Borrower who was hit with 72 per cent service charge on US$32,000 loan among victims of unscrupulous money lending practices in Hong Kong
- Intermediary said a loan had been arranged but a service fee of HK$180,000 would be charged, leaving just HK$70,000 for the borrower
- Hong Kong’s consumer watchdog releases study on borrowing with an analysis of more than 300 complaints against money lenders
A Hong Kong borrower secured a loan of HK$250,000 (US$32,000) from money lenders only to be told later that more than 70 per cent was to be deducted as a service charge.
The complainant, dubbed “C”, received a call from a man who claimed to be a “bank employee” and was then introduced to an intermediary, who asked him to sign an agreement for arranging loans with money lenders.
Later, the intermediary told C that a loan of HK$250,000 had been arranged but a service fee of HK$180,000 (US$23,000) would be charged, leaving just HK$70,000 (US$9,000), or 28 per cent of the money, for the complainant.
C refused and was then threatened by the pair.
In another case, a complainant signed an agreement with a financial intermediary, allowing it to arrange a HK$130,000 loan from another money lender to pay off debts and filing fees for a bankruptcy petition.
The complainant later wanted to terminate the petition filing and the agreement, but was told by the intermediary that HK$70,000 had been used up for lawyer and processing fees, and the remaining HK$60,000 for debt repayments. In other words, there would be no refund for contract termination and the complainant was also required to repay the HK$130,000 (US$17,000) loan.
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The next case involved the traps of loan custody. The complainant borrowed HK$1.8 million (US$230,000) from a money lender through an intermediary consultancy company.
Upon the company’s request, the complainant deposited the borrowed money with the company for custody, supposedly for securing another loan at a much lower interest rate in 90 days. Subsequently, the complainant could not find or contact the firm and the loan was not recovered. The complainant reported the case to police.
In another typical case, an intermediary asked the complainant to deposit a loan of HK$130,000 with it for custody, supposedly to ration the money so debts could be repaid in phases. However, after the complainant received HK$14,000 (US$1,800), the intermediary refused to give the rest.
The council also conducted in-depth interviews about consumer over-indebtedness. In one serious case, a low-income middle-aged housewife accumulated 37 loans totalling about HK$300,000 (US$38,000) in the space of a year.
Earning about HK$5,000 (US640) a month, she did not manage her finances well and overspent on insurance, beauty products and medical expenses for her children.
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She then started to borrow from different sources, including 23 second- or third-tier financial firms, eight telephone money lenders, three credit card agents and two online platforms, ranging from a few thousand dollars to HK$70,000. (US$8,900)
However, a network of money lenders shared information about debtors’ repayments. So when one debt was settled before the due date, the woman would receive money lending advertisements via SMS and Facebook.
In some cases, lenders charged substantial interest rates. For instance, she received only HK$2,000 (US$255) for a HK$4,000 loan that came with a HK$25,000 (US$3,000) penalty if repayment was late by an hour. Finally, after threats from debt collectors, her sister helped her settle some of her loans.
