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Monday, 21 September 2009
Court may ban debtors from splashing out on luxury items
The mainland’s top court is considering new measures to force debtors to meet their financial obligations, including banning them from air travel, luxury hotels and sending their children to private schools.
Court may ban debtors from splashing out on luxury items
Mimi Lau in Beijing 19 September 2009
The mainland’s top court is considering new measures to force debtors to meet their financial obligations, including banning them from air travel, luxury hotels and sending their children to private schools.
The Supreme People’s Court was drafting a legal document to limit debtors in nine areas of luxury spending in an effort to stem the rampant practice of dodging court-ordered payments, state media reported.
In 2005, the top court forbade debtors from buying property, travelling overseas or setting up companies. The latest regulation, if finalised, would increase pressure on debtors.
Yu Lingyu, head of the court’s Enforcement Office, was quoted as saying the move would further limit debtors’ freedom to use their assets. He admitted that it was currently difficult to recover court-ordered payments.
Citing the preliminary draft, Xinhua reported that debtors who failed to meet payments would also be barred from travelling first-class on trains, visiting high-end entertainment facilities and renting top-grade offices. Yu said the feasibility of the rule would be the subject of further discussions because of differing views over the definition of luxury spending.
Professor Xiao Jianguo of Renmin University’s school of law said there were about 2.2 million cases of court-ordered payments each year, with judicial authorities required to intervene in about half of them.
He estimated about 30 per cent of debtors were genuinely poor. “They are mostly peasants or truck drivers involved in money disputes or traffic accidents. These people really lack the ability to pay.”
The remaining 70 per cent had assets but refused to pay up.
“They would much rather channel their assets away or spend every dime they have on luxury items rather than meeting their financial obligations,” Xiao said.
“It’s very messy because society is filled with an atmosphere of debt-dodging. Ways of avoiding debt repayment have become a skill or an experience that is shared around.”
He added that the lack of regulations to enable efficient debt collecting made avoidance very easy. Similar regulations targeting luxury spending had been tried in Shenzhen and Guangdong’s Panyu district, but proved ineffective, he said.
However, he said the regulation coming from the top court would send a strong message that debts had to be repaid, and would improve the efficiency of debt collection.
He said the new regulation might go against a person’s freedom to consume, as guaranteed by the constitution, but only on a limited scale.
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Court may ban debtors from splashing out on luxury items
Mimi Lau in Beijing
19 September 2009
The mainland’s top court is considering new measures to force debtors to meet their financial obligations, including banning them from air travel, luxury hotels and sending their children to private schools.
The Supreme People’s Court was drafting a legal document to limit debtors in nine areas of luxury spending in an effort to stem the rampant practice of dodging court-ordered payments, state media reported.
In 2005, the top court forbade debtors from buying property, travelling overseas or setting up companies. The latest regulation, if finalised, would increase pressure on debtors.
Yu Lingyu, head of the court’s Enforcement Office, was quoted as saying the move would further limit debtors’ freedom to use their assets. He admitted that it was currently difficult to recover court-ordered payments.
Citing the preliminary draft, Xinhua reported that debtors who failed to meet payments would also be barred from travelling first-class on trains, visiting high-end entertainment facilities and renting top-grade offices. Yu said the feasibility of the rule would be the subject of further discussions because of differing views over the definition of luxury spending.
Professor Xiao Jianguo of Renmin University’s school of law said there were about 2.2 million cases of court-ordered payments each year, with judicial authorities required to intervene in about half of them.
He estimated about 30 per cent of debtors were genuinely poor. “They are mostly peasants or truck drivers involved in money disputes or traffic accidents. These people really lack the ability to pay.”
The remaining 70 per cent had assets but refused to pay up.
“They would much rather channel their assets away or spend every dime they have on luxury items rather than meeting their financial obligations,” Xiao said.
“It’s very messy because society is filled with an atmosphere of debt-dodging. Ways of avoiding debt repayment have become a skill or an experience that is shared around.”
He added that the lack of regulations to enable efficient debt collecting made avoidance very easy. Similar regulations targeting luxury spending had been tried in Shenzhen and Guangdong’s Panyu district, but proved ineffective, he said.
However, he said the regulation coming from the top court would send a strong message that debts had to be repaid, and would improve the efficiency of debt collection.
He said the new regulation might go against a person’s freedom to consume, as guaranteed by the constitution, but only on a limited scale.
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