By Arthur Chan

Hong Kong, 11 August 2025: Proposals have been put forward to enhance regulation of licensed money lenders, with the authorities seeking to curb predatory practices, high interest rates and dubious tactics such as intimidation and harassment. The move has been widely welcomed amid growing concern over the social impact of excessive borrowing and a rising number of complaints against debt collectors.

The suggested measures are outlined in a public consultation paper from the Financial Services and the Treasury Bureau (FSTB). In seeking to better protect borrowers and crack down harder on miscreant lenders, the government says it is trying to find the correct balance between sufficient access to credit and preventing abuse. The proposals include:

Loan limits: Setting an aggregate cap on unsecured personal loans based on a borrower’s monthly income; there could also be debt ratio, whereby repayments must not exceed a certain percentage of income. The limits would be strictest for low income earners. Government figures reveal that domestic helpers, whose monthly minimum wage is HK$4,990, account for 26% of the unsecured personal loan transaction market, the largest share by occupation, while their default rate is almost 10%, the highest among such borrowers.

Referee protection: Enhancing verification measures for loan referees. Under the present licensing conditions, a referee cannot be held liable for a loan and must provide written consent but, in practice, debt collectors are known to hound them to put pressure on the debtor. There are also numerous instances where referees’ names are accepted without their consent. The FSTB is also considering the idea of banning the use of referees altogether to stop harassment of third parties.

Credit reference data: Requiring all licensed money lenders to regularly submit personal credit information of their borrowers to the centralised Credit Data Smart (CDS) system – which provides consumer credit references – to get a better picture of borrowers’ debts. So far, only 36 out of 2,048 licensed lenders have joined CDS, although it is acknowledged that these 36 include the largest loan companies and account for about 64% of the loan business of all money lenders.

Handling complaints: Making it easier for borrowers to register grievances against money lenders and for the procedure to be more transparent. Communication and exchange of intelligence between the regulatory authorities and police will be strengthened. Money lenders will also be required to demonstrate responsible handling of complaints.

Education: The FSTB will step up publicity and education, with a particular focus on low income earners and young people, to help citizens understand the importance of prudent borrowing. It is promising a multilingual and multipronged approach.

The public consultation ends on 22 August but, already, some legislators and NGOs are concerned the proposals are too narrowly focused. There are questions over what can be done to tackle the problem posed by intermediaries who enable predatory lending and charge excessive handling fees that reduce the effective loan amount. Online lending platforms, which do not have a licence from Hong Kong, are another headache.

Concerns have also been expressed that the proposed cap on borrowing will send low income earners, particularly domestic helpers, to the “grey market” of unlicensed money lenders where extortionate interest rates and aggressive tactics – including threats, intimidation and public shaming – are commonplace.

In conclusion, it is clear that increased regulation of the money lending sector is both desirable and overdue. In this regard, the public consultation is a worthwhile exercise that will allow the FSTB to take all views on board. We await the outcome with interest.

Arthur Chan is a Partner with BC&C. He specialises in Criminal Litigation, being a Recommended Criminal Lawyer in the Doyles Guide rankings, and has a strong record in cyber fraud recovery claims. As well, he develops a broad range of civil and commercial litigation such as immigration, personal injuries and employment issues. He can be contacted at Arthur@boasecohencollins.com.