Thai Love Affair With Credit Means Big Business For Debt Collectors

[george]

Thai love affair with credit means big business for debt collectors

BANGKOK: -- Thai debt collectors used to go about their business with an iron bar and leave their victims in need of medical care.

Now they rely on verbal rather than physical threats, and their business is booming as Thais become increasingly enamoured with credit cards.

Consumer debt, mostly through commercial banks, stood at 153.8 billion baht (4.2 billion US dollars) in the second quarter, up 7.2 percent from the first three months of the year, and part of a steady rise that has tracked the country's recovery from the 1997 financial crisis.

The number of credit cards also keeps rising, up some 14 percent from last year, while spending on plastic is also up nearly 18 percent, according to the Kasikorn Research Center, part of the KasikornBank Group.

The Bank of Thailand's deputy governor Krik Vanikkul says the debt levels don't worry authorities and that the growth rate is considered normal.

That could change if consumers stop making payments on their debt and the number of non-performing loans begins to rise.

The overeagerness of banks to extend questionable loans was a key factor in the 1997 crisis, which began in Thailand and roiled regional economies.

Structural problems within the banks have largely been cleaned up but as consumers have grown more willing to borrow, debt collectors have found themselves increasingly in demand.

In the past, Thai debt collectors were notorious for their cruelty.

Around three years ago, a woman in northeastern Thailand had her hand cut off after she failed to make good on her debts.

"We had to do whatever it took to force them to pay, otherwise our employers would not trust us," said one debt collector who used to work undergound but has since legitimized his business.

"If they can't pay, they shouldn't have borrowed," he told AFP on condition of anonymity.

Police say those tactics are no longer tolerated.

"They don't take cruel actions like that any more, it's a crime," police spokesman Ajiravid Subarnbhesaj said of the new wave of debt collectors.

The main reason is that both debtors and collectors have become more savvy about the rules of the game, said Piya Pong-a-cha, director for debt management services at JMT Network Services which runs Thailand's first nationwide collection system.

"We can't play the 'bad guy' role any more," he said.

In the past, just the threat of legal action was enough to scare debtors into paying up, he said.

Now debtors are more aware of their rights under the law and are quick to turn to the Office of the Consumer Protection Board if they feel they have been wronged.

Piya said the most effective way to collect on debts was by offering people more options to pay down their loans through smart marketing tactics.

Despite debt collectors having largely given up the strong-arm tactics, however, they still resort to psychological pressure.

But debtors are fighting back, using websites to offer tips on how to avoid repayment and to share their experiences.

"I received 20 faxes a day for three days straight," one woman said in a posting.

Only after the company where she works threatened to sue the collection agency for harassment did the faxes stop, she said.

Other postings urge debtors to turn to the courts to arbitrate a solution.

"You could ask to pay only the principal, or half of it. If they don't take the offer, you don't have to pay," read one posting.

Some offer less practical advice, like telling debtors to find an under-the-table job so that collection agencies can't use a social security number or tax receipts to track them down.

Piya said he expected Thais to slip even further into debt in coming years thanks to fierce competition among banks and other lenders to attract new customers.

"Even if the economy slows down, I believe the amount of debt will still grow," he said.

For his company, that means bigger business.

JMT Network collected on 2.4 billion baht in bad debts in 2003, and more than double that figure last year.

The firm has already collected on 10 billion baht in the first seven months of this year, he said.

--AFP 2006-10-26

[sbk]

And I can't even get my husband to get an ATM card

[Casanundra]

Now why am I not surprised by this latest news...

One of mates had a huge bust up with his Thai girlfriend because she couldn't quite understand that the credit being offered had to be paid back eventually. She honestly thought it was free and was being offered like some sort of discount or incentive to buy. Duh!

The bust up came when she refused to believe anything he said about it being paid back thinking instead that he was just being a cheap charlie and didn't want her to go shopping.

My wife keeps nagging me for a credit card and its the latest status thing for the Thai's who are not content enough with the flashy car and mobile phone hanging off their ear but also to now be seen with the best credit card credit can give. As for paying it back, it doesn't even enter their poor little heads.

[Soju]

Well, my wife's not as bad as SBK's husband as she does have an ATM card. But thankfully she refuses to use a credit card and knows you can get into trouble if you use it to spend above your means. She's always after me about using my credit card too much, so I always have to assure her that I pay it off every month and only use it as a convenience as opposed to carrying cash. But lots of other Thai's I know are getting in way over their heads. This same sort of easy credit boom seems to hit all countries when they evolve from a cash society to a plastic society and the banks scramble to attract customers. I don't see that there's anything really unique to Thailand about this situation.

