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Concerted efforts to tackle consumer debt and bankruptcy


Consensus was reached at a high-level roundtable discussion held today (September 12) on how to address the community's concern over the issue of consumer debt and bankruptcy. Some immediate measures will be implemented with longer term measures to be further considered.

The participants of today's roundtable discussion include representatives from the Hong Kong Monetary Authority, the Hong Kong Association of Banks (HKAB), the Deposit Taking Companies Association, the Financial Services Bureau, the Official Receiver's Office, Police and Office of the Privacy Commissioner for Personal Data.

"Consumer debt and bankruptcy has been on the increase in recent years, and we appreciate the concerns of the community about the problem, and the impact this has on banks and other relevant financial institutions," the Secretary for Financial Services, Mr Stephen Ip, said.

"Tackling the issue requires the co-operation of all concerned parties. Today's roundtable discussion provides a good opportunity for relevant parties to have a frank and constructive exchange of views and to map out the way forward on this important issue," Mr Ip added.

"We are glad to see the HKAB's proactive approach in suggesting what positive actions banks and other relevant financial institutions will likely take to address the growing number of consumer debt related bankruptcies. We welcome such actions."

The measures that have been discussed include the following:

(a) Debt relief plan: Banks will jointly establish a non-profit making debt management organization to, among others, provide a consolidated debt relief plan so as to ease the immediate pressure of repayment on the part of the borrowers. This will minimize the need for borrowers to resort to bankruptcy.

(b) Tightening lending policies: Banks will review their lending policies and tighten up the same where necessary. For example, they will review their credit scoring models and make more use of the services provided by the credit bureau. The Hong Kong Monetary Authority will monitor the application of such policies.

(c) Enhance sharing of information: Banks will enhance their sharing of information within the current scope allowed by the relevant code issued by the Privacy Commissioner. This will include sharing of credit application data and more negative data. Moreover, there is a suggestion to extend the scope of positive data allowed under the code. The Privacy Commissioner has agreed to consider this positively.

(d) Enhanced cooperation among banks and government departments: Banks and the government departments present at the meeting will seek to improve information flow among them so that possible abuse cases can be detected early and suspicious cases can be acted upon by the Official Receiver and the Commercial Crime Bureau as appropriate in a cost effective and efficient manner.

Members agreed that relevant parties would need to assess the feasibility and implications of the proposals discussed at the meeting. A working group set up under the Official Receiver will meet later this month to take forward such proposals.

Participants attending the roundtable discussion were briefed, among other matters, on the existing bankruptcy regime; the risk management issues and problems encountered by the banks and financial institutions; the regime governing the sharing and disclosure of personal data; the enforcement measures currently taken by the Official Receiver and Commercial Crime Bureau.

Mr Ip confirmed that the participants had discussed the automatic discharge period of four years for bankrupts in the legislation and whether changes to that period were needed.

"The present bankruptcy legislation has built-in mechanisms against abuses. A creditor can object to the automatic discharge of a bankrupt. On application to the court, the period of automatic discharge can be extended from 4 to a maximum of 8 years, provided the court considers that there are grounds for so doing. The length of the automatic discharge period was the subject of wide consultation in 1995. Indeed the present automatic discharge period is by no means relaxed when compared with those in other jurisdictions such as Australia (3 years), Canada (9 months), the United Kingdom (3 years) and the United States (6 - 9 months)," Mr Ip explained.

"We therefore do not consider it necessary to change the law which would not solve the present problem. It would be more constructive and direct to take concerted action to seek improvements within the existing regime," Mr Ip said.

End/Wednesday, September 12, 2001


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