By tf-lawyer.com Beijing Announces Nationwide Crackdown on “Professional Closers”: A First Case Involves Fines Totalling 655,800 Yuan
In a significant move, Beijing authorities have launched a crackdown on “professional closers,” a term referring to individuals who exploit prepaid services by facilitating the closure of businesses to escape debts, harming consumer rights in the process. Recent reports from the Beijing Municipal Market Regulatory Bureau and the Economic Investigation Team of the Public Security Bureau detail how these agencies handled the first case of its kind in the country.
The investigation revealed that two art training companies, Beijing Xiaofanjia Education Consulting Co., Ltd. (operating as “Art Umbrella”) and Beijing Muyi Innovation Technology Development Co., Ltd. (operating as “Mu Yi Art”), were involved in fraudulent closures. The authorities discovered these businesses had participated in hiding liabilities under illegal pretenses. Following a transfer of tips from public security, the market regulation department initiated an investigation into these businesses and three debt mediation agencies involved, uncovering illegal activities like false registrations. Collectively, these entities were fined and forfeited a total of 655,800 yuan.
Parents of students affected by “Art Umbrella” expressed their frustration, revealing that the company absconded with over 20 million yuan in prepaid tuition fees. Although the crackdown on these so-called “professional closers” has brought some hope of accountability, many parents feel that the path to recovering their lost funds remains uncertain.
What Exactly is a “Professional Closer”?
Market regulation officials explained that “professional closers” typically target businesses—both online and offline—evaluate their debt levels, and charge a commission based on the total liabilities. They often employ covert agreements and exploit legal structures pertaining to company law, such as changes in the company representative or official bankruptcy proceedings, to help struggling businesses evade creditors.
Parents have reported that these individuals often organize last-minute promotions under the guise of celebrations before a business shuts down, enticing consumers to prepay substantial amounts. This behavior not only leads to unpaid wages for employees but also disrupts the entire market economy, damaging social credit systems and causing financial losses for consumers.
Regulatory Response and Enforcement
In light of the alarming rise of “professional closers” especially in industries like early childhood education and fitness, substantial public concern has prompted bureaucratic action. This year, regulations under the Beijing Single-Purpose Prepaid Card Management Ordinance aimed to oversee prepaid operations more effectively, leading to robust inter-departmental collaboration to monitor and punish businesses, “professional closers,” and unethical debt mediation practices.
Specifically, the cases of “Art Umbrella” and “Mu Yi Art” have drawn heightened scrutiny. Media reports revealed disturbing details about “Art Umbrella,” whose sudden business closures left approximately 2,000 students and their families with outstanding tuition fees. Despite promises and assurances to parents, the institution disappeared shortly after misleadingly promoting courses just weeks before going dark.
Accountability Measures
It has been revealed that three mediation agencies—Chao Lai International Business Consulting Co., Ltd., Sichuan Shunlijie Enterprise Management Consulting Service Co., Ltd., and Chuangqi Future (Beijing) Enterprise Management Consulting Co., Ltd.—helped facilitate these fraudulent closures. Upon investigation, significant fines were imposed on these agencies for submitting false registration materials and engaging in deceptive practices. Consequential penalties were also levied against individuals involved, underscoring a commitment to tackle this issue head-on.
Although penalties have been imposed, parents of affected students remain anxious about recovering their prepayments. Some parents have begun civil litigation to seek restitution, advocating for expedited court processes that could help bring fraudsters to justice more swiftly.
Expert Opinions on Regulatory Actions
Legal experts are calling for heightened scrutiny of business registration changes to prevent exploitation by “professional closers.” By identifying abnormal corporate behavior and enforcing stricter regulations, they hope to protect consumer rights more effectively.
They also urge businesses facing difficulties to comply with the law rather than resort to dishonest practices which could lead to even stiffer penalties. This recent crackdown in Beijing serves as a robust warning to other players in the prepaid service market, illustrating the necessity for collaborative efforts to foster a safer and more trustworthy consumer environment.
Consumer advisory initiatives have emerged as well, encouraging service providers to adhere to regulations governing prepaid operations and advising consumers to maintain contracts and receipts for all transactions to safeguard their rights.
In summary, the city’s recent actions signal a clear intention to root out deceptive practices in the prepaid business sector, fostering greater protection for consumers and promoting an equitable marketplace.