[GuestHouse]

The thing all foreigners married to Thais need to be very careful of is that debts by individuals do not become debts 'of families' (the expat included).

It's not a huge leap of imagination to extend 'Mamma has a hospital bill' to 'Pappa has a credit card debt.... mama is going to be thrown out of her home by the bank if she can't come up with...'.

Also, keep a very close eye on where your land deeds are kept.

If they are not in your name, they might very well wind up in the bank.

[edit]

I should add that exactly these circumstances occured to many expats at the ecconomic last turn down, I know two guys who found out their wive's families' had run up debts.

And what do you do? Like mama is in debt and you don't help out.

And one final point. Thais very often sign credit for family members who can't get credit - YOU HAVE NO IDEA HOW DANGEROUS THAT CAN BE.

We are all wise if we keep a very close eye on our Thai family's credit usage.

Edited October 26, 2006 by GuestHouse

[Soju]

Good point there, Guesthouse. Hadn't really thought along those lines but will certainly ask my wife to keep an eye out for any relatives that may be thinking of getting a credit card.

[Casanundra]

Very good point indeed.

A while back my wife mentioned doing exactly what you described above and signed as some guarantor for some Thai friend of hers who couldn't get credit and when she told me I did a back flip about it and had to tell her the risk she just took on.

Fortunately for her the friend didn't do a runner in this case but having said that the wife has been warned never to do it again and if I ever find out she has done it again without talking to me first then down the long long lonely road she will go.

[billd766]

The thing all foreigners married to Thais need to be very careful of is that debts by individuals do not become debts 'of families' (the expat included).

It's not a huge leap of imagination to extend 'Mamma has a hospital bill' to 'Pappa has a credit card debt.... mama is going to be thrown out of her home by the bank if she can't come up with...'.

Also, keep a very close eye on where your land deeds are kept.

If they are not in your name, they might very well wind up in the bank.

[edit]

I should add that exactly these circumstances occured to many expats at the ecconomic last turn down, I know two guys who found out their wive's families' had run up debts.

And what do you do? Like mama is in debt and you don't help out.

And one final point. Thais very often sign credit for family members who can't get credit - YOU HAVE NO IDEA HOW DANGEROUS THAT CAN BE.

We are all wise if we keep a very close eye on our Thai family's credit usage.

I was very lucky in that respect as my wifes brother who is a minibus owner/driver got into debt last year and we helped out with a loan (non returnable as it is family) and blow me down if he didn't do the same this year.

It got to the stage that my wife was asked if I would sign as the gurantor which we very reluctantly agreed to but fortunately the company would not accept me. We gave him more money and his 15 year old daughter gave 20k baht and he promised to turn over a new leaf. It seems that 3 months later he is still as stupid as ever and this time my wife said NO WAY.

Fortunately the deeds to our place are up here and he is down in Bangkok. Although his children and my wife's parents are more than welcome to stay he IS NOT. Not now or ever.

[nostrel]

normally in the western contries they do a credit check with specialist agencies to determine if the applicant is likely to pay back the debt . It seems this setup doesnt operate in LOS for some reason ,otherwise they would be mad to issue credit cards to people who have no intention or even any possibilty of paying back the loans .and thais are more likely to move home or vanish so is this a rush for economic growth at any cost?? Plus there still is no bankrupcy laws established after the crash of 97.

Thais live for today and dont worry about the future or saving for a rainy day.

[brazil]

and even more bad news to come .

it looks like they are thinking of upping the interest rate to be allowed on credit card repayments from a ceiling of 18% to 20%..

good news for credit card companies bad news for consumers

[1900]

and even more bad news to come .

it looks like they are thinking of upping the interest rate to be allowed on credit card repayments from a ceiling of 18% to 20%..

good news for credit card companies bad news for consumers

I could get better rates with the Mafia. A guy on another channel once noted his wife worked for a collection agency and that 35% of the cars and 30% of the pick-ups in Thailand are repo'ed.

[fxe1200]

Talking about interest rates. Pawnshops still take way too much. The motorcycle pawnshop in Trang, Wisekul Soi 7 takes 72 per cent effective. My request to a local politician to close that shop, after handing him over the evidence, was declined a couple of days later with no further comment.

[Martin]

This is just the result of a modern way of the exploiters preying on the gullible.

A shrewd old British Prime Minister, Harold McMillan, used to call the exploiters' agents: "The banksters".

