Hong Kong: Loan-sharking, including reports of violence against borrowers and the state's response
|Publisher||Canada: Immigration and Refugee Board of Canada|
|Publication Date||21 June 2011|
|Citation / Document Symbol||HKG103756.E|
|Cite as||Canada: Immigration and Refugee Board of Canada, Hong Kong: Loan-sharking, including reports of violence against borrowers and the state's response, 21 June 2011, HKG103756.E, available at: http://www.refworld.org/docid/4e4228a52.html [accessed 26 July 2014]|
Loan-sharking in Hong Kong
An adjunct professor of political science at the University of Waterloo, who has published material about crime in Greater China, indicated, in correspondence with the Research Directorate, that loan-sharking in Hong Kong is defined as the act of offering loans to borrowers who are then expected to pay high interest rates in a short period of time (Adjunct Professor 4 May 2011). Hong Kong-based media sources have reported on various loan shark operations in Hong Kong that charge annual interest rates that range from over 500 percent (SCMP 29 Oct. 2009; The Standard 31 July 2009) to 2,400 percent (SCMP 23 June 2010), even though the legal rate for annual interest in Hong Kong cannot exceed 60 percent (ibid.; ibid. 29 Jan. 2011; Hong Kong 1980, Sec. 24).
In correspondence with the Research Directorate, an associate professor of criminal justice at Xavier University, who has published on Hong Kong policing and criminal law in China, indicates that in Hong Kong, loan-sharking is a "form of predatory lending practices, often associated with triad society, enforced by force or unconscionable mean" (3 May 2011). Several sources also link loan-sharking with triads (Adjunct Professor 4 May 2011; The Standard 28 Aug. 2009; SCMP 23 June 2010). The Hong Kong Journal explains that triads were initially formed for political reasons, but that by the twentieth century they had transformed into criminal gangs (2009, 1). Sources indicate that triads are responsible for approximately three percent of Hong Kong's overall crime rate (Hong Kong Lawyer Jan. 2011; Hong Kong Journal 2009). Some triads involved in loan-sharking also reportedly operated gambling dens and illegal bookmaking operations (Hong Kong 12 Oct. 2010; SCMP 23 June 2010), sold contraband cigarettes (ibid.; Hong Kong 12 Oct. 2010), trafficked drugs (SCMP 23 June 2010; Hong Kong Lawyer Jan. 2011), smuggled humans (Hong Kong 12 Oct. 2010), or operated prostitution rackets (Hong Kong Lawyer Jan. 2011).
Incidents of violence
The South China Morning Post reports that in September 2009, a witness who testified in a loan-sharking case was attacked outside his apartment, sustaining multiple stab wounds in the mouth, lower jaw, neck and right arm (6 Sept. 2009). The victim, who reportedly appeared in court a week prior to the attack, was hospitalized "in serious condition" (SCMP 6 Sept. 2009).
Loan sharks reportedly use intimidation when borrowers do not pay back their debts (Adjunct Professor 4 May 2011; Associate Professor 3 May 2011; SCMP 23 June 2010). The Adjunct Professor stated that if borrowers do not pay, loan shark syndicates "usually send gangsters to engage in intimidation activities," such as splashing red paint on the door of the borrower's home (4 May 2011). A superintendent of the Hong Kong police, commenting on one powerful triad gang, stated that they "'used illegal debt-collecting tactics such as nuisance calls, home visits, threats, assaults or pouring paint'' to obtain money on default loans (qtd. in SCMP 23 June 2010). He further stated that, if they still did not pay back the loan, some debtors were forced to carry out illegal activities for the gang, such as selling contraband cigarettes, working at gambling dens, or collecting money from other debtors through intimidation (ibid.). In another case, the Chief Inspector of a regional crime unit in Hong Kong noted that some debtors who were unable to make interest payments to a loan-sharking syndicate handed over their personal bank accounts, which were then used by the syndicate to deposit payments from other debtors or to launder money (SCMP 29 Jan. 2011). According to the South China Morning Post, one person who missed an interest payment reportedly received warnings by letter and telephone, followed by having red paint poured on the door of his apartment (ibid.).
