Apple pursuit lures 20,000 students into high-interest loans with annual interest rates of up to 47%

Apple pursuit lures 20,000 students into high-interest loans

By Xinhua in Wuhan (China Daily), 2013-03-22

More than 20,000 college students have taken high-interest loans to buy fancy electronic products, mostly Apple devices, in Wuhan, the capital of Hubei province.

From the start of January 2012 to the end of February 2013, the students applied for loans with a total value of 160 million yuan ($25.7 million) from Home Credit China (HC China), a subsidiary of international investment business PPF Group.

“We have lost touch with about 100 of them, getting no response to calls or letters reminding them about delayed payments,” said Liu Mingwei, Wuhan regional manager of HC China.

With around 1 million students in Wuhan, it means about one in 50 of them is shouldering HC China’s heavy annual interest rates of up to 47.12 percent on a 12-month-term loan.

About 90 percent of the credit was used to buy Apple products, such as iPhones and iPads, and other high-end electronic products, Li said.

Home Credit China provides credit loans in nine, 12 and 15-month terms for college and university students, providing they can present an ID card, bank card and student ID card. Loan amounts range from 540 to 10,000 yuan.

“Quite different from the loan approval process in a bank, HC China passes the credit loan application in as little as dozens of minutes,” according to Zhang Zheng, a HC China salesman in Wuhan.

Then, students can take away goods after making a down payment at HC China’s partner stores. The down payments range from 10 to 30 percent of the marked price for each item.

In Wuhan, HC China’s list of partner stores covers major electronic product retailers and chain stores such as Gome and Suning. And the easy loans stimulate their sales volume.

In spite of this, some stores have refused such cooperation.

“I counted the loan rate and refused such unscrupulous business,” said a store manager who declined to be named.

The loans have encouraged students to embrace the craze for Apple devices.

“Apple products are a common topic or a particular community on campus. I used to feel isolated while they were discussing and playing with iPhones or iPads,” said a student at Wuhan University of Science and Technology surnamed Yu.

About half of her classmates and roommates have an iPhone. “I felt embarrassed even to take a look when they were in a heated discussion about a new application,” Yu said.

She bought an iPhone using a credit loan “in the heat of the moment during a marketing campaign by a salesman of HC China, but felt regret afterward”. The girl finally paid the credit with the help of her parents.

Similar to Yu, Wang Yong, a student at the China University of Geosciences, failed to pay back the loan in March due to overspending at the beginning of the spring semester. At that point, he started to work part time at KFC.

“The HC China salesman continuously called to warn me about the possible poor credit record, which would have a bad effect in the future. I was so afraid,” Wang said, adding that he had to ask his parents for help.

HC China will report the bad credit of the “vanished” college students who have failed to pay back their loan, according to the firm’s Wuhan branch.

Though college students are adults, their consumption view is not yet mature, said Qiu Baochang, leader of the legal team with the China Consumers’ Association.

Consumer finance companies like HC China offer loans to them with loose examinations, which is an incentive to young people’s irrational consumption, Qiu said.

The lawyer called for a rational consumption guide to educate college students, and suggested the government strengthen supervision on consumer finance companies in lending.

In 2009, the People’s Bank of China issued a regulation stopping banks from issuing lines of credit above 1,000 yuan to students.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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