I have seen at least two people now post messages on Thailand travel forums about this scam, so I thought that I would repost it here. You can read the whole thread here from the Thai visa forum.
Basically bike or car rental shops in Thailand are using people’s passports as security. The person who posted to the forum rented a bike on Koh Tao and used his passport as security. When he returned the bike, the rental shop owner said he damaged the bike and demanded 24,000 baht to cover the damage. He claims no damage was done and refused to pay, although he did make a counter offer of 10,000 baht.
The guy told the shop owner he would just get a new passport, which the shop owner countered that she would sell his passport on the black market. Reporting the problem to the police, didn’t get far.
The morale of the story is never use your passport as security, better to pay a cash deposit. If there is trouble, at least you can just walk away. Not getting your passport back can lead to other serious problems.
I found it was fairly common in Vietnam for hotel owners to hold your passport. It is good for them, as there is no way you can leave without paying. If they really need it for identification purposes, you can just give them a photocopy.