The police are investigating a business set up by three former senior bankers to provide short-term, high-cost cash advances to restaurants, bars and retailers who could not otherwise raise funds from banks.
Global Merchant Funding, whose founders include former Barclays Capital senior director Richard Grainger and whose backers have included high-profile Asian hedge fund Artradis Fund Management, is being scrutinised by police on grounds that it may be acting as an unlicensed moneylender.
The police have confirmed their investigations are continuing. No arrests have been made. Global Merchant says it is not a lender and does not need to be licensed.
The company gives businesses money up front and then collects a percentage of the credit card sales daily until it is repaid.
Global Merchant states clearly on its website and in its literature that its transactions are purchases - in this case they are purchases of future credit card receivables - and not loans.
The Moneylenders' Ordinance outlaws loans carrying effective annual interest rates of more than 60 per cent. It carries maximum penalties of a HK$5 million fine and 10 years' jail.
Companies taking Global Merchant's cash advances are sometimes charged more than the equivalent of a 60 per cent annual interest rate on a loan, according to analysis of figures found in documents Global Merchant has shown to potential customers.