The market is flooded with loan advertising which target young adults, packaging attitude “supremacy of consumption” and “buy now, pay later” as the trendy value and lifestyle. Alongside with the proliferation of online purchase and e-wallet and simplification of procedure for loan, the issues of “excessive borrowing” and “excessive consumption” have been intensified. These problems warrants serious attention of society and should be addressed without delay to prevent young adults from falling prey of the sugarcoated traps leading them to over borrowing.
The Consumer Council has, for the first time, collaborated with the Financial Services and the Treasury Bureau (FSTB) in a production of an online series of 3 short video clips appealling to young people to refrain from indulging themselves in food, drink and pleasure, since that would result in excessive consumption which in turn could ultimately lead to a crushing towering debt. The videos will be shown on the internet and social media by phases commencing today. The aim is to arouse the concerns and awareness of young consumers towards the potential risks and consequences that they must bear, and to foster in them the attitude of rational and responsible consumption.
Excessive Consumption & Borrowing
The Consumer Council has for long been much concerned about young consumers’ behaviour and attitude towards financial management. The Council's 2016 report titled “Online Retail – A Study on Hong Kong Consumer Attitudes, Business Practices and Legal Protection” has found the frequency of online purchase by respondents interviewed to be, on average, once every 10 days and the average amount spent $790. The most favourite items were apparels and accessories. Young adults were the group with the highest ratio in online purchase; among the 25 to 34 age bracket, 46% online.
The Securities and Futures Commission's Investor Education Centre undertook a study on the borrowing behaviour of Hong Kong people in 2014. The results showed that the most common reasons for personal loans was buying favourite items (28%), leisure and entertainment (17%), and travel (10%) – a total of 55% in the reasons for loans were related to consumer purchases. The figure speaks volume about the close link between pursuit of enjoyment and excessive consumption augmenting the desire to borrow.
It is revealed in another survey in April this year, which conducted on 500 working adults aged between 18 and 29, that 31% of them was in debt in the past year, in an average sum of $37,000. The majority (88%) of them own a credit card but about one-fifth were unable to settle in full each month, with credit card debt running up to an average of $20,000 for which they had to pay exorbitant interest charges.
Said the Council's Chief Executive, Ms Gilly WONG Fung-han, “What we have seen in recent years is an upsurge in online purchase and e-wallet which are well received by the younger generation because of their convenience and speed, coupled with a proliferation of loan products with advertisements promoting the attitude of “enjoy now, pay later”, playing down the seriousness of the problem, and encouraging consumers to pay off credit card debt by further borrowing and continue to spend extravagantly. People are given the impression that overspending and excessive borrowing are the norm.”
“While technology has brought convenience and speed it has also intensified the problem of borrowing amongst the young people. For example, earlier on a mobile phone money lenders app was launched claiming that one can get to know instantly the result of loan approval, and within an hour the fund will be transferred to his bank account. The maximum loan amount could reach hundreds of thousands dollars. What tends to be overlooked is that it's easy to borrow but plain difficult when it comes to paying back,” she added.
Quite a few finance intermediaries entice young borrowers to borrow purporting that they help them “clear their credit card debt” or “restructuring their debt,” and seek to charge them hefty handling fees. Consumers are reminded not to be induced by the loan advertising into borrowing blindly for extravagant consumption. Debt embroilment could get you into bankruptcy. Among other restrictions, bankruptcy will bar you from taking up company directorship or business management position and will be put on your personal credit record affecting your property mortgage, credit card approval. Moreover, prospective employers of some professions related to finance, law or legal enforcement such as disciplinary services, banks, law firms and estate agents, etc. may ask for certification of your personal credit record.
3 short videos exposing sugarcoated traps
Through these educational videos on the social media frequently accessed by young people, it is hoped that the message of rational consumption can be effectively conveyed to them with a view to nurture in them the concept of responsible financial management.
Video 1: “Scary Loan Horror - Not for the Fainthearted” (opening Nov 2)
It portrays how addiction in online purchase and excessive borrowing can lead to serious consequences, including mental stress and damage to family relationship, etc.
Video 2: “Sugarcoated Loan Trap - Money Lending Intermediary” (opening Nov 14)
It lifts the veil of finance intermediaries who appear to help borrower resolve financial problems but in fact only seek to pocket hefty handling fees. This only aggravates the problem.
Video 3: “NO to Loan Temptation - The Cold Calls” (opening Nov 24)
Through interesting and humorous presentation of key opinion leaders of university students, young people are demonstrated the way to deal with unsolicited sales calls with a reply of “NO”, and how to reject the temptation of easy borrowing.
Rational Consumption and Responsible Borrowing
The Council is emphatic against borrowing money to satisfy the desire of consumption. Consumers should carefully evaluate their financial situation, and their needs and repayment ability; think twice before rushing into action:
- If there is a genuine need for loan service, approach direct a bank or other finance institutions; always repay promptly on schedule to avoid exponential rise in costs in terms of interest or finance service expenses, and prevent the debt from running out of control;
- Never rely on the advertised interest rate alone, pay attention to additional terms and conditions, handling fees and extra charges;
- Find out the identity of the money lender by calling the hotline of the bank or the finance company concerned for verification, or checking the name lists of “licensed money lenders” and their appointed finance intermediaries on the Company Registry's webpage ;
- Any debt problem must be dealt with immediately without delay, approach the Social Welfare Department or voluntary agencies to seek assistance or counseling service. Alternatively, contact directly the bank or licensed money lenders for advice to prevent the problem from deteriorating further.