The line between high interest rates and usury is thinly drawn in Hong Kong. There are times when even the most reputable banks appear to steer uncomfortably close to crossing it. That is bad enough. But when highly regarded institutions stoop to the methods of back-street loansharks to collect their debts, the regulators should come down on them hard and fast.
The Consumer Council's damning survey of card-issuers shows that even moderate banks are demanding interest rates of between 24 and 30 per cent per annum. The greediest are demanding up to 42 per cent. That is substantially more than their counterparts in Japan or the United States. Yet the risk of default and bad debt is considerably lower than in the US and no higher than Japan. While such rates are not illegal - which those of 50 per cent and more offered by conventional loansharks certainly are - the suspicion that some of the credit card issuers are preying on their customers cannot be avoided. Loansharks' clients are usually those who cannot get credit from more reputable institutions. Credit card-issuers, however, usually attract customers who are in good standing with their banks and have references. Because their own risks are lower, they can afford to charge lower rates, and are usually expected to do so.
They are abusing their customers' trust if they charge the 'excruciatingly high' rates the Consumer Council criticises.
Yet the Council is surely right to confine its advice to customers to choose with care. This is a case for the buyer to beware. If the market will bear such rates, and for as long as there is no evidence of price-fixing between card-issuers, it is up to the customer to make the right choice.
But the all-too-common practice of pressuring referees to pay for the bad debts of those who use their names demands sterner action. Not only is there presently nothing to stop applicants giving - and banks accepting - references without the prior consent of the referees, but some card issuers also treat a reference as a licence to harass.
It is clearly both immoral and illegal to force a referee - particularly an involuntary and unwitting referee - to stand warranty for someone else's bad debt. The Consumer Council's call for a code of practice to require a referee's consent is only a first step towards bringing the card-issuers into line. The next is to back that code of practice with legislation - and to impose heavy fines for confusing a reference with a guarantee.
