Code of Money Lending Practice - Final Jan02

1 Code of Practice September 2018 CODE OF Money Lending Practice Table of Contents PART I INTRODUCTION .. 1 1 Status of the Code of Money Lending Practice .. 1 2 General Principles .. 1 3 4 4 Enquiries .. 5 PART II - RECOMMENDATIONS ON Money Lending Practice .. 6 Chapter 1 RELATIONSHIP BETWEEN MEMBERS AND CUSTOMERS .. 6 5 Terms and 6 6 Debt Recovery Expenses .. 8 7 Collection, Use, Holding and Erasure of Customer Information .. 8 8 Personal Referees .. 10 9 Equal Opportunity .. 11 10 Member Marketing .. 11 11 Annual Percentage Rates .. 12 12 Handling Customer Complaints .. 12 13 Additional Licensing Conditions of Money Lenders Licence and New/Revised Sample 13 Chapter 2 -LOANS .. 15 14 Loans .. 15 15 Residential Mortgage Lending .. 17 16 Other Secured Lending .. 19 17 Guarantees and Third Party Securities.

2 20 Chapter 3 RECOVERY OF LOANS AND ADVANCES .. 23 18 Application .. 23 19 Debt Collection Activities .. 23 20 Management of Debt Collection Agencies .. 26 USEFUL DEFINITIONS .. 29 Appendix 1(a) Money Lenders Licence Additional Licensing Appendix 1(b) Guidelines on Additional Licensing Conditions of Money Lenders Licence ..36 Appendix 1(c) Money Lenders Licence Licensing 76 Appendix 1(d) Sample form on disclosure of the existence of third parties by intending Appendix 1(e) Sample form on recording the particulars of appointed third party involved in a loan agreement ..83 Appendix 1(f) Sample form for recording explanation of terms of loan agreement given to intending 1 PART I INTRODUCTION 1 Status of the Code of Money Lending Practice This Code of Money Lending Practice ( Code ) is issued by the hong kong Licensed Money Lenders Association Limited ( LMLA ).

3 This is a non-statutory Code issued on a voluntary basis. It is to be observed by members of the LMLA ( members ) in dealing with their personal customers. It covers specifically Money Lending services. However, the principles of the Code apply to the overall relationship between members and their customers in hong kong . LMLA expects their respective members to comply with the Code. The recommendations set out in this Code are supplementary to and do not supplant any relevant legislation, in particular, the Money Lenders Ordinance ( ). The Code is subject to review and revision from time to time. Unless otherwise shown, this revised edition is effective from September 2018. Members should take active steps to comply with the revised provisions.

4 2 General Principles Equitable and Fair Treatment of Customers Members should treat all customers equitably, honestly and fairly at all stages of their relationship with the members. Treating customers fairly should be an integral part of the good governance and corporate culture of all members and their authorized agents. Disclosure and Transparency 2 Members and their authorized agents should set out and explain clearly the key features, risks and terms of the products, fees or charges applicable, possible consequences for any default in repayment, and make available the details of these to customers. Additional disclosures, including appropriate warnings, should be developed to provide information commensurate with the nature and risks of the products and services.

5 They should also provide information on conflicts of interest associated with the use by members of their authorized agents through which any product is sold. Appropriate information should be provided at all stages of the relationship with the customer. All financial promotional material should be accurate, honest, understandable and not misleading. Standardised pre-contractual disclosure practices should be adopted where applicable and practicable to allow comparisons between products and services of the same nature. [Amended in September 2018] Where advice is provided, the advice should be as objective as possible and should in general be based on the customer s profile considering the complexity of the product, the risks associated with it as well as the customer s financial objectives, knowledge, capabilities and experience.

6 Members should inform customers that it is important to provide members with relevant, accurate and available information. Financial Education and Awareness Recognising that customers have their responsibilities in enhancing financial literacy, members should join force with the government, regulatory bodies and other relevant stakeholders to promote financial education and awareness and help existing and future customers to develop the knowledge, skills and confidence appropriately to understand risks, including financial risks and opportunities, make informed choices, know where to go for assistance, and take effective action to improve their own financial well-being. The provision of broad based financial education and information to deepen customers financial knowledge and capability should be promoted.

7 Clear information on consumer protection, rights and responsibilities should be easily accessible by customers. 3 Responsible Business Conduct of Members and Authorized Agents Members and their authorized agents should have as an objective, to work in the best interest of their customers and be responsible for upholding financial consumer protection. Members should also be responsible and accountable for the actions of their authorized agents and third party service providers. Depending on the nature of the transaction and based on information primarily provided by customers, members should assess the financial capabilities and needs of their customers before offering them a product, advice or service. Staff (especially those who interact directly with customers) should be properly trained and qualified.

8 Members and their authorized agents should endeavour to avoid conflicts of interest. When this cannot be avoided, they should ensure proper disclosure, or have in place internal mechanisms to manage such conflicts, or decline to provide the product, advice or service. The remuneration structure for staff of members and, where appropriate, their authorized agents should be designed to encourage responsible business conduct, fair treatment of customers and to avoid conflicts of interest. In relation to any fees charged by any authorised agents or any other third parties, members should pay attention to the Additional Licensing Conditions, in particular, conditions 2 and 4 thereof ( the equivalent conditions 2 and 4 of the Merged Licensing Conditions).

9 [Added in September 2018] Protection of Consumer Data and Privacy Members should have in place appropriate control and protection mechanisms to protect customers financial and personal information. These mechanisms should comply with all applicable legislation and in particular should define the purposes for which the data may be collected, processed, held, used and disclosed. The mechanisms should also acknowledge the rights of customers to be informed about data-sharing, to access data and to obtain the prompt correction and/or deletion of inaccurate, or unlawfully collected or processed data. Complaints Handling and Redress Members and, where appropriate, their authorized agents should 4 maintain and monitor proper systems and procedures for handling complaints and provide customers with reasonable channels to submit claims, make complaints and seek redress that are accessible, fair, accountable, timely and efficient.

10 Such channels should not impose unreasonable cost, delays or burdens on customers. [Amended in September 2018] Competition Members should allow customers to search, compare and, where appropriate, switch between products and members easily and at reasonable and disclosed costs. Internal Control Members should establish and maintain proper systems and procedures to ensure their partners, employers, employees, principals or agents, any persons acting for them and any appointed third parties are informed of and observe the licensing conditions and the provisions of the Money Lenders Ordinance. [Added in September 2018] Books and records All books, records and documents of the Money Lending business of members must be kept on the premises specified in their Money lenders licence.