Xu Zhengyu: Strengthening regulation and supervision of licensed lenders will be implemented in two stages, multiple measures will be taken to address the problem of excessive borrowing.

On April 10th, the Financial Secretary of Hong Kong, Paul Chan Mo-po, introduced proposals and measures to strengthen regulation of licensed money lenders. These measures include enhancing regulation of unsecured personal loans, optimizing and improving borrower affordability assessment in six aspects. He stated that the Treasury Bureau and the Companies Registry are currently drafting revisions to the licensing conditions for money lenders and administrative guidelines, and have discussed with judicial bodies the phased updates to existing money lender licenses to match the implementation timeline of the measures. Paul Chan mentioned that from June to August last year, Hong Kong conducted a public consultation on strengthening regulation of money lenders, receiving a total of 150 submissions from various sectors of society. This process included briefings to committees and organizing sessions to introduce details of the measures to the money lending industry, professional organizations and non-governmental organizations. The response was overall positive, supporting targeted measures to address excessive borrowing and enhance regulation of money lenders. Following the release of the consultation summary and specific measures on March 13th this year, the implementation will be in two phases, scheduled for August this year and June next year, to ensure a gradual and smooth operation of the new measures. The measures include: 1. Strengthening regulation of unsecured personal loans - Money lenders will now be required to determine the actual loan amount and repayment period based on the borrower's maximum "repayment-to-income ratio" and remaining duration of employment contract when entering into unsecured personal loan agreements with low-income individuals. The new licensing conditions will come into effect on August 1st this year. Additionally, the income thresholds for borrowers have been adjusted to reflect realistic levels - for those earning up to or equal to HK$6,000 per month, the maximum "repayment-to-income ratio" is 35%; for those earning between HK$6,001 to HK$12,000 per month, the ratio cannot exceed 40%. Furthermore, for borrowers with irregular income, money lenders will be required to calculate the average monthly income based on the higher of the borrower's income record from the past three or twelve months. 2. Strengthening consumer protection - Money lenders will be prohibited from requesting borrowers to provide loan references when applying for unsecured personal loans. This provision will be enforced with revised licensing conditions starting August 1st this year. 3. Optimizing and improving borrower affordability assessment - To enhance the completeness of personal credit information on the "Credit Reference Agency" platform, money lenders engaging in unsecured personal loan business will be required to provide borrowers' personal credit information to the Agency every 30 days. The new licensing conditions for this will be implemented from June 1st next year, with the first six months being a trial period. The operator of the "Credit Reference Agency," namely the Hong Kong Interbank Clearing Limited, will establish an online platform and provide technical support for money lenders to upload borrowers' personal credit information. Money lenders will not incur development costs for using the online platform. In order to encourage more detailed and effective loan application assessments, it is deemed necessary to have more money lenders join the "Credit Reference Agency." The threshold for money lenders to join the Agency has been lowered from HK$100 million to HK$50 million in unsecured personal loan business. Moreover, for loans involving borrowers with monthly incomes below HK$12,000, money lenders are required to join the Agency. This second phase of new licensing conditions is planned to be implemented from June 1st next year. It is estimated that around 340 money lenders will need to join and use the "Credit Reference Agency" for loan application assessments, accounting for about 94% of the overall unsecured personal loan market. 4. Optimizing complaint handling - The Companies Registry and the police have established complaint hotlines and a "Licensed Money Lender Complaint Hotline Directory" to help the public access contact information and complaint channels for money lenders. In addition, the Companies Registry will enhance the supervision of money lenders' complaint handling systems and procedures to ensure proper follow-up on complaints. 5. Enhancing publicity and promotion - Efforts will be made to promote the importance of prudent borrowing to foreign domestic workers, youth, and low-income individuals. Collaboration with non-governmental organizations will be strengthened to develop financial education resources and information on borrowing, enhancing the financial literacy of society as a whole. Education and regulation will go hand in hand to equip citizens with sound financial concepts. 6. Optimizing the regulatory system for money lenders - The Money Lenders Ordinance will be revised to empower the Companies Registry to be responsible for issuing and regulating money lender licenses uniformly, as well as publishing a list of repeat offender money lenders on its website to enhance transparency. Specific legislative amendment proposals will be consulted for public opinions.