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  • 2002.05.15

Concerns over advertising tactics of loans and credit cards

The advertising tactics of financial institutions in the promotion of loan and credit services have given rise to grave concerns, amidst rising incidence in people getting seriously into debt - and bankruptcy.

The Consumer Council has conducted a survey which covered advertising in the print media of loans and credit cards, between February and April, and found at least 57 ads to have adopted tactics of concern. Three major tactics were identified in the survey:

  • Advertising incentives that encourage more debt and prolonged repayment (15 ads).
  • The benefits of these advertising claims are often grossly exaggerated (17).
  • Aiming at students and young people as their targets of advertising (25).

First and foremost, the offer of incentives such as gifts, cash rebate, interest rate reduction, interest free credit is invariably dependent upon the consumers fulfilling certain stipulated conditions that include paying only the "minimum payment" or maintaining a high "utilization rate" of revolving credit. Examples include:

  • Rebate of interest of the first two months of revolving credit loan is conditional upon paying only the "minimum payment" in the first 7 months.
  • Similarly, rebate of 3.75% of the amount of credit card balance transfer is conditional upon repaying only the "minimum payment" in the first 9 months.
  • Free credit life insurance that requires maintaining a high "utilization rate" of 70% or above of the revolving credit loan.
  • 1% rebate on any increase of credit card outstanding balance, but provided that "finance charge" - interest on the credit card debt - is incurred for that particular month and the rebate is capped at 50% of the finance charge.

Second, exaggerated claims of low interest rate, high rebate and even savings are common tactics. Examples include:

  • Rebate of interest of 6 months for an instalment loan of 36 months does not mean rebate of 1/6 or 16.7% of the interest paid. It is calculated on the basis of Rule 78, a jargon few consumers will understand, which means rebate of interest of only 21/666 or about 3.2%.
  • A $80,000 loan to be repaid at a low monthly instalment of $1,440 is actually applicable for only the "Deferred Principal Payment Option" i.e. repayment of interest only without any principal in the first few months of the loan. This effectively creates the perception of cheap credit but consumers actually pay more interest in the end.
  • Advertising "low introductory interest rate" in comparison with the rates of other loan credit to highlight savings. However, once the introductory promotional period ends (usually 3 to 4 months), the interest savings will be substantially reduced.
  • Benefit offers are dependent upon such conditions as punctual payment record and no early redemption of loan or keeping a high credit utilization rate. So, eventually, consumers may not be eligible to receive such benefits. But the benefits are factored into the advertised Annualized Percentage Rate (APR), thus grossly under-stating the APR.

Third, the market for university students is hotly contested by loan and credit card providers, with frequent promotional activities on the campuses of universities these days. This is the category with the highest number - 25 out of 57 ads - in the survey.

Special revolving credit loans and personal instalment loans have been set up exclusively for university students. Full-time students are not required to provide any income proof and can easily acquire credit of up to $20,000.

Financial institutions are urged to ensure that their advertising and promotional materials are fair and reasonable and do not contain misleading information. They should adhere to the principles of balance, clarity, objectivity and transparency.

On the other hand, it is equally important for consumers to understand their own financial capabilities, analyze the information available, compare options, seek clarifications prior to making informed decision. In choosing a bank service, consumers should take into account not just the interest rate but their fees and charges.

Public misperception of specialist qualifications

How does one ascertain a specialist from a general practitioner of medicine?

By the impressive array of testimonials of specialized qualification on display in the doctor's clinic?

This could, however, be totally erroneous. The truth is that only doctors whose names appear in the Specialist Register maintained by the Medical Council, can carry the title Specialist.

Such registration is recommended on condition the doctor has successfully completed a period of specialized training of generally 6 years (in the case of Hong Kong) after internship.

It is not uncommon to find clinics of private doctors decked out with postgraduate diplomas of qualification in cryptic medical nomenclatures.

While such diplomas will help broaden the knowledge of a doctor in some medical fields, they are by no means the specialized qualification required of a bona-fide specialist for registration purpose.

The average consumers, however, are not aware of the distinction between postgraduate diplomas and specialist qualification.

Postgraduate diplomas are awarded to doctors who can demonstrate clinical competence in the diagnosis, investigation and management of particular diseases. Some require only a short period, for instance 6 months, of relevant training in specified fields.

Examples include: Diploma in Child Health (DCH), Diploma in Dermatology (Dip Derm), Diploma in Ophthalmology (DO), and Diploma in Laryngology and Otology(DLO).

These testimonials are, however, not to be taken as the same as specialist qualification, which is represented by FHKAM (Paediatrics), i.e. Fellowship of the Hong Kong Academy of Medicine, and Specialist inPaediatrics, etc.

The names of specialists can be found via the Medical Council website( ) or on the government gazette, special supplement No. 4, or contact the Medical Council direct at 2961 8648.

