There are no estimates of the number of non-permanent residents who leave Canada before paying their debts
It began with a Chinese-language news story about international students in Canada maxing out their credit cards on computers and clothes before leaving the country.
That led to an investigation that discovered a phenomenon involving some temporary residents of Canada who depart the country without settling credit-card debt, fulfilling their retail borrowing commitments, or honouring their automobile payments.
George Lee, an immigration lawyer in Burnaby, has been aware of the problem of transnational consumer debt for years. He’s been drawn into multiple lawsuits in which residents of Canada scour the world to find people who have left the country without reimbursing what they owe.
“This phenomenon has been going on now for quite a while. I’ve dealt with agreements or contracts like this. Sometimes a credit card company has to go after the person. But the person is in China or somewhere else. And the client doesn’t have much power to get them,” says Lee.
Although the veteran immigration lawyer has been hired to trace non-permanent residents of Canada who head out the country leaving debts, he has also read about the problem in the Chinese-language media and on social-media platforms such as Weibo.
Lee can’t estimate the number of non-permanent residents of Canada who leave the country before paying their debts, however.
“Many people don’t take (defaulting) seriously. They might joke: ‘Maybe I’ll do that.’ But I don’t have a percentage on how many are doing it. This is just what selfish persons do. I think most people care about their financial credit reputation.”
Lee, who frequently travels to China, said tracing people in distant lands who don’t pay their debts here is made more difficult because it is normally a civil matter, not a criminal offence, so police don’t normally get involved.
Articles in Chinese-language media outlets describe international students going on credit-card luxury-shopping sprees in Canada. The articles say they swipe their cards to buy computers, mobile phones, clothes and cosmetics in Canada, which they often sell at low prices through the underground economy. They hawk the goods, Lee said, either before they leave Canada or after returning to Asia.
Setty Pendakur, a University of B.C. planning professor emeritus, is also aware of the problem of debt default by some international students and other non-permanent residents, of which there are more than 1.4 million in Canada.
“This has been going on for at least five years,” Pendakur said. When international students who renege on payments go back to China, he said “their credit will be the same as before.” Since defaulters don’t normally get a criminal record in Canada, he says “they get off scot-free in China.”
India-born Pendakur, who has travelled to China more than 86 times, has helped shape the populous country through his work for the World Bank and as senior adviser to China’s State Council, which is similar to the Privy Council of Canada. His knowledge of bad credit comes from conversations with Chinese friends and officials in both China and Canada.
Many of the more than 180,000 students from China who are studying in Canada (with 50,000 in B.C.) are from well-off families and don’t have the grades to get into places such as SFU, Capilano University or Langara College, Pendakur said. A large proportion attend what he calls private “three-room universities” in Vancouver and elsewhere.
Like many students of higher education, they are bombarded with credit card offers from companies looking for new, well-heeled clients, Pendakur said. “I know of at least seven young foreign students, under 20 years of age, with three credit cards each. With a $5,000 limit on every card.”
Crossing borders to dodge debt is part of a wider problem. The seven largest U.S. credit card issuers now face the highest level in almost a decade of loans they never expect to collect. Still, most credit card companies do well on the stock market and their competition for future high-end customers remains fierce.
Although consumer debt is rising in many countries, The Financial Times reports that Chinese millennials’ love of credit cards is particularly raising debt fears. With young people not following the frugal ways of their parents in China, the country has seen a 40 per cent rise in one year of outstanding consumer loans — used for vehicle purchases, holidays, household renovations and expensive household goods.
Aside from a central bank database that provides limited information, China lacks credit data on consumers. While the average U.S. consumer’s credit history dates back 14 years, financial specialists say credit information on most residents of China only goes back a few months.
Vancouver’s Fenella Sung, a translator and former Chinese-language talk-show host, said she spent most of a year trying to get paid by a rich man from China who used her language services to unsuccessfully apply to extend his permanent resident status in Canada.
“The Canadian system,” Sung said, “simply has no effective way to deal with those who want to come here temporarily, take advantage of our system for their own selfish gain and then move on.”
Lee, the immigration lawyer, said collecting on bad debt is never easy, but it’s especially difficult to hunt down non-residents who skip the country. He advises Canadians who offer credit to young people to first get their parents’ to sign on as guarantors.
As for anyone planning to rack up bad debt in Canada and then flee across an international border, Lee has some prudent advice. “Who knows,” he says, “you may change your plans and want to come back.”