Hong Kong banks have not learned the lessons of the subprime crisis and are continuing to offer cheap, easy credit even as the economy continues on its downward spiral, welfare sector representatives warn.
People might be tempted by offers of cheap credit and fall into a debt trap, worsening an already bleak situation, they said.
The claim comes as several of the city's leading banks are promoting personal revolving credit facilities by offering an interest rate below the bank's prime interest rates over a fixed period to attract customers.
'We're looking at a depression coming and at the same time we have these banks offering lax and easy access to credit,' said Fernando Cheung Chiu-hung, a former welfare sector legislator. 'This sort of practice might lead people to overborrow and fall into the debt trap - the main cause of the mortgage crisis in the United States that caused the current meltdown.'
The Sunday Morning Post was contacted last week by a reader enraged by the way DBS Bank had attempted to sell one such product to him over the phone.
The reader, a senior lawyer, said there was pressure to sign up immediately and it was only when he insisted on finding out the terms of the deal that he discovered that the interest rate almost tripled after the first 12 months.
'I just think this is cruel,' said the reader.
