Hong Kong must stop loan sharks from preying on the vulnerable

South China Morning Post

16 hours ago

The misery inflicted on desperate debtors by Hong Kong's predatory loan sharks is well known and has persisted despite laws intended to combat the problem. Victims face crippling rates of interest, exceeding the legal limit, and are often sucked into a spiral of debt. Those who fall behind with payments are often intimidated and their family members and employers harassed.
There is a need to do more to prevent such abuses. The
public consultation , launched last month, on strengthening regulation of the sector provides a much-needed opportunity for reform. It should lead to meaningful changes that better protect borrowers and crack down harder on miscreant lenders. The measures need to have teeth.
Money lenders are already required to obtain a licence. The permitted interest rate is capped at 48 per cent. It was cut from an eye-watering 60 per cent in 2022, but remains high. Lenders often charge debtors extortionate handling fees, sometimes a third of the sum borrowed, which effectively raises the interest rate way beyond the legal level. This needs to be tackled.
Many of those deep in debt are on low incomes, especially
foreign domestic helpers . The government proposes a cap on the amount a low-income individual can borrow when taking on an unsecured personal loan. This would be based on their salary. A limit would also be imposed on the proportion of their income they are required to repay each month.
Another problem is that of 'referees' for borrowers being
harassed . They must consent to the giving of a reference and are not liable for the debt, but are often targeted by lenders. The proposals would require steps to be taken to confirm consent has been given. Officials are also
suggesting that the biggest lenders be required to join the centralised Credit Data Smart system to check the creditworthiness of potential borrowers. So far, only 36 out of 2,048 licensed lenders have joined. Other proposed measures include improving the complaints mechanism and stepping up publicity.
The government's proposals are a step forward. A balance must be struck between ensuring sufficient access to credit and preventing abuse. But there is room for more to be done. Lawmakers have called for tougher measures. Their suggestions and others raised during the consultation must be carefully considered.