Is only 50,000 paid back out of 120,000 debt? Exposing the gray industry of "discounted debt repayment": some merchants claim you must first default to qualify.

This article is sourced from Times Weekly, authored by Lu Yongzhi and Wang Miaomiao.

Image source: TuChong Creative

“Credit cards starting from 30,000, pay off at 30-50% discount, with a clearance certificate from the bank; online loans starting from 100,000, write-off at 1-1.5% discount, if not successful, full refund.” On the occasion of International Consumer Rights Day (March 15), Times Weekly reporters found that on secondhand trading platforms, some merchants openly advertise “debt relief” services, even诱导 consumers to deliberately default. One merchant claimed: “Only by default can it be processed.”

On February 6, the State Administration for Market Regulation, Cyberspace Administration, Ministry of Public Security, People’s Bank of China, and China Securities Regulatory Commission jointly issued a risk warning, directly addressing the rampant chaos of “illegal代理维权” (unauthorized rights protection). These criminals use slogans like “debt clearance,” “debt optimization,” and “credit whitening” to诱导 consumers委托 them for “rights protection,” but in fact set numerous traps.

Times Weekly investigation found that some merchants not only诱导负债人 (“induce debtors”) to “must default to handle,” but also set thresholds such as “vehicles worth over 300,000 not eligible.”

Wu Zewei, a special researcher at the Commercial Bank of Suzhou, told Times Weekly that these thresholds reveal the true purpose of these merchants: they are not helping genuinely distressed groups but are selecting those with moderate debt, lacking professional knowledge and resistance, as “soft targets,” exploiting their urgent desire to get rid of debt through forged documents and malicious complaints to “harvest” them. After委托, personal information faces huge risks of secondary sale and泄露, and may even be诱导 into deeper金融犯罪.

“Credit card payoff at 30-50% discount, online loan write-off at 1-1.5%, no default, no way to handle.”

“To process this, you must default. If you don’t default, they will think you have repayment ability and won’t agree to a discount.” On March 10, Times Weekly contacted a merchant on a secondhand platform as a debtor, who straightforwardly presented the core logic of “must default.”

When the reporter expressed concern that defaulting would affect life, the merchant immediately proposed a full set of “托管” (escrow)方案: “Even if you default, we will handle it for you. You just need to go to work. If collection calls come, we handle them, and your contacts won’t be爆通讯录 (exposed). You’re worried about answering calls and affecting the process. We will sign a confidentiality agreement. If you want to handle it face-to-face, you can come to Chengdu.”

According to him, the processing cycle depends on the default duration: “If you haven’t defaulted yet, it takes at least three months; for overdue cases, the fastest can be done in over a month. The big five banks (Agricultural, China, Industrial, Construction, Postal) take longer, others are faster.”

More surprisingly, the merchant clearly stated client selection criteria: “Vehicles over 300,000 can’t be handled, mortgage houses are okay, but public housing funds should not exceed 50,000, and if you have a business license and are operating, you need to transfer ownership. If not, no problem.”

When asked about recent successful cases, the merchant said a client owed over 120,000 yuan, but finally paid back 54,439 yuan plus 2,000 lawyer fees, totaling 56,439 yuan. This means a debt reduction of about 55%.

Another merchant provided a more systematic approach. Their product detail page states: “Legal and compliant” debt reduction of 40%-70%, capable of handling all five major banks, with proof issued within 7-15 working days after settlement, quick if documents are complete, full refund if unsuccessful.

Image source: Screenshot from a secondhand platform

This merchant explained the “business rules” in detail: “Credit cards starting from 30,000, online loans from 100,000. Credit cards can be settled at 30-50% discount with a bank clearance certificate; online loans can only be written off at 1-1.5%. Multiple credit cards totaling over 30,000 are acceptable; online debt must total at least 100,000 to proceed.”

Regarding success rate and operation principles, the merchant was confident: “Write-off success rate is 100%, discount settlement success rate around 60-70%. For credit cards, we can apply for 30-50% settlement, and after settlement, the bank issues a certificate, and the credit report shows ‘C’ (settled). For online loans, we can’t settle but can only write off or do both credit card and online loan write-offs together.”

When asked why online loans can’t be settled, the explanation was: “All online loans have fund providers, who can’t coordinate like banks. Settlement doesn’t affect credit reports; write-off just suspends repayment, which definitely impacts credit.”

Experts analyze the “discounted debt repayment” gray industry: inducing default is “drinking poison to quench thirst,” and there is no such thing as “legal and compliant.”

