Official backs show-and-tell of bad credit

PUBLISHED : Thursday, 17 November, 2011, 12:00am
UPDATED : Thursday, 17 November, 2011, 12:00am


A proposal allowing the government to reveal the credit histories of hundreds of students to credit agencies is aimed at teaching them not to default on student loans, an official says.

Undersecretary for Education Kenneth Chen Wei-on (pictured) said the measure allowing the handover of credit information would only deter those who deliberately refused to pay back loans. 'Borrowing from the government is like borrowing from someone else. You have to pay it back responsibly,' he said.

His comments came days after Privacy Commissioner Allan Chiang Yam-wang warned that the move would violate students' privacy.

Under the proposal - which is subject to public consultation ending in February - students who fail to pay more than HK$100,000 debt for more than a year will risk having their data revealed to credit reference agencies. Chen said around 600 people fell into this category and that action would be stringent.

A poor credit history will affect a person's ability to secure bank loans, mortgages or credit cards.

Hong Kong's student loan default rate is 13 per cent - higher than developed economies such as the United States and Britain, which both have around 9 per cent.

The city's Student Financial Assistance Agency recently proposed lowering the interest rate to 1.7 per cent for students borrowing under the non-means-tested schemes it provides and extending the repayment period to as long as 17 years.

But at the same time, officials pledged to take tough measures against the growing number of students with bad loans.

Nancy So Mei-Yee, controller of the assistance agency, said yesterday that among 13,000 students who defaulted on loans, 40 per cent involved debts owed for more than two years while 30 per cent involved debts dragging on three years or more.

She said a team of 90 officials, up from just 20 members years ago, were now working on loan-default cases within the student loans agency.

The government will ensure that none of these liabilities - other than those where debtors filed for bankruptcy - will be written off, So said. Officials will also continue to discuss privacy protection with Chiang.

The privacy commissioner has urged the government to explore less intrusive measures. He said he feared the proposal, if approved, would open the floodgates to credit-history requests by other government departments seeking to recover government rents and rates, overdue taxes or water charges.