Low value, personal loans have often been the subject of regulatory enquiry. Whether it be high interest rates, unclear disclosures or inappropriate debt collection practices.
However, a loans business operating in the People’s Republic of China has recently been reported as operating in a manner which even the most morally unscrupulous would have difficulty defending. A whole new course of “predatory lending” has been established (we hope, temporarily).
In a practice that has been reported globally, lenders through a peer-to-peer lending platform have been requiring naked digital photographs of female borrowers to be provided as security for their low value loans. The “security” is then used as a form of blackmail in the event that the borrower does not make repayments under the loan, with the threat that the photographs will be publicly distributed (presumably on the internet).
Could the practice be adopted in Hong Kong?
Leaving aside the grossly unethical approach to lending which such an arrangement involves, Hong Kong’s regulatory framework for money lenders specifically prohibits the taking of photographs as security for loans.
Prohibited security under Regulation 12 of the Money Lender Regulations (Cap 163A) includes:
- photographs, whether developed or not, of the borrower or surety or of any member of the family of the borrower or surety;
- bank savings or deposit account books; and
- identity cards, passports, warrant cards, or other documents establishing the identity or nationality of the holder.
While lenders that adopt such practices may be assumed to be operating without regard to their legal obligations, some comfort can be taken by the fact that there is a clear prohibition on the taking of these forms of security by regulated money lenders in Hong Kong.
HKMA-regulated banks are also subject to a veritable feast of credit risk management and broader prudential standards – nude photos are unlikely to satisfy any of them.