Noose tight­ens on shady loan deals

New rules in force to crack down on fraud­u­lent money-lend­ing busi­ness and phone scams

China Daily (Hong Kong) - - HK - By LIN WENJIE in Hong Kong cherry@chi­nadai­lyhk.com

Hong Kong has moved to crack down on un­scrupu­lous mid­dle­men in­volved in il­le­gal or im­proper money-lend­ing trans­ac­tions, as well as on tele­phone scams, which have seen a dra­matic rise in the city in re­cent months.

Un­der new reg­u­la­tions to be im­ple­mented on Thursday (to­day), money lenders are only al­lowed to deal with in­ter­me­di­aries ap­pointed by lenders if a loan ap­pli­ca­tion is sub­mit­ted by a third-party fi­nan­cial in­sti­tu­tion, and the mid­dle­men in­volved must not charge bor­row­ers. Banks in Hong Kong do not ac­cept third-party re­fer­rals.

The Fi­nan­cial Ser­vices and the Trea­sur y Bureau also re­quires lenders to keep all ev­i­dence re­lat­ing to loan deals, such as writ­ten, video or au­dio records show­ing that all the terms and con­di­tions of the agree­ment had been clearly ex­plained to the bor­rower.

Lenders are also re­quired to in­clude a warn­ing on ad­ver­tise­ments say­ing: “You have to re­pay your loans. Don’t pay any in­ter­me­di­ary.”

Pa­trick Ho Chung-kei, deputy sec­re­tary for fi­nan­cial ser­vices and the trea­sury, said on Wed­nes­day it’s eas­ier to regu- late fi­nan­cial agen­cies through money lenders.

“Lenders have the re­spon­si­bil­ity to en­sure that the en­tire process is done legally. I hope the new rules will ef­fec­tively and ex­pe­di­tiously tackle the prob­lem of in­ter­me­di­aries charg­ing fees, and re­lated mat­ters that cause pub­lic con­cern. The new rules will fur­ther help the po­lice in im­ple­ment­ing the law more ef­fec­tively and col­lect­ing ev­i­dence,” he said.

Ac­cord­ing to gov­ern­ment sta­tis­tics, about one-third of some 2,400 to 3,400 hot­line calls made to Hong Kong banks for loans each month were about in­quir­ing or com­plain­ing about ex­pe­ri­ences against cul­prits per­pe­trat­ing loan fraud and pos­ing as “bank clerks”.

Fi­nan­cial in­ter­me­di­ates, cre­ated to grease the mon­eylend­ing busi­ness, are seen to in­creas­ingly con­trib­ute to the in­dus­try’s deep malaise, which was ex­ac­er­bated by the surge in the num­ber of phone-scam vic­tims in the city.

The most com­mon de­cep­tive tac­tics de­ployed in­clude of­fer­ing “ex­ceed­ingly low­in­ter­est loans” or “no han­dling charges if a loan ap­pli­ca­tion is un­suc­cess­ful”. They are aimed at lur­ing prospec­tive bor­row­ers to se­cure loans and get­ting them to pay ex­or­bi­tant fees dis­guised as “con­sul­ta­tion fees” or “guar­an­tee money”.

Some of the cul­prits would even ab­scond af­ter col­lect­ing the fees.

The po­lice had car­ried out a se­ries of op­er­a­tions in the past 15 months and ar­rested more than 600 peo­ple con­nected with il­le­gal loans.

Ho urged the pub­lic to check care­fully the terms and con­di­tions of in­ter­me­di­ary agree­ments be­fore sign­ing them, and make sure that they do not con­tain any fee-charg­ing pro­vi­sions. Af­ter sign­ing an agree­ment, the bor­rower must ob­tain a copy of it.

Be­fore sign­ing a loan agree­ment with a money lender, the bor­rower should also re­port the in­ter­me­di­ary’s iden­tity and pro­vide a copy of the agree­ment reached.

As of Oc­to­ber this year, about 1,080 money-lend­ing li­censes had been is­sued by the Reg­is­trar of Com­pa­nies.

Reg­is­trar of Com­pa­nies Ada Chung Lai-ling warned that any­one who vi­o­lates the reg­u­la­tions faces a fine of up to HK$100,000 or two years’ im­pris­on­ment.

JUSTIN CHIN / BLOOMBERG

Hong Kong has tight­ened reg­u­la­tions gov­ern­ing un­scrupu­lous mid­dle­men in­volved in il­le­gal or im­proper money-lend­ing trans­ac­tions, as well as tele­phone scams, which have seen a dra­matic rise in the city in re­cent months.

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