25th June 2024 – (Hong Kong) Hong Kong has witnessed an alarming surge in cases of foreign domestic helpers falling victim to the nefarious machinations of loan sharks. These unlicensed moneylenders employ deceptive and coercive tactics to ensnare vulnerable workers, predominantly from the Philippines, into cycles of debt and despair. The consequences are dire, with helpers and their employers facing relentless harassment, threats of violence, and even physical assaults. It is imperative that the Hong Kong government takes decisive action to combat this scourge and protect the rights of these indispensable members of society.

The plight of Filipino domestic helpers in Hong Kong mirrors the horrific experiences of their compatriots back home. According to a 2021 survey conducted by the Bangko Sentral ng Pilipinas (BSP), a staggering 45% of adult Filipinos had outstanding loans, with 14% borrowing from informal lenders.[1] Despite a slight easing of inflation in early 2024, many Filipinos continue to struggle to meet their basic needs due to elevated prices of essential commodities.[2] Desperate and lacking access to legitimate financial services, they turn to loan sharks, only to find themselves trapped in a nightmarish web of debt and intimidation.

The modus operandi of these predatory lenders is insidious. They lure unsuspecting domestic helpers with promises of easy money and enticing prizes, such as smartphones, in exchange for personal information and “loan consultations.” Once the hook is set, the loan sharks transfer funds into the workers’ accounts without proper documentation and demand repayment within a short timeframe, often with exorbitant interest rates and surcharges. A helper who borrows a meager HK$2,000 can quickly see their debt balloon to HK$4,800 or more—an increase of 140%.

When the hapless borrowers inevitably struggle to repay, the loan sharks unleash a torrent of abuse and intimidation. Debt collectors harass workers and their employers through incessant phone calls and menacing WhatsApp messages. They circulate photos of employers’ children and disseminate fake obscene pictures to shame and humiliate. In extreme cases, they vandalise homes with red paint—a notorious scare tactic—and even resort to physical violence, as seen in the brutal beating of one domestic helper.

The impact on the lives of these workers and their employers is devastating. Most helpers in these situations lose their jobs, as employers are understandably reluctant to continue the employment relationship under such duress. However, terminating the contract does not absolve the helper of their debts or put an end to the harassment. The cycle of misery persists, with workers often borrowing from multiple lenders in a desperate attempt to stay afloat.

To address this crisis, Hong Kong must draw lessons from the Philippines and take proactive measures to regulate the lending industry and protect foreign domestic helpers. The Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) has rightly called on the government to establish laws governing domestic helpers’ borrowing practices and urged employers to educate their workers about potential scams.

One crucial step is to impose strict limits on the amount that domestic helpers can borrow. Singapore, for instance, caps foreign workers’ loans at S$500 (approximately US$370). Hong Kong could adopt a similar approach, allowing helpers with contracts of six months or more to borrow no more than the equivalent of two months’ salary. This measure would not prohibit borrowing altogether but would ensure that workers only take on debts they can realistically repay.

Furthermore, Hong Kong must crack down on unlicensed lenders and strengthen the regulation of legitimate money lenders. As of April 2023, the city had over 2,000 licensed money lenders. The government should consider implementing more stringent licensing requirements and harsher penalties for those who engage in illegal or unethical practices. The statutory interest rate cap of 48% per annum should also be reviewed to prevent predatory lending.

Collaboration between government agencies, employers’ organisations, NGOs, and consulates is essential to raise awareness and provide support to vulnerable workers. The Labour Department has taken positive steps by working with law enforcement to promote anti-deception awareness among helpers and sharing information with source country consulates. However, more can be done to educate workers about financial prudence and encourage open communication with employers when financial difficulties arise.

Lawmaker Edward Leung Hei has suggested that the government explore requiring debt companies to share applicants’ information to assess their ability to handle debt. This proposal merits serious consideration, as it could help prevent over-indebtedness and identify potential red flags. However, any such measures must be implemented with due regard for privacy and data protection.

It is important to note that while some may argue for discriminatory borrowing caps on foreign workers, this approach is misguided and unfair. As Rowena Borja, vice-chairwoman of the Hong Kong Federation of Asian Domestic Workers Unions, rightly points out, locals are also capable of taking out loans, and individuals should be responsible for repaying their debts.[3] The focus should be on promoting financial literacy, regulating lenders, and protecting all borrowers from exploitation, regardless of their nationality.

The scourge of loan shark harassment is not unique to Hong Kong or the Philippines. It is a global problem that preys on the most vulnerable members of society. However, by taking decisive action and learning from the experiences of other nations, Hong Kong can set an example for the rest of the world in safeguarding the rights and well-being of its foreign domestic helpers.