrawn by POS card swiping, or other sources of funds of the borrower?
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Lawyer’s note:
On December 24, 2024, the National Financial Regulatory Administration issued a statement saying that “recently, information about illegal loan intermediaries has appeared on social platforms under the banners of ‘debt restructuring’ and ‘debt optimization,’ inducing consumers to ‘borrow new loans to repay old ones’ or to apply for high-interest bridge advance funding. Such so-called ‘restructuring’ and ‘optimization’ not only conceal risks such as high-fee traps and personal information leakage, but may also induce people to commit crimes such as fraud and thus violate the law.”
Therefore, this type of business does indeed carry certain legal risks.
Industry participants, due to a lack of understanding of the law, may hold the following perceptions:
"Nowadays individuals can all apply for POS machines, and using POS machines to cash out is very common, so it should not involve any illegality."
"When bank staff approve loans for customers, they all know that most customers will use POS machines to swipe the money out."
Therefore, subjectively, they never regarded helping clients use POS machines to cash out via card swiping as an illegal or criminal act. However, Lawyer Shao reminds practitioners that they should still not harbor any wishful thinking.
5
In conclusion:
Through the analysis in this article, some loan intermediaries may wonder: does this mean that as long as they do not take customers to swipe POS machines to cash out, their business will not involve any legal risk?
Please stay tuned for the next installment.
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