Opinions on Issues in the Handling of Criminal Cases Involving “Trap Loans” (Mainland China)

Joyce Wen

On February 28, 2019, the Supreme People’s Court, the Supreme People’s Procuratorate, the Ministry of Public Security, and the Ministry of Justice issued the Opinions on Issues in the Handling of Criminal Cases Involving “Trap Loans” (the “Opinions”), which came into force on April 9, 2019.  In the effort to carry out in-depth crime sweeping campaigns and severely punish offenders engaging in “trap loans,” the Opinions contain more detailed provisions concerning the definition and practical determination of “trap loans” that are built on the Opinions on Issues in the Handling of Criminal Cases Involving Malicious Forces released by the Supreme People’s Court, the Supreme People’s Procuratorate, the Ministry of Public Security, and the Ministry of Justice in January 2018.  The Opinions are highlighted below:

The first portion clearly differentiates between “trap loans” and private lending.  “Trap loan” is a generic term for the criminal activity of falsely representing itself as private lending in order to induce victims to enter into borrowing agreements or other agreements that are substantively about borrowing for the primary purpose of unlawfully possessing another’s property.  Through the use of falsely increasing loans, inducing breaches of the agreement, arbitrary determination of contract breach, destruction or concealment of evidence of repayment, a false debt is created, and unlawful possession of the victim’s property is obtained through litigation, arbitration, notarization or even violence, threats and other means.  The term includes the illegality of the purpose, falsehood of debt, and the means of “debt collection.”  The perpetrators of “trap loans” subjectively seek to take unlawful possession of the property of others, and from an objective viewpoint, it employs schemes to create false debts In practice, “trap loan” offenses often create the illusion of private lending, fabricating false payments through moving funds, deliberately causing a contract breach of arbitrarily define a contract breach, maliciously increasing the lending amount and “collecting debt” through both hard and soft approaches.  However, it is noteworthy that not all of the five types of criminal schemes and steps will necessarily appear in a “trap loan” offense; the methods vary widely and are constantly evolving and changing to evade law enforcement.  Therefore, when determining the “trip loan” offenses, it is still necessary to consider if there is illegal possession under the pretext of private lending as the major characteristic of the offense.

The second portion addresses the practical determination of “trap loans.”  The Opinions provides for the determination of accomplices and crime amounts, the disposal of the property involved, the determination of malicious forces and convictions.  “Trap loan” offenses subjectively aim at illegal possession and objectively invade property rights.  However, the forms they can take vary too widely to enumerate.  The combination of different criminal means and scenarios may lead to absolutely different determination on the characteristics of cases or the concurrence of crimes.  Therefore, when handling “trap loan” cases, a judicial authority needs to look at the specific methods used to obtain unlawful possession of another’s property and find for the offense depending on the requisite elements of the offense in criminal law; if no violence or threats are involved, and the main method of gaining unlawful possession has been through deception, then they shall be deemed as a fraud offense.

The third portion deals with the jurisdiction of “trap loans” cases.  Articles 11 and 12 of the Opinions contain provisions covering the jurisdiction, establishment and investigation of “trap loans” cases in strict accordance with the relevant provisions of the Criminal Procedure Law and based on the principle of facilitating the investigation of criminal facts as well as litigation.  Therefore, the Opinions provide assurances to fair and efficient law enforcement and investigation through providing comprehensive examples of the “trap loan offense”, “the place of the crime”, “the place of the result of the crime”, and more specifically where one perpetrator committing multiple offenses as well as joint offenses, under which relevant public security agencies can set up cases and investigate ex officio.  With respect to the “trap loan” offenses involving malicious forces, since “trap loans” are generally just a part of their criminal activities, the Opinions provide that such cases shall be investigated by the public agencies that investigate underworld organizations, and criminal organizations to ensure the completeness and comprehensiveness in handling those cases.  In addition, the Opinions specifically provide that the “trap loan” crimes that are turned over, reported, accused, and filed by citizens shall be accepted immediately by public security agencies.  If criminal activities are confirmed as a result of their review, such cases shall be dealt with or transferred pursuant to jurisdictional requirements to ensure that the citizens can receive timely judicial protection.