Licensed money lenders offer an alternative route of financing for individuals and businesses.
Generally, a person carrying on business as a money lender in Hong Kong must obtain a money lenders licence. This article will help you understand (i) the situations where you would need to obtain a money lender license to lend money and some exemptions; and (ii) the license application process.
When do you need a money lenders license to lend money?
Money lenders refer to people whose business is that of making loans or who advertises or announces himself or holds himself out in any way as carrying on that business.
The following persons are exempted from obtaining a money lender’s license:
- Any subsidiary of a bank, a restricted licence bank, or a deposit-taking company.
- A co-operative society registered under the Co-operative Societies Ordinance.
- A registered credit union.
- A registered trade union.
- An insurer.
- The University Grants Committee.
- A bank
- which is incorporated or established outside Hong Kong;
- recognised as a bank by the relevant declared banking supervisory authority; and
- carrying on banking business in the place where that banking supervisory authority is located.
- An organisation
- which is a member of the International Union of Credit and Investment Insurers (The Berne Union); or
- which has been declared in writing by the Registrar that he is satisfied that it was established by one or more national governments with the object of financing, or guaranteeing the financing of, the export of a country’s goods or services.
- A corporation licensed to carry on business in securities margin financing.
- A corporation licensed to carry on business or an authorised financial institution registered to carry on business in engaging in securities margin financing to facilitate acquisitions or holdings of securities by the corporation or institution for its client.
The following loans are generally exempted from the licensing requirement:
- made bona fide by an employer to his employee.
- made to a company secured by a mortgage, charge, lien or other encumbrance.
- made by a company under its bona fide credit card scheme to any holder of a credit-card issued under the scheme.
- made bona fide for the purchase of immovable property on the security of a mortgage.
- made by a company, firm or individual whose ordinary business does not primarily involve money lending.
- made between a holding company and its subsidiary.
- made to a company where the loan forms part of a transaction involving the export from, or import into, Hong Kong of goods or services.
What are the eligibility requirements for a money lenders license application?
The Money Lenders Ordinance specifies the following requirements that the licensing court shall consider in processing an application for a money lenders license.
- The applicant is a fit and proper person to carry on business as a money lender.
In simple terms, a fit and proper person means one who is financially sound, competent, honest, reputable and reliable. In determining whether a person is fit and proper, the following criteria set out in Section 129 of the Securities and Futures Ordinance needs to be satisfied:
- Financial status or solvency;
- Educational or other qualifications or experience regarding the nature of the functions to be performed;
- Ability to carry on the regulated activity competently, honestly and fairly; and
- Reputation, character, reliability and financial integrity.
As the SFC looks at the substance of the requirements and the materiality of any failure of meeting them, a person may be satisfied as fit and proper although he fails to comply with all individual elements set out in the Guidelines. Concerns regarding whether one meets the substance of any criteria or whether that failure to meet any requirements is material may be discussed with the SFC’s Licensing staff before submitting an application.
- The premises to which the application relates are suitable for the carrying on of the business of money-lending.
The usage of the premises and permission from the landlord and tenant would be looked at.
- The grant of such licence is not contrary to the public interest.
Moreover, you are required to submit a business plan with your application to show that you have comprehensive understanding of the money-lending business and are ready to carry on the business. Apart from basic information and background of the applicant, details regarding organisational structure, human resources, business operation and relationships, and finances should be included in the plan. Information on the digitalised systems and other automation systems used in the business should also be provided.
How can I apply for a money lenders license?
The application form, statement form and the relevant supplementary information sheets for individuals and businesses differ. To apply for a money lenders license, you should submit the documents to the Companies Registry and the Hong Kong Police Force. For the purpose of investigation, the Police may require the applicant to provide further information and documents. Normally, a licence will be granted by the Licensing Court in 3 to 4 months’ time from the date of delivery of the application.
Key Takeaways
- Generally, you should obtain a money lenders license to carry on a money-lending business.
- For a successful application, you would need to demonstrate your competence and reliability in the money-lending business.
References:
- Money Lenders Ordinance
- License application process: https://www.sfc.hk/-/media/EN/files/LIC/handbook/licensing-handbook.pdf
- https://www.cr.gov.hk/en/publications/docs/17-e.pdf
- License application documents: https://www.cr.gov.hk/en/services/money-lenders/application/licence-renewal.htm
- Fit and Proper Guidelines: https://www.sfc.hk/-/media/EN/assets/components/codes/files-current/web/guidelines/fit-and-proper-guidelines/Fit-and-Proper-Guidelines.pdf
- Guidelines for submission of business plan: https://www.cr.gov.hk/en/publications/docs/Guidelines_for_Submission_of_Business_Plan_e.pdf
Money Lender Reform Report: https://www.consumer.org.hk/f/initiative_detail/301161/Report_Final.pdf