Legal loopholes make debt collection an arduous task Most commercial banks say it takes time and money to recover debts through legal procedures.   Le Minh Tam from a bank in HCM City complained that the bank has been taking legal proceedings to demand the payment of the debt worth approximately VND1 billion for six years. However, Tam cannot say for sure when the bank collect the debt. According to Tam, in September 2007, Tran Thi Dung in district 8 in HCM City, borrowed VND900 million from the bank, mortgaging the house under her name for the loan. One month later, Tam sold the house to a relative at VND900 million plus 50 taels of gold. However, the buyer did not make payment in cash and gold as promised. As a result, Tam did not have money to pay the bank debt. The case was brought to the court which then judged that Tam had to pay money to the bank, while the house buyer had to pay back the house. However, the involved parties appealed against the decision to higher courts. This means that the bank would have to keep waiting to have the problem solved. Pham Chi Hieu, General Director of ABBank, said the bank has filed hundreds of sets of documents to sue the borrowers for debt collection. And he knows that it will take the bank many years to follow the lawsuits. According to Nguyen Huu Dang, General Director of the Bank for Investment and Development of Vietnam, in some cases, 10 years were not enough to deal with a debt. Bankers have noted that the number of lawsuits for debt collection has been on the rise due to the high bad debt ratio, estimated at 7.8 percent of the total outstanding loans, which has put a hard pressure on banks. Under the current laws, when the enforcement agencies sell mortgaged assets, debtors have the right to ask for re-assessment of the assets, with no need to give reasons. This has been fully exploited by debtors to prolong the time and delay the legal proceedings. In general, banks would rather collect debts by negotiating with clients than suing the debtors, because they don’t want to waste time and money to follow complicated legal procedures. However, it is also an arduous job to negotiate to reach agreements with clients. Tran Manh Linh, a credit officer of a Hanoi-based bank, said that in many cases the bank had to give financial support to debtors to persuade them to leave the houses, which were mortgaged at banks for loans. In 2010, an individual mortgaged a house at his bank to borrow VND10 billion, and he could not pay the debt. Linh tried to persuade the debtor to sell the house to the bank. It also promised to give a financial support to help him look for a new accommodation. Only after 10 negotiations, did the bank reach an agreement with the debtor, promising to give a financial support of VND300 million. Meanwhile, the deputy general director of a joint stock bank said it is not simple to buy mortgaged real estate from debtors. The Credit Institution Law does not allow banks to buy real estate products for business, unless they buy houses for their offices. Kim Chi, VietNamNet Bridge