What is the nature of these “debt relief” services? If debtors believe诱导逾期 (“induced default”), what risks do they face?

Tian Lihui, director of the Financial Development Research Institute at Nankai University, told Times Weekly that from a bank risk control perspective, large-scale debt reduction on credit cards only occurs in the non-performing asset write-off stage after confirming the debtor has lost repayment ability and judicial collection has failed. This is an internal bank disposal, not an actively applicable policy. Merchants exploit information asymmetry between consumers and banks, packaging this rare event as a general rule.

Wu Zewei explained that “banks usually only consider large principal reductions when they are thoroughly confident the debtor has lost all repayment capacity and recovery costs far exceed the value. This is part of non-performing asset write-off, not regular negotiation.” He emphasized that the difference between credit card and online loan write-offs is that credit cards have mature transfer mechanisms, while online loans involve multiple fund providers and often insurance, making principal reduction negotiations extremely difficult. The so-called “1.5% write-off” is merely a suspension of collection, fundamentally an illegal operation under information asymmetry.

Regarding the merchant’s claim that “must default to handle,” lawyer Sun Yuhao, senior partner at Shanghai Haohua Yongtai Law Firm, said: “This behavior is not only suspected of violation but may also be illegal. Inducing debtors to deliberately default is essentially inciting malicious breach of contract, violating the basic principles of good faith under the Civil Code of the People’s Republic of China.”

He further explained that if debtors follow such诱导, they will face credit record damage. According to the “Credit Reporting Industry Management Regulations,” overdue information will be truthfully recorded and retained for five years, severely affecting future loans and employment. More seriously, if merchants further incite debtors to forge poverty or medical documents to apply for debt reduction, they may be suspected of fraud or loan deception, bearing civil or criminal liability.

Bo Tong Consulting’s chief industry analyst Wang Pengbo added: “This artificially induced default model distorts normal credit performance behavior, increasing banks’ overall risk costs. Long-term, banks will tighten risk controls, raise approval standards, and increase credit rates, ultimately harming honest borrowers’ access to finance.”

Regarding the fundamental difference between “write-off” and “settlement,” Tian Lihui explained: “Settlement means the debt relationship is terminated, and the credit report shows a zero balance. Write-off is an internal accounting treatment by the bank; the debt still exists, and the credit report will show a long-term ‘bad debt’ status, which is far more serious than overdue, essentially indicating the official credit relationship is permanently terminated.”

Sun Yuhao further pointed out that according to the Ministry of Finance’s “Financial Enterprise Bad Debt Write-off Management Measures,” write-offs must follow the “account write-off case storage” principle, and banks still retain recovery rights. Merchants packaging “write-off” as “discounted settlement” is false advertising. If users pay high service fees but the debt remains, the merchant’s behavior may constitute fraud.

Regarding thresholds like “vehicles over 300,000 cannot be handled,” Wang Pengbo analyzed that this is a precise筛选 (“screening”) of target objects. Setting such asset thresholds aims to select users without sufficient repayment ability or strong enforcement assets, who are more likely to default and closer to the real bad debt disposal group. Consumers entrusting such agencies face high risks, needing to provide ID, bank cards, credit reports, verification codes, etc. These agencies lack proper qualifications, and confidentiality agreements are ineffective. The risks include data leaks, secondary collection, scams, and losing contact after paying fees.

Despite repeated regulatory warnings about illegal代理维权 and clarifications of boundaries, some institutions continue to operate under the guise of legal consulting or debt consulting on various platforms, leading to ongoing chaos.

Wu Zewei pointed out that these illegal rights protection companies survive by exploiting information asymmetry and forging materials to maliciously投诉 (“complain”), using “legal consulting” as a cover to evade regulation. To eliminate this chaos, multiple measures are needed: educate consumers about legitimate rights channels and risks of dishonesty; banks should optimize internal negotiation processes and establish humane relief channels to reduce debtors’ reliance on black-market help; regulators should deploy joint enforcement actions, crack down on platform illegal ads and information, and increase penalties.

For consumers deeply in debt, lawyer Sun Yuhao recommends proactively negotiating with financial institutions, directly contacting official bank or online loan platform customer service, and applying for personalized installment plans or moratoriums based on actual difficulties. For complex debt disputes, consult正规律师事务所 or resolve through litigation or arbitration. Never trust third-party intermediaries claiming to “reduce debt” or “whiten credit reports,” and always protect personal information to avoid secondary losses.