Hong Kong government to impose new rules on money lenders to combat illegal loans
Hong Kong’s government plans to introduce more stringent conditions for money lending licences, in its latest effort to combat the rise in illegal loans.
But financial intermediaries – not money lenders – caused the most trouble, as they have been involved in over 500 illegal lending cases since the third quarter last year, according to Patrick Ho Chung-kei, Deputy Secretary for Financial Services and Treasury. Only 40 to 50 of them were successfully handled by the courts.
Intermediaries link lenders and borrowers, who usually can’t apply for bank loans due to poor finances or bad credit records.
Many of those middlemen use deceptive tactics to induce prospective borrowers to apply for loans, and charge very high fees in the process, according to a Legislative Council paper.
Such charges are prohibited under the current Money Lender Ordinance.
The proposed measures will require potential lenders to report the identity of the intermediaries they appoint to the Registrar of Money Lenders, which processes their licence application, renewal and endorsements. That way borrowers can check if the intermediaries dealing with their loans are trustworthy.
New money lenders will not be allowed to obtain or collect any personal data from a third party unless they can provide written confirmation of its legitimacy.
The new rules will also require lenders to include a warning on adverts, reading: “You have to repay. Don’t over-borrow.”
Theconditions will be submitted to the Licensing Court for endorsement in the third quarter, and are expected to come into effect at the end of this year, Ho said.
At the panel on financial affairs yesterday, lawmakers questioned the government decision to target money lenders rather than overhauling the lending regulation system as a whole, as many regulations hadn’t been reviewed since the 1980s.
Ho said regulating lenders was more efficient than directly targeting intermediaries when tackling the most pressing issue, that of eliminating the extra charges.
The other approach might have triggered a long and complicated legislative process, he said.
There is currently no specially designed legislation regulating intermediaries.
Ho added that intermediaries came in many different forms, making proof and prosecution of related scams extremely difficult. But money lenders, who worked closely with intermediaries in business, could be expected to help solve the problems.
“It seems we impose more responsibilities on money lenders, but they also have their protection strengthened,” said Ho.
Ho reiterated that money lenders with no knowledge of the malpractice of their partners would not be subject to legal responsibilities.
