Company charged with lending without a licence

PUBLISHED : Tuesday, 22 May, 2012, 12:00am
UPDATED : Tuesday, 22 May, 2012, 12:00am


A company providing what it says are cash advances to restaurants and retailers went on trial yesterday, accused of lending money without a licence.

Global Merchant Funding, through a representative, pleaded not guilty in Eastern Court to one count of carrying on business as a moneylender in breach of the Money Lenders Ordinance. It describes its product is a cash advance, but prosecutors say it is a loan.

GMF started operating in 2009. Under a merchant-cash-advance contract that it offers, it buys a merchant's future credit card and debit card receivables at a discount, and takes a certain percentage of its card sales directly from the merchant's processing bank. There is no deadline by which the amount must be paid.

'The true nature of the transaction is a loan,' said Clifford Smith SC, for the prosecution. He later added: 'The effective rates of return show that a very high level of interest is built into the purchased amount.'

Smith said that in one case the effective rate of return was about 50 per cent.

Smith said there were some discounting transactions that might be said to have the same effect as a loan, but were not recognised as such.

During the trial, prosecutors called former GMF sales representative Fung King-keung, who said that when customers inquired about the product, he would tell them it was not a loan.

Fung also said he had started working at another company, Advance Merchant Payments (AMP).

Under cross-examination by Simon Westbrook SC for GMF, Fung said he went to AMP after GMF fired him, and that sometimes AMP dealt with customers similar to those of GMF.

Westbrook suggested that Fung had been fired for poor performance and had contacted GMF employees after he had left to obtain their customer lists, which Fung denied.

Fung said he was arrested by police - though not prosecuted - over an allegation that after he started working at AMP he offered money to a former GMF colleague for client lists.

Fung denied the allegation.

He said he had been suspended from duty at AMP because police were investigating him.

The trial continues before Judge Li Kwok-wai.