Shanghai police have arrested eight suspects for an alleged multimillion yuan fraud against a woman who loaned money from them.
More than 340 suspects in over 100 gangs have been detained since last September when police started to crack down on criminals who set up debt traps to ensnare their victims in a mountain of debt.
Huangpu police started investigation in May when a woman surnamed Shen came to them and claimed that her creditor was seeking court action to freeze her company's bank account because she was unable to pay her debt to him.
Shen intended to borrow 20 million yuan ( million) from the suspect, surnamed Yin, but ended up owing him almost 100 million yuan after being loaned 14 million yuan, police said. Shen needed money to set up a factory and was introduced to Yin in July 2014.
At that time, Yin initially lent her 2.43 million yuan with the number on the contract being 2.7 million yuan at the monthly interest rate of 3 percent for three months, and then 2.4 million yuan at a monthly interest rate of 4 percent in the name of another suspect, police said.
As Shen failed to pay back the money after three months, Yin got her to sign a new contract of 5.7 million yuan in November 2014 for four months, which combined the previous two contracts. After that, Yin, in the name of his gang members, made her sign a further 12 contracts that combined all her previous debt so that by November 2015, Shen owed Yin about 34 million yuan.
Yin, who provided all the money, also demanded a monthly 1.1 million yuan of "bond money" from Shen claiming to be her guarantor behind the debt, police said.
Police added the entire debt of Shen would be subject to review and she would probably have to return part of the money.
Shen had managed to repay about 7 million yuan of her debt before seeking help from the police.
In 2015, the Supreme People's Court of China issued a regulation in trying private lending cases according to which lending contracts with the annual interest rate of debt not higher than 24 percent are considered to be legal, while those with an interest rate of over 36 percent won't be backed by the court.
Legal experts said contracts with an interest rate between 24 and 36 percent could be subject to legal arbitration, but the debtor was not protected by the court.