It goes like this: "Get people to want things they don't need, and tell them that it is alright to buy them with money they haven't got (which we will lend them). And then we will live comfortably on the interest that they have to pay us".

However, Thailand isn't too deeply in trouble.

It is America that is really in the deep, deep rotting manure. The banksters there, aided by a villain called Alan Greenspan, have got lots of Americans to run up huge debts on the basis of unsustainable "values" of their houses, and they are on the verge of starting to suffer.

Britain is deep in it, too. And lots of debt-loaded brits are simply taking themselves by repudiating their debts through personal bankruptcy or IVAs (Individual Voluntary Arrangements).

The 'sophisticates' scoff at the idea that being satisfied to have the security of managing on what is sufficient and not striving for excess would be more sensible. But the 'sophisticates' are just conning gullible people into becoming their debt-slaves.

Ah, well. It is their karma that they are building up.

[hardy1943]

And I can't even get my husband to get an ATM card

I know what you mean.I have over 800,000 Baht in the Thai bank

and an retirement income of over 140,000 Baht a month and I can not get one,

but my wife had one before we got married with an income of 4,000 Baht a month

and 2 children to house and feed.That really make sense.

[kmart]

Credit is so easy to get here for Thais, and seemingly few of them ever read the small print.

My ex g/f had this thing about buying things on the never-never; allied to her brother's football gambling addiction was trouble right from the start. I returned home after work one night to find the "heavy mob" of local tough guy debt collectors (one of them was an off-duty cop - go figure) outside my house shouting threats through the security screens.

That was the end of that; 40k later.

I would not have a credit card given in this country.

[scratt]

Does anyone know if it is possible to get store finance, (if you have a work permit and visa etc.), for items like HD tvs and so on?

I have the cash to buy one, but would rather put 30 - 50% down and finance the rest over 6 months or so... I just don't want a wasted trip round a load of Malls to hear 'Mai Dai' all the time...

I am wondering if anyone has any experience of this here.. Thanks.

[vanheusden]

And I can't even get my husband to get an ATM card

I know what you mean.I have over 800,000 Baht in the Thai bank

and an retirement income of over 140,000 Baht a month and I can not get one,

but my wife had one before we got married with an income of 4,000 Baht a month

and 2 children to house and feed.That really make sense.

My financial position is roughly the same as yours. I live in Thailand (retired) with my Thai wife for the last five years. We opened a JOINT bank account with the Siam Commercial Bank and we were both given ATM cards. The bank tried to foist two credit cards on us as well, but my wife declined...

I am extremely satisfied with the SCB: outstanding customer service.

[OzMan_Bkk]

The major problem is the lack of a centralised credit agency where banks can check if customers have existing cards. I know a couple of my staff have multiple cards, one having at least 4 that I know of. With a central credit agency banks can check what inquiries have been made by other banks or financial institutions. This immediately puts up a red flag in the minds of the credit provider.

Until Thailand institutes this CCA system people will continue to get into trouble. Fantastic plastic ? Not unless you always pay before the due date. Got a girlfriend/wife who doesn't understand how it works. Get her a debit card instead. No funds = no purchase. Simple solution.

[tung tsz]

Sorry to burst the bubble guys

but I was just back in UK where

Sky TV advertises loans and credit cards

every 5 mins

Apparently the personal debt balance is now

running at 3 trillionpounds

So it ain't just the Thais

tung tsz

[Phuket Stan]

And I can't even get my husband to get an ATM card

I know what you mean.I have over 800,000 Baht in the Thai bank

and an retirement income of over 140,000 Baht a month and I can not get one,

but my wife had one before we got married with an income of 4,000 Baht a month

and 2 children to house and feed.That really make sense.

Really easy to get a Thai credit card Get a relationship going with someone in the bank just like a personel banker in Europe etc Put about 200000 baht on term deposit Bank will bend over backwards to give you a credit card providing your visa is correct ie retirement or work visa

[Heng]

Sorry to burst the bubble guys

but I was just back in UK where

Sky TV advertises loans and credit cards

every 5 mins

Apparently the personal debt balance is now

running at 3 trillionpounds

So it ain't just the Thais

tung tsz

Was about to say the same. The Thais are just now getting knee and neck deep in about 1/5 of the debt instruments available to folks in the west, where the love of credit and debt seems to be the status quo. That said, like most societies, you'll see the 80/20 rule-effect here. 80% will have a tendency to spend their lives in debt (whether it's credit cards or sloooowly paying off that mortgage), while 20% are more than happy to supply the credit whilst living debt free themselves.

