Domestic workers had to submit their passports, employment contracts, and employers’ contact information to get the money, Chief Inspector Ho Yan-kit said.

Hong Kong police have arrested 46 people allegedly involved in an illegal money lending scheme, in which they posed as phone retailers and offered loans to domestic workers with annual interest rates as high as 400 per cent.

Police said on Tuesday that 17 men and 29 women, aged 20 to 76, were arrested on suspicion of violating Hong Kong’s Money Lenders Ordinance, possessing unlawfully obtained travel documents, and money laundering.

Under Hong Kong’s regulations, the maximum interest rate for loans must not exceed 48 per cent a year.

However, illegal lenders masquerading as two phone retailers targeted domestic helpers in need of small loans, charging them annual interest rates as high as 397 per cent, Chief Inspector Ho Yan-kit of the Hong Kong Island regional crime unit told reporters on Tuesday.

“[Illegal lenders] abused the victims’ need for money and imposed unreasonable terms, handling fees, advance repayment and hidden costs, while forcing them to buy unnecessary electronics to get the loans,” Ho said in Cantonese.

Domestic workers had to submit their passports, employment contracts, and employers’ contact information to get the money, he said, adding that the lenders would harass both workers and their employers if repayments were missed.

One of the arrested phone retailers allegedly lent HK$3,500 to a domestic worker on paper but provided only HK$1,000 in cash after forcing the debtor to buy a cell phone for HK$1,300 and pay additional fees.

The debtor then had to repay HK$2,942 in four months, amounting to an annual interest rate of 102 per cent, according to Ho.

According to the chief inspector, another victim who engaged with a different phone retailer received HK$1,950 in cash – less than what she intended to borrow – with the rest of the loan amount made up for in cash vouchers to be used at the phone retailer. She then had to repay HK$6,015 within three months – equivalent to an annual interest rate of 397 per cent.

Police launched a surprise inspection of the two retailers on Sunday, uncovering numerous receipts and loan records. Ho said police estimated the first firm had loaned HK$9 million to about 1,500 people in the past six months, while the second had lent HK$30 million to approximately 5,000 people.

The firms had operated for “a few years,” Ho said.

When asked if the arrests were long overdue, Ho said authorities had only received complaints in recent months, adding that some domestic workers were reluctant to report these high-interest loans to police.

Illegal lending websites

At the same briefing, Chief Inspector Wong King-shing of the Central District crime unit said police had also arrested members of four illegal lending websites and the mastermind of a local lending syndicate.

Since July, police have been receiving reports of domestic workers falling victim to illegal lending websites that demanded their passports and employment contracts for loans.

Wong said many domestic workers were directed to these websites through friends or social media and were instructed to download an unknown application.

Some websites used names similar to licensed financial companies, he added.

Wong said these websites would immediately withhold almost half the borrowed amount as “administrative fees,” with some cases reaching annual interest rates of 3,000 per cent.

This local syndicate had operated for at least a year, involving 140 victims and approximately HK$700,000 in loans, he added.

Chrystie Lam, president of the Coalition of Global Home Service Sustainable Development, an NGO focusing on family and domestic worker issues, urged domestic workers not to borrow from unregulated lenders or share travel documents with third parties.

“Resigning or borrowing repeatedly [for repayment] after receiving harassment from lenders is not a solution,” Lam said in Cantonese at the briefing, adding that workers in such situations should report to authorities.

She also encouraged employers to talk to their domestic workers if they had fallen prey to high-interest loans instead of rushing to terminate them.

Sources: HKFP