Hong Kong will impose limits on loans that can be taken out at licensed money lenders in response to what an official called “excessive borrowing” among domestic workers and low-income residents.
Migrant domestic workers sit in front of a luxury fragrance advertisement in Hong Kong, on November 5, 2023. Photo: Kyle Lam/HKFP.
Christopher Hui, the secretary for financial services and the treasury, wrote in his blog on Monday that the government plans to limit the size of unsecured personal loans that can be taken out at licensed money lenders.
Hui said the proposed borrowing cap will be based on the borrower’s monthly income,
“For example, if a borrower’s monthly income falls below a certain level, the unsecured personal loan that lenders can approve must not exceed a specific percentage of that borrower’s monthly income,” Hui wrote in Chinese.
As of October, there were 2,129 licensed money lenders in Hong Kong. They are governed by the Money Lenders Ordinance. However, the law does not cap the amount that can be borrowed or limit the debt servicing ratio (DSR), which refers to how much of a borrower’s monthly income would be used to repay the loans.
Secretary for Financial Services and the Treasury Christopher Hui meets the press on October 26, 2023. Photo: Kyle Lam/HKFP.
Hui added that authorities will step up public education of “prudent borrowing” among domestic workers, youth and low-income residents.
In particular, Hui singled out domestic workers, saying that authorities would remind them to seek permission from a referee before writing down their contact information.
Money lenders usually ask a borrower to provide the contact details of a referee. Hui wrote in his blog in June that some employers have been harassed by money lenders after their domestic workers took out loans and listed their employers as referees.
The government issued a letter to all licensed money lenders in June to warning them against engaging in illegal money lending and debt collection practices.
The Companies Registry. File photo: GovHK.
In his blog, Hui wrote that money lenders should not harass referees while trying to get hold of borrowers. Referees were not liable to repay loans, he wrote.
Hui said the government was working on a series of measures to combat “excessive borrowing,” with a public consultation to take place in the first half of 2025.
Apart from establishing a borrowing limit, the Companies Registry – which handles complaints about money lenders – will enhance its reporting mechanism and strengthen information exchange with the police.
According to the Companies Registry, a total of 172 complaints were received about money lenders from January to October. The figure marks a significant increase compared to that of 2023, which saw 109 complaints throughout the year.