[Thaising]

Thai like to show-off what they have to save face, they never no the meaning of self sufficiency that put them in bad debt. Therefore financial institutions are taking full advantage by giving out credit card on those with limited pecuniary knowledge.

[lotus eater]

The thing all foreigners married to Thais need to be very careful of is that debts by individuals do not become debts 'of families' (the expat included).

It's not a huge leap of imagination to extend 'Mamma has a hospital bill' to 'Pappa has a credit card debt.... mama is going to be thrown out of her home by the bank if she can't come up with...'.

Also, keep a very close eye on where your land deeds are kept.

If they are not in your name, they might very well wind up in the bank.

[edit]

I should add that exactly these circumstances occured to many expats at the ecconomic last turn down, I know two guys who found out their wive's families' had run up debts.

And what do you do? Like mama is in debt and you don't help out.

And one final point. Thais very often sign credit for family members who can't get credit - YOU HAVE NO IDEA HOW DANGEROUS THAT CAN BE.

We are all wise if we keep a very close eye on our Thai family's credit usage.

A wise and very realistic post. I've been adamant (& I mean it) that after the current (substantial) parents' debt is paid off there will be no tolerance of further debt - by me. But putting guesthouse's post with others regarding debt collectors' methods etc I am curious as to what such methods are as applied to the local village loan sharks - non existent, similar or old fashioned brutal? I was also curious to know (being a comparative newcomer to Thaiand) what typical village loan shark interest rates are. (I was shocked to see 'loans' at 5% a month?!)

[sbk]

And I can't even get my husband to get an ATM card

I know what you mean.I have over 800,000 Baht in the Thai bank

and an retirement income of over 140,000 Baht a month and I can not get one,

but my wife had one before we got married with an income of 4,000 Baht a month

and 2 children to house and feed.That really make sense.

My financial position is roughly the same as yours. I live in Thailand (retired) with my Thai wife for the last five years. We opened a JOINT bank account with the Siam Commercial Bank and we were both given ATM cards. The bank tried to foist two credit cards on us as well, but my wife declined...

I am extremely satisfied with the SCB: outstanding customer service.

Sorry, misunderstanding here. My husband does not want to even get an ATM card, much less a credit card. He is strictly a cash man. If he doesn't have the cash, then he doesn't buy it.

[Nemo.]

Thais are just like the Chinese (escpecially Singaporeans) really. The 5 C's of life

Career

Condo

Credit Card

Car

Club membership

That is how you measure your success in life. We will soon have the "my card is platinum" "well mine is bigger than yours" syndrome

Now why am I not surprised by this latest news...

One of mates had a huge bust up with his Thai girlfriend because she couldn't quite understand that the credit being offered had to be paid back eventually. She honestly thought it was free and was being offered like some sort of discount or incentive to buy. Duh!

The bust up came when she refused to believe anything he said about it being paid back thinking instead that he was just being a cheap charlie and didn't want her to go shopping.

My wife keeps nagging me for a credit card and its the latest status thing for the Thai's who are not content enough with the flashy car and mobile phone hanging off their ear but also to now be seen with the best credit card credit can give. As for paying it back, it doesn't even enter their poor little heads.

[thaigene2]

And I can't even get my husband to get an ATM card

I know what you mean.I have over 800,000 Baht in the Thai bank

and an retirement income of over 140,000 Baht a month and I can not get one,

but my wife had one before we got married with an income of 4,000 Baht a month

and 2 children to house and feed.That really make sense.

Yes Hardy - agree. How ironic too that the banks are freezing mortgages to foreigners - or restricting guarantees to just 8 year repayments (when loan is in Thai wife's name). Gee - that guy's only been married 5 years and only earning 140,000 baht per month. A huge risk! But Khun Sompong and his wife who spends all of his 45,000 baht per month salary gets a 20 year mortgage on some garish new townhouse with only 20% down and thinks he's going to 'rent it to a farang'! Who's the greater credit risk?

Edited October 27, 2006 by thaigene2

[mitrapaap]

Now why am I not surprised by this latest news...

One of mates had a huge bust up with his Thai girlfriend because she couldn't quite understand that the credit being offered had to be paid back eventually. She honestly thought it was free and was being offered like some sort of discount or incentive to buy. Duh!

The bust up came when she refused to believe anything he said about it being paid back thinking instead that he was just being a cheap charlie and didn't want her to go shopping.

My wife keeps nagging me for a credit card and its the latest status thing for the Thai's who are not content enough with the flashy car and mobile phone hanging off their ear but also to now be seen with the best credit card credit can give. As for paying it back, it doesn't even enter their poor little heads.

