Billboards flash names of deadbeat debtors to shame them

Above throngs of busy commuters at a Shanghai railway station, four large billboards — some sandwiched between the screens flashing train schedules — spotlighted the name of the head of a midsize industrial products maker.

But he was not promoting his company or its goods.

The Shanghai Railway Transportation Court put his name in lights earlier this month because his company failed to pay a 2.9 million yuan ($433,000) debt. A separate court in Zhejiang province issued an order freezing his company’s assets two years ago for money owed to China Construction Bank.

As growth slows, struggling borrowers are finding it harder to repay their loans, pushing the bad debt of China’s banks to above $299 billion by the end of May, although analysts say the actual level is much higher.

To fight this rising tide, Chinese courts have ramped up their use of shame tactics, underlining the failure of other methods of making debtors pay.

Zhou Qiang, president of the Supreme People’s Court, China’s highest court, declared in March that debt avoidance was a major problem. He said the court would give those who tried to avoid judgments against them“nowhere to hide ”, according to a newspaper published by the court.

It would do so by collecting information on absconding debt ors, holding news conferences to gain publicity, and restrictingaccess to credit, among other methods, Zhou said.

For 10 days ending on Friday, the names, ID numbers, addresses, case numbers and amounts owed by 20 people, either individual debtors or the heads of companies, were flashed across screens at the two main Shanghai railway stations at 10 minute intervals. In some cases there were also photos of the miscreants.

The debtors displayed on the board sometimes owe modest amounts, with one shamed for failing to pay just 1,984 yuan .“It is an important initiative to deter dishonest debtors,” the Shanghai Railway Transportation Court said in a news release.

Some of the people featured have changed their phone numbers and addresses and disappeared, according to the release, which added that the public can call in with clues to help authorities track down runaway debtors.

Normal methods of enforcement in China, including the freezing and forced sale of assets, have not worked.

“There are too many cases, too few judges, and each judge has to handle lots of cases in a year,” said Wu Zhendong, a financial services lawyer from King & Wood Mallesons.

A decree issued by the State Administration for Industry and Commerce at the end of last year set out the circumstances under which a company can be publicly shamed.

The decree expands upon 2013 Chinese Supreme Court rules that say dishonest debtors’ details can be published in newspapers or on the radio, television and internet.

While courts outside China’s financial hub have adopted this tactic before, the judiciary in Shanghai just began shaming with gusto this year.

It doesn’t always resonate with the public, however.

In May, Shanghai Putuo People’s Court plastered the details of 76 debtors on electronic billboards on the outside of five popular shopping malls, said a spokesman at the court. However, it received no public response, such as tips about the whereabouts of the debtors, he said.

Neither Shanghai court offered a reward for information on a missing debtor.

More than 3.4 million deadbeat debtors have had their information released to the public, according to the Supreme People’s Court’s newspaper. Ten percent of those who were shamed “satisfied their obligations”, it said.