Financial Secretary: Set a repayment income ratio cap for low-income individuals, with a monthly income of 6000 capped at 35%

To strengthen the regulation of lenders, the Financial Services and the Treasury Bureau conducted public consultations on several key points from June to August last year. The authorities announced today (13th) the consultation summary and specific measures to enhance the regulation of licensed lenders to address the issue of over-borrowing and better protect citizens. The relevant measures will be implemented in two phases. The first phase measures listed in the consultation summary mainly cover the establishment of a "repayment-to-income ratio" cap for unsecured personal loans for low-income individuals, prohibiting lenders from requiring borrowers to provide loan consultants, and stipulating that lenders must include risk warning phrases specified by the Companies Registry in their lending advertisements. These measures will be implemented in August this year. The second phase measures related to "Credit Reference" will be implemented in June next year. Regarding the "repayment-to-income ratio" cap, it limits the borrowing amount for low-income individuals. For those with a monthly income of HKD 6,000 or below, the repayment ratio cannot exceed 35%; for those with a monthly income between HKD 6,001 and HKD 12,000, the repayment ratio cap cannot exceed 40%. The thresholds will be reviewed every two years. For individuals without a fixed income, the bureau recommends that lenders calculate the average monthly income based on the borrower's income records from the past 3 or 12 months, taking the higher amount. With an annual interest rate of 30% and a repayment period of 12 months, under the new regulations, the maximum loan amounts for the aforementioned two categories of borrowers are approximately HKD 22,246 and HKD 50,847, respectively. As for the second phase measures related to "Credit Reference," the Financial Services and the Treasury Bureau proposes that starting from June 1 next year, all lenders engaged in unsecured personal loan business must provide relevant personal credit information of borrowers to the credit information platform "Credit Reference" every 30 days. The first six months will be a trial period, involving about 800 lending institutions, and the information to be provided includes credit limits and repayment records. The Financial Services and the Treasury Bureau and the Companies Registry are drafting amendments to the relevant lender licensing conditions and administrative guidelines and have discussed with the judicial authorities to update the issued lender licenses in phases to align with the implementation timeline of the measures. From June to August last year, the Financial Services and the Treasury Bureau conducted public consultations on several key points, including strengthening the regulation of unsecured personal loans, enhancing public interest protection, optimizing and improving borrowers' affordability assessments for unsecured personal loans, optimizing complaint handling, strengthening publicity and education, and optimizing the lender regulation system. During the consultation period, the authorities received a total of 150 submissions from various sectors of society, and also provided a briefing to the Legislative Council's Financial Affairs Committee and held briefing sessions to explain the details to the lending industry, professional organizations, and non-governmental organizations. A spokesperson for the Financial Services and the Treasury Bureau stated: "The government is determined to further strengthen the regulation of lenders to protect citizens' rights. We are pleased to see strong support from all sectors of society for enhancing the regulation of lenders and agree that targeted measures should be taken to address the issue of over-borrowing. Respondents generally supported the main measures proposed in the consultation document and provided valuable opinions on the specific details of each measure. We will brief the Legislative Council's Financial Affairs Committee next month on the consultation summary and the details of the various measures." The Financial Services and the Treasury Bureau hopes that all sectors of society will continue to support the implementation of measures to address the issue of over-borrowing through multiple approaches. The Financial Services and the Treasury Bureau and the Companies Registry will maintain close communication with industry organizations through various channels to provide information and guidance to lenders, ensuring the smooth implementation of the measures