As mentioned, Hong Kong laws ban annual interest rates exceeding 60 percent (ibid. 23 June 2010; ibid. 29 Jan. 2011). The Hong Kong Money Lenders Ordinance was enacted in 1980 with the stated purpose of providing for
the control and regulation of money lenders and money-lending transactions, the appointment of a Registrar of Money Lenders and the licensing of persons carrying on business as money lenders; to provide protection and relief against excessive interest rates and extortionate stipulations in respect of loans; to provide for offences and for matters connected with or incidental to the foregoing; and to repeal the Money-lenders Ordinance 1911. (Hong Kong S.A.R. 1980)
Section 24 of the Hong Kong Money Lenders Ordinance states:
- Any person (whether a money lender or not) who lends or offers to lend money at an effective rate of interest which exceeds 60 per cent per annum commits an offence.
- No agreement for the repayment of any loan or for the payment of interest on any loan and no security given in respect of any such agreement or loan shall be enforceable in any case in which the effective rate of interest exceeds the rate specified in subsection (1). (ibid.)
- Any person who commits an offence under this section shall be liable-
- on summary conviction to a fine of $500000 [62,421.76 Canadian dollars (CAD) (XE.com 21 June 2011a)] and to imprisonment for 2 years;
- on conviction on indictment to a fine of $5000000 [624,236.40 CAD (XE.com 21 June 2011b)] and to imprisonment for 10 years. (Amended 82 of 1994 s. 33) (ibid.)
According to the Associate Professor, in November 2006, the Secretary for Financial Services and the Treasury said that "[f]rom the law enforcement point of view, Section 24 is generally an effective tool in curbing the loan-sharking activities in Hong Kong" (3 May 2011).
In 2002, the Hong Kong Special Administration Region's (SAR) Licensed Money Lenders Association (LMLA) issued the Code of Money Lending Practice for its members (Hong Kong S.A.R. n.d.). Some of the objectives of the code are to promote good money lending practices; to increase transparency; and to promote a fair relationship between members and customers (ibid.).
The Adjunct Professor at the University of Waterloo stated that the government of Hong Kong has responded to loan-sharking by "encouraging victims to report such issues to the police," and by providing "police protection of victims concerned, police investigation of such issues, and possible legal prosecution of suspected criminals who engage in such loan-sharking and intimidating activities" (4 May 2011). Similarly, the Associate Professor at Xavier University stated that the Hong Kong SAR treats loan shark offences "seriously" and expressed the opinion that the SAR is "doing a competent job in keeping loan sharks under control" (3 May 2011).
Media sources have reported on several cases between 2009 and 2011 in which police officers arrested gang members involved in loan-sharking operations (The Standard 28 Aug. 2009; SCMP 29 Oct. 2009; ibid. 23 June 2010; ibid. 29 Jan. 2011; Hong Kong 12 Oct. 2010).
For example, in July 2009, sources reported that the police shut down a loan-sharking gang and made seven arrests (IPRSID 30 July 2009; The Standard 31 July 2009; SCMP 31 July 2009). The group reportedly advertised in magazines and online forums that potential borrowers could obtain low-interest loans without proof of income (ibid.; IPRSID 30 July 2009; The Standard 31 July 2009). According to The Standard, over 150 people borrowed money (ibid.). Those who did not pay the interest, which was up to 540 percent annually, were "harassed" by telephone and, in some cases, forced to give the gang access to their bank accounts (ibid.).
In August 2009, reports The Standard, undercover police shut down a suspected loan shark group that posed as legitimate companies in eight locations on Hong Kong Island and East Kowloon (28 Aug. 2009). The police arrested 17 people suspected of "acting in breach of money-lending licensing conditions, false imprisonment, criminal intimidation and triad-linked activities" (The Standard 28 Aug. 2009). This arrest is corroborated by the South China Morning Post, which notes that the undercover police officers, who posed as loan applicants, were threatened into borrowing money and prevented from leaving (28 Aug. 2009).
The South China Morning Post reports that in June 2010, the police arrested 91 people from a powerful Tai Po triad gang who were involved in several illegal activities, including running a loan-sharking operation that charged annual interest of up to 2,400 percent (23 June 2010). Those arrested included two gang leaders and 15 associates suspected of "drug trafficking, illegal bookmaking, recruitment of people into a triad society, lending money at excessive interest rates and operating gambling dens" (SCMP 23 June 2010). Approximately 100 police officers carried out the arrests, which followed a four-month undercover operation in which an officer infiltrated the gang (ibid.).