Consumers are advised to consult their own doctors before seeking the service of specialists. They should also be aware of the charging scale of specialists of the field in need.

Is the skin-whitening product you are using safe?

The beauty-conscious can heave a sigh of relief.

The Consumer Council has tested a total of 32 skin-whitening products and, surprisingly, they all passed the safety requirement on mercury and lead content.

The results are reassuring particularly at a time of rising public concern on the safety standards of cosmetic products following a number of recent mercury poisoning cases in which some models of beauty cream were detected with high concentrations of the heavy metal.

The use of mercury in cosmetic products is restricted due to its serious side effects such as impaired vision and kidney damage.

All products in the test have made claims to be able to eliminate skin pigment, bleach the skin, lighten skin tone, remove freckles and dark spots, etc.

Samples were sourced from a diversity of outlets including cosmetic shops and counters at department stores, Chinese medicine clinics, and beauty parlours with prices ranging from $5 to $1,800.

All samples were tested to examine if they are in compliance of the requirement stipulated in the "Hygienic Standards for Cosmetics" of the Chinese National Standard that cosmetic products should not exceed the concentrations of 1 ppm mercury and 40 ppm lead.

Despite the fact that the products were safe from excessive mercury and lead, the Council found the labelling of some samples to be unclear.

For example, the labels of some were neither in Chinese nor English but only in foreign languages. Some did not disclose the whitening ingredients stating merely that the products contain "whitening essence" or "whitening factor".

In addition, a few samples claim to "remove pimples". This may render the products to come under registration as pharmaceutical products. No registration numbers, however, were found on these products.

Further, in one sample, the name "Hidrokinon" which is similar to the name of a pharmaceutical ingredient Hydroquinone, was found on its label. Hydroquinone is a skin bleaching agent and products containing this ingredient have to be registered under the Pharmacy and Poisons Ordinance.

Both cases have been referred to the Department of Health for further action.

Consumers are advised to conduct a skin test before applying any skin-whitening cosmetics on their face, and refrain from products that are of unknown sources or with unclear labels. They should stop using any product that causes skin rash or irritation.

And always remember the best way to keep a fair skin tone is to apply adequate sunscreen while staying outdoors and avoid the midday sun whenever possible.

The importance of toy safety

Toy slides, yoyos and toy tops, floatation toys...... What do they have in common?

The safety of these toys has all been brought under the focus of the Consumer Council in this (May) issue of CHOICE.

The Consumer Council has initiated a test on 6 samples of toy slides, priced from some $400 to $2,000, following a complaint that the run-out section of the toy slide is too short to prevent children from falling to the ground.

The mechanical and physical properties of toys are regulated under toy standards stipulated in the Toys and Children's Products Safety Ordinance. But the standards do not provide for specific requirements to address such hazards as entrapment and falling from height in connection with swings, slides and similar toys.

The samples were, therefore, tested with reference to a draft toy standard of the European Committee for Standardization:

  • In 2 samples, the run-out sections of the slides were found to be shorter than the draft requirement of 150 mm. And in 1 sample, the retaining side of the slide was not deep enough - the draft requirement is more than 50 mm.
  • In 4 samples, the height of handrails were inadequate - the draft requirement is more than 350 mm.
  • In 5 samples, the distance between the top of a step and the bottom of the step above was found too close - the draft requirement is for a distance between 230 mm and 280 mm.

As a safety precaution, parents are advised to consider installing protective surfacing of the floor of at least 2 m in all directions from the toy slide.

On yoyos and toy tops, these toys have become popular again because of a recent TV cartoon series. At least 3 accidents involving such toys were reported resulting in injuries to 3 children.

The report contains comprehensive safety tips on yoyos and toy tops. Parents are urged to consult the report if their children are playing such toys.

Meanwhile, over the period from July 2000 to March 2002, the Customs and Exercise Department has tested 10 different types of floatation toys such as swim rings and arm rings, and found 9 of them to be in non-compliance with the Toys and Children's Products Safety Ordinance. These non-compliant products include: swim rings, arm rings, inflatable kickboards, and beach balls.

Consumers are advised to choose floatation toys with simple design and without small pieces or pieces with sharp angles. They should check their floatation toys each time before they use the products. Parents are also reminded that floatation toys are not life saving devices and should never leave children unsupervised while swimming with these toys.

Performance of Mobile Phones

Test results of 19 new modelshave led to a new ranking order (in terms of their performance) of 49 mobile phones available in the market.

Detailed test results of the 49 models of mobile phones were contained in this issue of CHOICE.

Chairing the press conference today (May 15) on the publication of CHOICE issue number 307 is Dr. Matthew NG, Vice Chairman of Publicity and Community Relations Committee of the Consumer Council.