Spark Deep Dive: How loan sharks target desperate Hongkongers

When his grandmother died, Hongkonger Fai Chan inherited her flat in eastern Kowloon valued at HK$3 million in 2023. But first, he had to pay a HK$1.2 million premium to the city’s Housing Authority. He did not have the money. That was the start of his journey into the world of borrowing at high interest rates and sinking deep into debt.

He had been shunned by banks due to a past bankruptcy. So he turned to two well-known finance companies for the money. Each lent him HK$600,000, and he paid the Housing Authority.

But their 40 per cent annual interest rate over 10 years meant he had to repay HK$22,000 a month, which swallowed almost his entire salary of HK$20,000 to HK$30,000.

The punishing monthly payments became unbearable, and he turned to smaller, less regulated lenders to borrow even more. Soon, he was juggling loans from six different places, all licensed lenders. He was taking on new debt to pay off his old ones.

Chan never missed a payment but lived in constant anxiety. His phone number was shared among lenders. These loan sharks bombarded him with offers of “help” if he needed more cash.

“Over WhatsApp, they will say, ‘just come over and get money in 30 minutes’,” Chan recalled. “But once you get there, they will scrutinise your request and get all your information, your family’s telephone numbers too.”

He learned that hidden handling fees were the biggest trap. A borrower taking out a HK$10,000 loan might only receive HK$8,000 after a 20 per cent fee was deducted. However, they would still have to repay the full HK$10,000 plus interest.

The law prohibits lenders from charging fees over the stated interest rate.

Seeing him struggle, a friend lent Chan HK$180,000. The loan enabled him to break the cycle of borrowing and sinking deeper into debt. By then, Hong Kong’s property market had slumped. The value of his grandmother’s flat sank to HK$1.2 million.

He sadly gave up the flat he inherited, selling it for HK$1.8 million. After repaying his friend and settling his debts, he was left with virtually nothing.

Even now, his phone still occasionally buzzes with messages from lenders. Some falsely claim he still owes them money.

Looking back, he said he never would have accepted his inheritance if he had known the trouble it would bring.

Staff writers

1. According to the news, which of the following is true?

(1) Chan had to borrow money because of a flat he inherited from his mother.
(2) At one point, Chan was dealing with loans from six places, none of which were licensed lenders.
(3) Lenders are not allowed to charge fees over the stated interest rate.
(4) Chan got out of debt after a friend lent him money.

A. (1), (3) only
B. (2), (3) only
C. (2), (4) only
D. (3), (4) only

2. According to the news, list TWO ways loan sharks manipulate their victims.

3. List ONE positive and ONE negative outcome of Chan’s experience with predatory loan companies.

1. What is being shown in the illustration? How does it relate to the information in the news?

2. Based on your own knowledge and what you learned in the news, how did predatory lenders get the nickname “loan shark”?

bankruptcy: a legal process that helps a person or business who cannot repay their debts. Bankruptcy grants them relief by either wiping out what they owe or making a plan for them to pay over time. However, they may be forced to sell things they own, and it could be more difficult for them to get loans in the future.

interest rates: the amount you are charged for borrowing money – a percentage of the total amount of the loan. For example, if you borrow HK$1,000 at a 10 per cent interest rate, it means you will repay HK$1,100.

loan sharks: people or businesses that lend money but charge extremely high interest rates and may even use threats of violence to collect debts

scrutinise: to examine something very carefully in order to discover information

1. D

2. One way loan sharks manipulate their victims is by bombarding them with messages and offers of “help”. Even after Chan paid off all his debts, loan sharks continued to contact and harass him, falsely claiming that he still owed them money. This can stress out vulnerable and unaware individuals.

Additionally, moneylenders collect all of a borrower’s contact information, as well as that of their family and friends, so they can harass others in the victim’s network.

Finally, loan sharks charge hidden handling fees, which take advantage of vulnerable individuals who lack the funds to repay their debts. They may resort to borrowing more money from other loan sharks to pay the fees, continuing the cycle.

3. A positive outcome for Chan was that he managed to break the cycle of borrowing and repaying, thanks to a friend lending him money. He was no longer in debt.

However, the value of the flat he inherited dropped by more than half, forcing him to sell it. Unfortunately, he was left with very little money after paying off his debts.

1. This cartoon shows a man stranded on a boat surrounded by sharks. The man seems desperate to grab the money being handed to him by a ‘finance company’, as it says on the sleeve. This is a nod to the information in the news because the man is in a vulnerable situation and needs cash. He is willing to take the money from this so-called finance company. All the while, he is surrounded by sharks - which represent loan sharks - that are ready to prey on him.

2. Loan sharks likely got their name because sharks are predatory creatures that hunt their prey. Similarly, loan sharks also seek out vulnerable people, hunting them down and preying on their assets. (accept all reasonable answers)