Anyone who has lived or worked in Hong Kong will have heard stories about aggressive debt collection — red paint splashed across the door of a debtor's flat is not a myth. While this behaviour has always been illegal, the rules around lending itself were never strong enough to deal with the root cause: reckless, unsecured lending to vulnerable borrowers who were unlikely to repay their debt. The Financial Services and the Treasury Bureau's (FSTB) Consultation Conclusions, which were published earlier this year, mark a shift in that position.
The new measures aim to tackle the issue of excessive borrowing and better protect the public. The FSTB will implement relevant measures in two phases. Phase one will take effect on 1 August 2026, introduces three key changes.
First, debt servicing ratio (DSR) caps will apply to unsecured personal loans for low-income earners: monthly repayments for borrowers earning HK$6,000 or less will be capped at 35% of their income, while those earning between HK$6,001 and HK$12,000 will face a 40% limit.
The Secretary for Financial Services and the Treasury, Christopher Hui, has confirmed that the HK$6,000 threshold was set with reference to the average monthly wages and food allowance of domestic helpers, whilst the HK$12,000 benchmark aligns with the income ceiling of the Working Family Allowance Scheme. He emphasised that the tightened regulations target not just domestic helpers but all low-income individuals.
In practical terms, the DSR cap limits the maximum loan principal a borrower can take on. FSTB’s own data confirms that excessive borrowing has become "particularly acute" among low-income earners and foreign domestic helpers — a cohort routinely exploited by predatory lenders offering fast and simple approvals to applicants who cannot realistically pay back the debt. The Consultation Conclusions highlight the wider consequences of this problem, noting that when borrowers default or leave Hong Kong without settling their obligations, it is often their employers or other third parties who bear the brunt, facing persistent harassment from debt collectors pursuing unpaid loans, despite having no involvement in or liability for the underlying borrowing.
Second, the use of loan referees will be banned outright. Under the current system, moneylenders routinely require borrowers to nominate a “loan referee”, typically an employer, colleague, or friend as a condition of the loan approval. The referee’s role is ostensibly to verify the borrower’s identity or employment, in practice referees became inadvertent targets for debt collectors when the borrower cannot be located. The ban directly removes this mechanism by which innocent third parties are drawn into debt recovery disputes and should substantially reduce the number of people exposed to collector harassment.
Third, all moneylenders will be required to include a risk warning statement specified by the Companies Registry in their lending advertisements — a measure designed to ensure borrowers are clearly warned of the risks before taking on debt.
The FSTB and the Companies Registry are currently drafting revised licensing conditions and administrative guidelines and have held discussions with the Judiciary on updating existing money lender licences in phases to dovetail with the implementation of the measures. Non-compliance with the new DSR caps will constitute a direct violation of licensing conditions.
Phase two will commence on 1 June 2027. It will require moneylenders offering unsecured personal loans to report their borrowers' credit information (including loan applications, terms of approved loans, and repayment records) to the Credit Data Smart (CDS) platform every 30 days. Lenders with total unsecured personal loans of HK$50 million or more, or those lending to borrowers with monthly incomes below HK$12,000, must also join the CDS platform to obtain personal credit reports for loan assessments before approving applications. The CDS was introduced in April 2024 by the Hong Kong Monetary Authority together with industry associations of banks, money lenders, and deposit-taking companies. As at May 2025, 36 money lenders — accounting for approximately 64 per cent of the loan business of all licensed money lenders — had already joined the platform. The goal of mandatory participation is to stop borrowers from quietly building up debts across several lenders at once — something that was easy to do when lenders had no centralised way of seeing the full picture.
What This Means for Creditors
These reforms will change the debt recovery landscape in Hong Kong. Stricter lending rules should, over time, reduce the volume of irrecoverable debts, but in the near term, creditors and lenders will need to adapt their recovery strategies to comply with the new framework. The transition period between now and June 2027 will be important. Our debt recovery practice advises lenders, employers, and corporates across Hong Kong on the full range of recovery options from pre-action negotiation and restructuring through to enforcement and cross-border tracing. If you would like to discuss how these changes affect your business, please contact a member of our team.
