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| New rules on referees explained to FilCom by HK government officials last April |
Starting from yesterday, Aug. 1, all licensed money lenders are no longer allowed to require borrowers to provide a referee (or “reference” as it is commonly known among migrant workers), who end up being harassed by collectors if the loan is in default, or the borrower can no longer be found.
In addition, the “debt servicing ratio”caps which limit the amount of loan that can be extended to borrowers also took effect.
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| PINDUTIN ITO PARA SA DETALYE |
Under this mechanism, those earning HK$6,000 or less per month can only be granted loans for which the monthly repayment does not exceed 35% of their salary. For those earning between HK$6,001 to HK$12,000 the repayment cap is set at 40% of their monthly income.
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| The debt servicing cap explained |
The new measures
which would impact greatly on migrant domestic workers whose salaries generally
fall within the regulated amount, are part of the government’s effort to regulate
the activities of licensed money lenders.
According to a
statement issued by the government yesterday, Saturday, the debt caps “will not
only protect the public, but also encourage money lenders to grant loans more responsibly,
thereby helping to address the issue of excessive borrowing and foster a more
healthy market development.”
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| PINDUTIN PARA SA DETALYE |
The stricter regulations
were previously opposed by some sectors during a three-month public consultation last year, saying limiting the amount that borrowers, particularly MDWs, would prevent
them obtaining loans that should be significant enough to fund projects like
building a home or investing in business.
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| How to determine the loan cap for affected borrowers |
But others
supported the restrictions, saying excessive borrowing by low-income workers has
spawned many problems, including relentless harassment by collectors, and
borrowers resorting to crime like theft, or becoming depressed or suicidal.
Employers’ groups
also lobbied heavily for the restrictions, saying they have been harassed and threatened
by collectors after their debt-saddled helpers left their employ.
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| Basahin ang detalye! |
The second phase
of the new regulations will take effect on June1 next year. This phase will
require all money lenders engaged in providing unsecured loans to regularly
submit personal credit information of their relevant borrowers to the Credit Data
Smart (CDS) under government supervision.
Money lenders will
also need to meet specific requirements to join the CDS to obtain personal
credit information on their loan applicants.
The Financial
Services and the Treasury Bureau (FSTB) which is the prime movers of the new
regulations called on the community to support their implementation so as to
curb problems associated with excessive borrowing.