Deplorable, but true. The average Thai just can't manage money. The less there is to manage, the less they are able to manage it. Today they borrow, paying back is for after-tomorrow but even tomorrow is not yet in their mind, so why worry about after-tomorrow. This is not basically wrong as it is just their way of living and mentality. The problem is that there are no or almost no laws to protect them from companies who know how to manage money and do so recklessly at what ever it might cost or whatever damage it might cause to the individual.

[FREDPAT]

Does anyone know if it is possible to get store finance, (if you have a work permit and visa etc.), for items like HD tvs and so on?

I have the cash to buy one, but would rather put 30 - 50% down and finance the rest over 6 months or so... I just don't want a wasted trip round a load of Malls to hear 'Mai Dai' all the time...

I am wondering if anyone has any experience of this here.. Thanks.

I was able to buy my car with financing......put THB140,000 down, with payments of 17,000/month for 36 months. Excellent way to establish a credit rating.

[FREDPAT]

The thing all foreigners married to Thais need to be very careful of is that debts by individuals do not become debts 'of families' (the expat included).

It's not a huge leap of imagination to extend 'Mamma has a hospital bill' to 'Pappa has a credit card debt.... mama is going to be thrown out of her home by the bank if she can't come up with...'.

Also, keep a very close eye on where your land deeds are kept.

If they are not in your name, they might very well wind up in the bank.

[edit]

I should add that exactly these circumstances occured to many expats at the ecconomic last turn down, I know two guys who found out their wive's families' had run up debts.

And what do you do? Like mama is in debt and you don't help out.

And one final point. Thais very often sign credit for family members who can't get credit - YOU HAVE NO IDEA HOW DANGEROUS THAT CAN BE.

We are all wise if we keep a very close eye on our Thai family's credit usage.

A wise and very realistic post. I've been adamant (& I mean it) that after the current (substantial) parents' debt is paid off there will be no tolerance of further debt - by me. But putting guesthouse's post with others regarding debt collectors' methods etc I am curious as to what such methods are as applied to the local village loan sharks - non existent, similar or old fashioned brutal? I was also curious to know (being a comparative newcomer to Thaiand) what typical village loan shark interest rates are. (I was shocked to see 'loans' at 5% a month?!)

I just paid off a THB2,000,000 loan from a "loan shark." Here's how it worked: Showed them my condo, whose relative value at the time was roughly 5,500,000. Based on that, I borrowed 2,000,000. Met at the land office where a bazillion forms were signed (a la visa renewals), my Chanote was handed over, tax was paid (about 140,000) by me, and the first two months' interest taken right off the top. Sold my condo for THB5,200,000 last month, met the sharks back at the land office, etc. End of the day, I was handed a cashier's cheque for 2,400,000, the loan sharks one for 2,280,000. Nine months total timeline from borrowing to payback, 2 months off the top plus an additional 7 months. At 2% interest/month (THB40,000), they made roughly US$7,800 in 9 months. They then asked if I'd like to go into business with them, to which I answered, "Is a frog's ass watertight?"

All above-board, very friendly, no strong-arming AND NOT ONE SINGLE PHONE CALL OR INQUIRY AS TO MY FINANCIAL STATUS OR INTENTION OR LACK THEREOF TO PAY ANYTHING BACK!

By the way, 5%/month is ILLEGAL as it is usurious (spelling???). Mine, at 24%/pa, was just under the acceptable limit. Correct me if I'm wrong, but I don't think private money-lenders can charge more than credit card companies, which is about 26%/pa, if I'm not mistaken.

Anyone need a loan????

[Martin]

I am so old that I had grandmothers who preached to us: "Neither a lender, nor a borrower, be."

They saw even buying a house on a mortgage as "Saddling yourself with a huge debt".

Wise women.

And in my youth, governments controlled the 'never-never' rigorously. We had to save up about 40% for down-payment before we could get furniture etc.

They were right. We need protecting from ourselves.

It is going to be interesting in a few years, when all the "Westernised countries" debt ends up owned by the few oil-exporting countries of the Middle East and Russia etc.

The West shouldn't expect much mercy. There are a lot of old sores that are most unlikely to be forgotten.

This year, I shall watch the Thai government's actions on personal debt.

The coup appears to have been backed by the most conservative political elements.

It will be interesting to see if the concept of "be satisfied with sufficiency" is put into practice, or is just lip-service whilst the rich are still enabled to find it easy to exploit the poor.