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

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 Treasury 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 regulate 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 money-lending 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 low-interest 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.

cherry@chinadailyhk.com

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. Justin Chin / Bloomberg

(HK Edition 12/01/2016 page9)