In January 2011, the South China Morning Post reports that after an 11-month investigation, police officers broke up a loan shark syndicate that lent money to 140 people at annual interest rates of up to 1,000 percent (29 Jan. 2011). The investigation began in February 2010 when one of the victims sought help from the police after paying more than 32,000 Hong Kong dollars on a loan of 5,000 Hong Kong dollars (SCMP 29 Jan. 2011). When he defaulted on his interest payments, red paint was poured on his front door (ibid.). Another victim of the same loan shark syndicate contacted the police in March 2010 after being threatened by the gang (ibid.).
A September 2008 article by Hong Kong's Information Services Department indicates that a police constable was involved in "aiding and abetting a person to lend money at an excessive rate exceeding 60% per annum" as well as dealing with "the proceeds of an indictable offence" (Hong Kong 8 Sept. 2008). The policeman was convicted and sentenced to 12 months in jail and suspended for two years (ibid.).
This Response was prepared after researching publicly accessible information currently available to the Research Directorate within time constraints. This Response is not, and does not purport to be, conclusive as to the merit of any particular claim for refugee protection. Please find below the list of sources consulted in researching this Information Request.
Adjunct Professor of Political Science, University of Waterloo. 4 May 2011. Correspondence with the Research Directorate.
Associate Professor of Criminal Justice, Xavier University, Cincinnati, Ohio. 3 May 2011. Correspondence with the Research Directorate.
Hong Kong. 12 October 2010. Hong Kong Government News. "Police Anti-triad Operation Netted 39 People." (Factiva)
_____. 8 September 2008. Information Services Department. "Policeman Convicted for Loan-Sharking."
The Hong Kong S.A.R. 1980. Money Lenders Ordinance. (International Centre for Asset Recovery)
_____. N.d. Licensed Money Lenders Association Ltd. (LMLA). Code of Money Lending Practice.
Hong Kong Journal. 2009. Harold Traver. "Controlling Triads and Organized Crime in Hong Kong."
Hong Kong Lawyer. January 2011. "42 Accused Triad Gangsters in Court After Police Raids."
IPR Strategic Information Database (IPRSID). 30 July 2009. "Loan Shark Gang Arrested." (Factiva)
South China Morning Post (SCMP) [Hong Kong]. 29 January 2011. Clifford Lo. "Up to 1,000pc Interest Charged by Loan Sharks." (Factiva)
_____. 23 June 2010. Clifford Lo and Michael Martin. "91 Arrests Smash Tai Po Triad, Police Say." (Factiva)
_____. 29 October 2009. "In Brief." (Factiva)
_____. 6 September 2009. Clifford Lo. "Witness in Triad Loan Shark Case Slashed Repeatedly Outside Flat." (Factiva)
_____. 28 August 2009. Danny Mok. "17 Arrested over Loan Shark Scams." (Factiva)
_____. 31 July 2009. Clifford Lo. "Raids Nab Loansharks Charging Victims 540pc." (Factiva)
The Standard [Hong Kong]. 28 August 2009. Diana Lee. "'Legitimate Loan Sharks' Busted in Undercover Sting."
_____. 31 July 2009. Diana Lee. "Loan Shark Ring Charged Up to 540pc Interest."
XE.com. 21 June 2011a. "Currency Converter."
_____. 21 June 2011b. "Currency Converter."
Additional Sources Consulted
Oral sources: The Associate Director and the Director of the Centre of Comparative and Public Law at the University of Hong Kong were unable to provide information for this Response. Attempts to contact an associate professor of criminal law, a visiting professor in the Faculty of Law and an assistant professor in the Department of Sociology at the University of Hong Kong, as well as a representative of the Asia Crime Foundation, were unsuccessful.
Internet sites, including: Amnesty International; Asia Observer; Asia Society; Asia Times Online; Crime and Misconduct Commission; Global Integrity Report; Human Rights Watch; International Centre for the Prevention of Crime; International Crisis Group; International Herald Tribune; International Relations and Security Network; South China Morning Post; The Standard; Transparency International; United Nations (UN) - Office on Drugs and Crime, Refworld; United States Department of State; World Bank.