When Wall Street English went under, thousands of students were left stranded with loans they took out for lessons they will never receive.
August 24, a closed branch of Wall Street English in Beijing. Photo from CFP
By ZOU Luhui, ZENG Yanglin, ZHANG Lingxiao
In 2018, a typical course at Wall Street English cost 54,600 yuan (US$,8700). Zhangzhang could have paid in full but was persuaded to take out a student loan for no extra fee and a minimal rate of interest. She downloaded a fintech app and took out the loan on the spot.
“The saleslady took my phone, and clicked, clicked, clicked. She did everything for me,” Zhangzhang said.
It didn’t end well. When Wall Street English, once the top adult English school in China, went under, thousands of students like Zhangzhang were left wondering where their money had gone and saddled with loans they took out on the flimsiest of financial advice.
A group of ten students has reached out to more than 6,500 others, who paid a total of 520 million yuan to Wall Street English: averagely 80,000 yuan each. Over half took out personal loans. They can’t get out of the financial commitment, and no refunds are in sight.
On August 15, when Jiemian News sent questionnaires to students, 245 responded overnight. Of the 229 who had loaned over half of them were between 30,000 yuan and 60,000 yuan. Some were as much as 300,000 yuan. A substantial 97 percent of them took out the loans with the help of Wall Street staff. Many borrowed from more than one lender.
A quarter of them didn’t even know they had loans. Of those who did, around a fifth had no idea what interest rate they were paying. Half the loans came from Duxiaoman, a Baidu fintech spinoff. The loans were perfectly legal, but the students haven’t completely given up on getting their money back.
Zhangzhang had just paid off her first course when she was sold the VIP program for 96,000 yuan. Down payment? Only 10 percent, but the monthly installment turned out to be 3000 yuan, nearly half her salary. The loan is now paid off, and she has lessons booked until 2025.
REN Jing, who works at a media company, had a similar experience. She initially borrowed 86,000 yuan but was recommended an upgrade only two days later. The new program consisted of one-on-one sessions with native speakers and cost over 90,000 yuan. She couldn’t afford it, 4000 yuan a month was nearly half her salary too. Ren went on to describe a very hard sell indeed, and one which she eventually gave in to.
She then went on to explain how the native speaker was unavailable most of the time, but the salesperson was always there. Ren received a relentless barrage of calls and text messages, uncountable upgrades.
WANG Xi, who borrowed 100,000 yuan, was told that Wall Street had a deal with Duxiaoman, which meant no fees or interest. A year into her course, when she asked to cancel the unused lessons, she was refused a refund. Only then did she read the fine print in the Duxiaoman contract. Her loan was entirely unconnected to her Wall Street English contract.
“I was able to borrow as much as I wanted. No questions asked. If I had logged into Duxiaoman myself and asked to borrow this much, would I have been able to? Probably not,” Wang said. Her mental health and marriage have both suffered.
Unfair the deal may seem to be, but perfectly legal, according to ZHAO Zhanling of the China University of Political Science and Law. “There are two contracts. One between the students and Wall Street, another between the student and the loan issuer. Even if the first contract is dissolved, the second is still valid,” he said. You borrow money from a bank to buy a car, you can’t ask the bank for your money back when the car catches fire.
Some students showed us their agreements with Duxiaoman which specifically clarified that the students are fully responsible for their loans irrespective of the relationship between the borrower and Wall Street. Duxiaoman paid Wall Street English in full when the loan was issued. The rest is between the students and Duxiaoman.
But no one was made aware of this uncomfortable, yet cozy, arrangement. In fact, they were not even aware of the basics. In many cases, the salespeople just told them that it was a “simple installment plan” and clicked “Accept” for them.
Wall Street English essentially transferred their own risks to the students. Ultimately, if students fail to pay, it’s down to the lenders, but these are risks that both Wall Street and Duxiaoman were well aware of when they undertook the arrangement in the first place. The school can declare bankruptcy. But the students don’t get off so easily.
Duxiaoman terminated its relationship with Wall Street earlier this year, and some loans are already delinquent. Another fintech platform, Merchant Union, ended its deal with Wall Street English in January 2020. A spokesperson said that all the loans were legal and compliant, and their terms and risks were fully disclosed. Merchant Union is working with customers to resolve ongoing disputes.
For the students, however, the best and perhaps only option might be to pay off their loans. When asked about the cancelation, a Duxiaoman customer service associate inserted a long paragraph laden with jargon in a live chat. The gist was that Duxiaoman paid Wall Street, and now you had better pay Duxiaoman. Otherwise, it’s your credit score that suffers.
It’s widely agreed that the students have a weak case if they seek recourse through the lenders. Microfinance companies can issue loans up to 200,000 yuan if terms and risks are fully disclosed. Consumer loans do not require a thorough credit review. The terms are set in stone. All boxes are checked, and Duxiaoman is cleared of liabilities.
Wall Street English, may not be off the hook quite yet. SHA Jian, a consumer finance lawyer, reckons that if a loan was taken out on the recommendation of a Wall Street English salesperson, he or she essentially performed the duties of a financial advisor.
“Were these people properly trained? Are they certified to be financial advisors? Did they communicate the risks effectively?” he said.
“But,” he added, “everyone has their obligations.”
Due diligence applies at all levels. Yes, the students may have been hoodwinked in some way. But many of them recklessly entered into bad deals without even pausing to think. The lessons they learn from Wall Street English may be much valuable to them in years to come than any VIP package.
(Zhangzhang, Ren Jing, and Wang Xi are pseudonyms.)