x Abu Dhabi, UAEWednesday 26 July 2017

A hard lesson on perils of spending beyond means

Yuan Yizhong, who is retired, cut up his son's seven credit cards after he discovered that the 29-year-old had run up thousands of yuan in debt he could never afford to pay.

Yuan Yizhong, who is retired, cut up his son's seven credit cards after he discovered that the 29-year-old had run up thousands of yuan in debt he could never afford to pay. "My son got his first credit card when he had a job. But later on he was unemployed," said Mr Yuan, who lives in Beijing.

"However, he continued to apply for credit cards and overdraft credit cards on purpose, since he felt money was come by so easily." Mr Yuan put his life savings towards paying his son's credit card debts and made only a dent in the total - 260,000 yuan (Dh139,800). His son has not yet managed to pay off even half the total sum, while Mr Yuan has taken on extra work as a taxi driver to try to pay what he owes.

The case of the Yuan family is not unusual and is one of the reasons that there are growing calls for greater regulation of the credit card business in China. Many Chinese people have no experience of credit cards and lose control of themselves when presented with what looks like free money. The amount of credit card debt that was more than six months overdue rose 131 per cent in the second quarter of this year to 5.77 billion yuan, the People's Bank of China reported.

That amounts to 3.1 per cent of the total outstanding credit card debt at the end of June. The country's banking watchdog, the China Banking Regulatory Commission (CBRC), told banks in July not to offer gifts to new credit card holders, to cease issuing cards to applicants under 18, and to stop setting quotas for their sales staff. And the regulator told the banks to more carefully appraise applicants' creditworthiness before issuing cards. Mr Yuan is strongly critical of his son's behaviour, but he also thinks the banks should bear some of the blame.

"It is true that my son is not good," he said. "He let me down. He spent money wastefully. If he had a job, applied for credit card and had the ability to pay back, that's fine. "But banks still gave him cards when he was unemployed. "And even though he owed money to Bank A, Bank B still approved his application and let him draw too much money on his account." Mr Yuan said he made numerous appeals to the banks to stop issuing credit cards to his son, but to no avail.

"I was not familiar with the credit card system. When I received calls from banks, they told me if I didn't pay back my son's loan, they would sue my son," he said. "I got scared. I had no way out. So far, I have paid back about 90,000 yuan. "In my house, we have got nothing valuable left." He said he planned to complain to the CBRC and the police about what he described as threats from the banks.

"Banks just want to earn money through interest on loans and procedure fees," he said. "They are just after money. They don't have any sense of social responsibility." @Email:business@thenational.ae