The Law Reform Commission released its report on The regulation of debt collection practices on 29 July 2002. The aim of the report is to review the adequacy of the existing law that governs the way in which creditors, debt collection agencies and debt collectors collect debts in Hong Kong outside the court system, and to recommend such changes in the law as may be thought appropriate.
The Commission recognises that it is a fundamental precept in our society that individuals should honour their debt obligations. Yet, it is equally important that debtors and members of the public should be protected by law from debt collection methods that overstep the bounds of acceptable pressure.
Having reviewed available statistics, the level of protection afforded by the existing law, as well as, measures taken in other jurisdictions, the Commission has made the following recommendations:
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A criminal offence of harassment of debtors and others should be created, such that it would be an offence if a person, with the object of coercing another person to repay a debt-
- harasses the other with demands for payment which, in respect of their frequency or the manner or occasion of making any such demand, or of any threat or publicity by which any demand is accompanied, are likely to subject him or members of his family or household or any other person to alarm, distress or humiliation;
- falsely represents, in relation to the money claimed, that criminal proceedings lie for failure to pay it;
- falsely represents himself to be authorised in some official capacity to claim or enforce payment; or
- utters a document falsely represented by him to have some official character or purporting to have some official character which he knows it has not.
Paragraph (a) has no application in respect of anything done which is reasonable for the purpose of either securing the discharge of an obligation due, or believed to be due, or for the enforcement of any liability by legal process.
- Debt collection agencies should be subject to a statutory licensing system under which it should be a criminal offence to collect debts as a business without a valid licence.
- The proposed licensing regime should cover both consumer debts and commercial debts, and the Administration should have due regard to the experience of other jurisdictions in determining the appropriate body to carry out the licensing of debt collectors and in devising an efficient and cost-effective licensing regime.
- The licensing requirement of the proposed statutory licensing regime should include individual debt collectors as well as debt collection agencies, but support staff of collection agencies who are not involved in communicating with any debtors, referees or their families and friends, would not require licensing. Communication in this context includes written, verbal, electronic and personal visits forms of communication.
- Only a person or corporation carrying on business as a debt collector in Hong Kong, or advertising, announcing or holding itself out as so conducting itself, should require to be licensed under the proposed licensing scheme. The general law may be relied upon to determine what constitutes carrying on business in this context.
- The licensing authority should be required to formulate a code of practice for debt collection following consultation with representative bodies of credit providers, debt collectors, consumers and other relevant bodies. Such a code should provide practical guidance on the standard of conduct that individual and corporate debt collectors are expected to meet. The consequences of breach of the code should be formulated by the relevant authority following consultation as aforesaid, and having regard to the contents of the code. We further recommend that, in an appropriate case, breach of the code should entitle the authority to revoke, suspend or decline to renew the licence of the party in breach, and to impose other penalties such as reprimands and fines.
- Whilst we welcome the progress made in terms of expanding the sharing of consumer credit data, the matter should be kept under review with a view to further alleviate bad debts and abusive debt collection practices.
Important Notices