Chinese courts use technology to tighten noose on debt defaulters

Chinese courts have started using technology to punish those who avoid repaying their debts, while plans are underway to build a nationwide social credit system.

Hong Meidi recently received an early morning call from a debtor surnamed Jiang.

"He told me he has paid his medical bill and asked to be removed from the blacklist as soon as possible," said Hong from the People's Court of Songyang County, east China's Zhejiang Province.

The blacklist Hong referred to is a list of debtors the court has passed on to Sesame Credit, a credit-scoring system by Alibaba subsidiary Ant Financial. It rates its users' credit based on data such as their online purchase history and investment.

In 2003, Jiang received treatment at traditional Chinese medicine hospital in Songyang. The hospital later sued him for failing to pay a 2,951 yuan (around $444) medical bill.

Normal methods of enforcement for cases such as this would include the freezing and forced sale of assets, but Jiang had left Songyang and there were no assets that could be sold. The court order had been left unfulfilled for a decade.

After Jiang's name was listed on the blacklist his Sesame Credit score dropped dramatically, which encouraged him to repay the debt. A lower credit score can harm one's ability to obtain travel visas and they may face upfront charges to rent a car or book a hotel.

Only 20 percent of court decisions have been implemented in recent years, affecting judicial authority and credibility.

In 2015, the Supreme People's Court began to cooperate with Sesame Credit, which will deduct credit points of those who default on court fines.

Statistics showed that Sesame Credit has helped courts punish more than 1.21 million debt defaulters and over 126,000 of them have paid their debts as of the end of July.

"We should reward those who keep their word and punish those who break their promises," said Chen Wenjin from Ant Financial.

As authorities are working to establish a reliable nationwide credit rating system, Chinese courts are also exploring new ways to punish those who do not pay their debts.

In August, the People's Court of Shunqing District in southwest China's Sichuan Province introduced a recorded message on mobile phone numbers of 20 debtors to push them to pay their fines.

When someone calls one of the debtors they first hear a recorded message telling them that the person they are calling has been put on a blacklist by Shunqing District Court for failing to repay debts and asking them to urge this person to fulfill their legal obligations.

The court said the measure is aimed at shaming debtors who disappear after being ordered to repay debts. "The debtors' relatives and friends are reminded of their lack of credibility, which puts debtors under increased pressure," said Xi Tao from Shunqing District Court.

According to the court, most of the debtors on the blacklist have deliberately hidden or transferred their assets. Some of them have even fabricated proof or refused to fulfill court rulings and threatened violence.

Shunqing is not the only place to adopt the recorded messages. Courts in provinces of Hubei, Henan and Jiangsu have recently introduced similar measures.

The People's Court of Sanmen County in Zhejiang Province has provided the messages as a option for a total of 492 debt defaulters since late June.

However, many debtors have also tried a variety of ways to avoid repayment and escape court orders.

A woman in central China's Hubei Province had plastic surgery to disguise herself after a court asked her to repay debts of over 25 million yuan. She was detained in July.

On July 16, more than 300 Chinese cities jointly released a declaration aimed at enhancing the credit system to improve credit ratings.

"China traditionally cherishes credit. We need technological support as the country works to build a nationwide social credit system," said Ma Guanghai, vice president of Shandong Federation of Social Science Circles.

Ma said that in the future, frequent debt defaulters may be rejected when trying to buy breakfast, take a bus and look for jobs.