The Shanghai Banking Regulatory Commission fined seven commercial banks recently for breaking rules, including not properly determining cardholders' ability to repay loans. Three members of a Shanghai family, in a way, became victims of banks' leniency when they committed suicide in June for being unable to repay their 2.4 million yuan ($392,000) credit card debt. The late punishment imposed on banks cannot bring the three back to life, but at least it warns banks as well as the public to be wary of credit card debts, says an article in Beijing News. Excerpts:

The "credit card slavery" of the Shanghai family is not news in China. Last year, credit card debts outstanding for 6 months or more jumped 71.9 percent to more than 25 billion yuan ($4.08 billion). The outstanding debt figure should give an idea of the number of "credit card slaves" in the country.

Lured by short-term profits in issuing credit cards, many commercial banks offer easy access to authorization in a bid to attract more applicants, even if some of them don't have the ability to repay their debts. But the banks alone are not to blame for the situation. Lack of proper supervision on the social credit system too should be blamed. And to improve supervision, all sides, including the departments of tax, finance and police, need to collect accurate data on every person before issuing him/her a credit card.

The credit information system of the People's Bank of China, which serves as a guideline for credit card issuance, is far from exhaustive. Its database till 2013 included 600 million Chinese citizens, out of which only 100 million had credit records.

Moreover, because of lack of a proper rating model and credit risk assessment, it is still difficult to screen all unsuitable applicants simply on the basis of their credit records. Chinese banks should learn from the credit bureaus in the United States which collect credit records of about 200,000 citizens a year and conduct more than 2 billion sets of data processing a month.

China should learn from countries that have in place effective credit card managements, and most importantly, raise the application bar by constantly improving the accuracy of their citizens' credit records.

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