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| Vice Consul Gino Soriano (middle, in blue) with leaders of migrant concern groups consulted on the PCG's proposals for amending the law regulating money lending in HK |
A host of proposals meant to enhance protection for migrant worker-borrowers, including doing away with referees for loans, has been submitted by the Philippine Consulate to the Hong Kong government in response to a call for public inputs on proposed amendments to the Money Lenders Ordinance.
The two-month public consultation on the document issued
by the Financial Services and Treasury Bureau (FSTB) of the Hong Kong
Government aimed at further tightening regulation of licensed money lenders, ended last
Aug. 22.
In drafting its proposals, the PCG consulted about a
dozen stakeholders, mostly non-government organizations that cater to MDWs. The resulting document reflected the general sentiment that
MDWs need to be better protected against unscrupulous money lenders.
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On the other hand, pro-employer groups like the
Democratic Alliance for the Betterment of Hong Kong, have pushed for the amendments, saying a number of employers have been blackmailed by debt collectors
into repaying money borrowed by their helpers.
In its proposals, the PCG urged that money lenders
be prohibited from asking borrowers to provide loan referees when applying for
unsecured loans.
The PCG said that based on its own experience and that of various concerned groups, many MDWs in distress over loan problems were not the actual
borrowers, but had been tricked or prevailed upon to sign as referees.
“The usual tactic employed by money lenders is to exert
pressure on the loan referee to the point that he or she will be compelled to
chase after the direct debtor for payment,” said the PCG in its response.
FSTB’s consultation document merely proposes that
referees be made to sign a document agreeing to such a role, and never to be made
to pay in lieu of the borrower. Doing away with loan referees was mentioned only in passing.
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| DAB officers say employers often bear the brunt of unpaid loans by their helpers |
Apart from further strengthening regulation and enhancing public education about responsible borrowing and avoiding unscrupulous money lenders, the PCG’s other main proposals include:
1) Setting up a Victims’ Protection Mechanism to encourage more MDWs targeted by rogue money lenders and collectors to come forward and file complaints with the police, instead of cowering in fear, lest their jobs be put in peril;
2) Requiring all money lenders to join the Credit Data Smart (CDS) platform, with penal sanctions for non-compliance. In the past, some money lenders deliberately avoided joining the CDS so they could extend loans to MDWs far more than they could reasonably repay given their credit history;
3) Limit the amount that a MDW could borrow, but in any case, the maximum loan cap should be no less than $19,900 spread out over a 12-month period. This amount according to the FSTB’s own study, is the average loan amount secured by MDWs at present.
In the FSTB’s draft proposal, the amount that a MDW could borrow should be no more than what he or she earns in a month. Thus, those earning $5000 a month or less could only borrow this much each time. For those earning between $5,001 to $10,000 the maximum loan amount is twice the monthly salary.
The alternative being proposed by the government is to set a limit of 35% of the borrower’s monthly salary as the repayment amount per month.
Thus, an MDW earning the minimum monthly wage of $4,990 and has no outstanding loan should be paying a maximum of $1,750 each month. Assuming that the money lender charges an annual interest rate of about 30% and the repayment period is 12 months, the maximum amount of loan that can be extended to the MDW earning the minimum wage is $18,000.
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| The government proposes to limit the amount of loan to MDWs to no more than their monthly pay |
According to the PCG, setting a higher loan cap could prevent MDWs seeking the help of loan sharks if the money they need to borrow is more than what is allowed under the new law.
Beyond tightening control over the operations of money lenders, the PCG also urged the Hong Kong government to look into migrant workers’ call for a living wage, or one that will provide for their and their family’s basic needs, so they need not borrow money in case of emergencies.
The PCG said that the various community organizations it consulted said the current minimum allowable wage of $4,990 is insufficient to address the migrant workers’ needs and has not kept up with the rising cost of inflation.
“PCG HK notes that the Hong Kong government has consistently acknowledged the invaluable contribution of MDWs to its economy. In this regard, a reexamination of the MAW of MDWs is also a necessary component of a holistic approach in tackling unmanageable MDW loans,” said the PCG.
