Titled "Buying and Selling as Lending in Disguise: Uncovering the Scam Behind Jewelry Store's 'Gold Installment' Program"

As we enter 2026, the rising and fluctuating international gold prices have drawn market attention. Behind the booming investment in precious metals and gold jewelry trading, some illegal gold businesses are also surging beneath the surface. Recently, reporters learned that a type of business called “gold installment” has emerged, claiming zero down payment and low interest rates, but hidden behind it are the risks of illegal lending, masquerading as consumption. What exactly is the scam behind the “gold installment”? Besides this, what other similar scams should we be wary of?

The Yuhuan City People’s Procuratorate in Zhejiang Province recently used a big data legal supervision model to discover that a local jewelry store had applied for enforcement of notarized debt documents in 9 cases within a year, which showed obvious abnormalities and drew the attention of regulatory authorities.

Zhou Chaozhang, Director of the Sixth Procuratorial Department of Yuhuan City People’s Procuratorate: A notarized debt document, simply put, is, for example, some borrowing relationship or sales relationship that, after being notarized by a notary agency, can be directly used to apply for court enforcement with the notarized document, thus avoiding litigation. It is more commonly used by banks and other financial institutions.

An in-depth investigation by the procuratorial authorities into the enforcement files related to the store found that what appeared to be simple disputes over sales contracts was actually a scam targeting consumers. A consumer, Mr. Zhang (a pseudonym), was previously attracted by the store’s advertisement saying “no credit check, 0% interest, and you can cash out your gold immediately,” and purchased a gold bracelet priced 30% higher than the market price, signing relevant contracts and repayment promises. In this way, Mr. Zhang fell into the trap set by the business.

Zhou Chaozhang: We determined this was illegal lending. Based on the statements of the parties involved in this case, our preliminary estimate indicates that the annual interest rate exceeds 70% to over 100%, with the interest burden on the parties being very high in a short period.

Prosecutors stated that this behavior, disguised as legal transactions but actually involving illegal lending, is a chain of actions consisting of a total of “five steps of harvesting.” The first step is precise profiling: identifying borrowers with credit flaws and difficulties obtaining loans. The second step is packaging the rhetoric: using terms like “zero down payment” and “no credit check” to attract victimized consumers.

Zhou Chaozhang: The merchants will say we don’t check credit, zero down payment installment. Young people in need of money may easily fall for this temptation. Since gold is a hard currency, for example, the gold you take home with zero down payment can be sold immediately. Merchants exploit this psychology, leading those who may be financially tight and have credit flaws to fall into the trap.

The third step is called the contract trap: merchants use ordinary consumers’ lack of understanding of laws and regulations or their desire for small advantages to circumvent financial regulation by signing installment sales contracts. The fourth and crucial step is called “cash-out shrinkage”—inflating the price and then allowing consumers to cash out at a price below the international gold price, completing the harvesting and achieving illegal profits.

Zhou Chaozhang: For example, if the merchant prices the gold at 10,000 yuan, after installments, the consumer may need to pay approximately 11,000 to 12,000 yuan. When the consumer goes to cash out the gold, the cash-out price is about 10 yuan lower than the international gold price, resulting in a calculated annualized interest rate that is very high, far exceeding the legal limit.

Yue Shenshan, Deputy Director of Beijing Yuecheng Law Firm, stated that merchants disguised this “trap loan” as consumer installment, with the key point being the concealment of the true interest rate of the gold installment.

Yue Shenshan: Merchants hide the true interest rate, making the information opaque, and the spread in the middle is actually very large. Moreover, the borrowing period is very short, and this interest rate far exceeds the upper limit of the annualized interest rate permitted by the state, using this method to lend.

The final step of the scam is “judicial laundering,” where merchants use previously signed notarized debt documents to legitimize the inflated debts.

Zhou Chaozhang: The state has strict penalties for illegal lending. The most concealed part of the entire process is legalizing the inflated debts through notarized debt documents, arbitration documents, or civil judgments, and then applying for court enforcement.

Not only offline, but online channels offering disguised lending under the guise of “zero down payment gold installment” have also harmed many consumers. Reporters reviewed public reports and found that multiple media outlets had previously exposed that installment malls were using consumption as a pretext for lending, selling goods that included not only gold but also mobile phones, cameras, and e-commerce platform store value cards, among other highly liquid goods. However, some installment malls did not have the qualifications to engage in financial businesses.

Yue Shenshan explained that such installment malls actually take advantage of some consumers’ urgent need for money, as well as loopholes in their unfamiliarity with interest rate calculations and rules, to achieve high-interest lending and obtain illegal profits by signing contracts.

Yue Shenshan: These platforms do not have lending qualifications; they are considered private lending. High-interest lending violates national laws and regulations and constitutes illegal business activities disrupting market order. In severe cases, it could constitute the crime of illegal business operation.

The real annualized interest rates on the products from these installment malls are much higher than the upper limits set by our country’s laws. So how did the real annualized interest rates perform the “disappearing act”?

Yue Shenshan: The platform splits the high-interest rates, converting them into various fees, such as membership fees, technology service fees, or handling fees, itemizing the charges. However, if these fees are added together, the real annualized interest rate far exceeds four times the LPR limit (the upper limit for private lending interest rates) allowed by the state, constituting high-interest lending.

On March 15, the National Financial Supervision Administration and the People’s Bank of China jointly issued the “Regulations on the Explicit Comprehensive Financing Costs of Personal Loan Business,” requiring lending institutions to provide borrowers with a personal loan comprehensive financing cost disclosure form when conducting business. This form must itemize all interest and fee items, including loan interest, installment fees, credit enhancement service fees, etc. Yue Shenshan stated that regulatory authorities must work together to jointly combat the “trap loan” scams related to installments, forming a collaborative effort.

For consumers, Zhou Chaozhang, Director of the Sixth Procuratorial Department of Yuhuan City People’s Procuratorate, reminds that when shopping in installments, it is important to verify qualifications, choose legitimate and licensed financial institutions, calculate comprehensive annualized interest rates, and clearly understand the nature of contracts, staying alert to traps such as inflated prices or short repayment periods.