Hong Kong Proposes Enhancements To Regulate Money Lenders

The Hong Kong government has launched a public consultation on enhancements to regulate licensed money lenders. Currently, any entity or person carrying on a business as a money lender in Hong Kong must obtain a money lender’s licence. The licensing of money lenders and regulation of money-lending activities are governed by the Money Lenders Ordinance (Chapter 163 of the Laws of Hong Kong) and implemented by the Licensing Court, the Companies Registry (CR) and the Police, each playing different roles and functions within the money lenders regulatory regime.

In recent years, the community has become increasingly concerned about excessive personal borrowing, especially by foreign domestic helpers (FDHs) and other low-income earners. Statistics reveal that unsecured personal loans granted by licensed money lenders reached a high level of 9.3% in 2024. Larger money lenders reflected that the default rate for borrowers with monthly income of HKD10,000 or less was 9.4%, and the rate for FDHs was 9.9% in 2023.

The Hong Kong government is proposing the following measures, which mainly focus on unsecured personal loans:

Enhancing The Regulation of Unsecured Personal Loans

It is proposed that a cap be set on (a) the aggregate amount of unsecured personal loans or (b) the “debt servicing ratio”.

If the borrower’s monthly income is HKD5,000 or less, (a) the aggregate unsecured personal loan cap is one month’s income and (b) the “debt servicing ratio” cap is 35%.  Where the monthly income is between HKD5,001 and HKD10,000, (a) the aggregate unsecured personal loan cap is two months’ income and (b) the “debt servicing ratio” cap is 40%.

For example, if a borrower’s monthly income is HKD5,000, his debt servicing amount is capped at HKD1,750 (35% of HKD5,000). If he takes a personal loan with an annual interest rate of 30% to be repaid in 12 monthly instalments, then the maximum principal amount will be HKD18,000.

Further, to prevent situations where borrowers take large loans before disappearing when their employment contracts end, the government proposes that repayment periods for unsecured personal loans shall not exceed the remaining term of the borrowers’ employment contracts.

Strengthening the Protection of Public Interest

Under the current regime, an intending borrower may provide a referee to the money lender if the referee has given written consent to act in respect of the loan application. The role of a referee is confined to the provision of information about an intending borrower, and the referee should not be required to repay the loan. Yet, employers of certain defaulting borrowers, including those employing FDHs who reside with them, and non-debtors are harassed by money lenders and debt collectors, causing social problems.

To further protect public interest, including the interests of FDH employers, the government proposes that… READ FULL ARTICLE

By: Rossana Chu and Beverly Fu at YYC Legal LLP

Note: This material has been prepared for general informational purposes only and is not intended to be relied upon as professional advice. Please contact us for specific advice.

Stay informed with the latest legal developments at Global Law Experts