MY TAKE
My Take
by

Crooks are setting up Hong Kong for a subprime crisis of its own

Unscrupulous lenders and their middlemen are touting ‘worry-free’ loans – and our government seems helpless to do anything about it

PUBLISHED : Tuesday, 12 April, 2016, 10:25pm
UPDATED : Tuesday, 03 May, 2016, 8:36pm

If you watch television regularly, you will have noticed Hong Kong has its own version of subprime lending. Some advertisements are so outlandish they ought to be outlawed.

One features an elderly woman who joyfully reverse-mortgages her home to take out money for her son to start a business. That’s proof of love, the ad says.

Another has a young couple taking endless photos and selfies, only to want more and more expensive camera and lens equipment. But what to do now that both have “maxed out” their credit cards? Call a lender and draw a personal loan, of course.

What kind of loans are on offer? Some ads say no face time is necessary, nor proof of earnings, employment or financial statement. You can apply by phone or on the internet, they claim, and money will be deposited into your bank account right away.

Why not crack down on the middlemen, many of whom use deceptive tactics to induce borrowers to take out loans, and charge high fees in the process?

“I need a loan,” a poor guy in one commercial begs. “No worries, you’re not alone,” a beautiful lender, who magically appears, replies. I doubt debt collectors will look anything like that pretty lady.

You can already guess the sky-high interest and handling fees being charged by such lenders and their middlemen. Since most people have no working knowledge of compound interest and some have trouble handling simple interest, my guess is that many if not most borrowers have no idea how much they will end up owing if they miss even a single payment.

No worries, the government is on the case. The Financial Services and the Treasury Bureau plans to toughen licensing conditions for lenders. How? The proposed measures will require lenders to give a list of their middlemen to the Registrar of Money Lenders.

Lenders will be discouraged from collecting personal data from third parties without the applicant’s consent. They will also have to include a warning on ads, reading: “You have to repay. Don’t over-borrow.”

But why not crack down on the middlemen, many of whom use deceptive tactics to induce borrowers to take out loans, and charge high fees in the process, according to a Legislative Council paper?

My guess is that 100 per cent of these middlemen are crooks. But no, bureau deputy chief Patrick Ho Chung-kei says that would be against industry practice.

With regulators like that, subprime lenders have nothing to fear.