The Regulation of Debt Collection Practices

The Law Reform Commission was established by the Executive Council in January 1980. The Commission considers such reforms of the laws of Hong Kong as may be referred to it by the Secretary for Justice or the Chief Justice.

The Secretary of the Commission is Mr Stuart M I Stoker and its offices are at:

THE LAW REFORM COMMISSION
OF HONG KONG

REPORT

Chapter	*Page*

Preface	1

Terms of reference	1
The Sub-committee	1

1. Debt collection in Hong Kong	4

Introduction	4
Statistics on personal credit delinquency	4
Statistics compiled by the Police	5
Statistics compiled by the Hong Kong Monetary Authority	7
Statistics compiled by the Privacy Commissioner for Personal Data	8
Industry overview	9

2. Some features of extra-judicial debt collection	12

Stages of debt collection	12
Different types of debt collection activities	12
Non-judicial debt collection	13
What causes abusive debt collection?	15
The nature of the debt collection process	15
The lack of professionalism among some debt collectors	16
Loose-lending	17
Economic downturn	17
The judicial process in debt recovery	17
Other factors	18

3. Existing criminal sanctions against abusive debt collection	19

Criminal law sanctions	19
Intimidation	19
Criminal damage to property	21
Threats to kill or murder	22
Theft and blackmail	22
Assault	24
Mens rea for assault	25
False imprisonment	26
Forcible detention	28
Triad offences	29
Summary Offences Ordinance (Cap 228)	30
Post Office Ordinance (Cap 98)	31
Criminal sanctions for participation	31
The principal	31
Secondary participation	31
Vicarious liability	33
Corporate liability	33

4. Existing civil remedies for abusive debt collection	35

Civil remedies for abusive debt collection	35
Trespass to the person	35
False imprisonment	36
Remedies for assault, battery and false imprisonment	37
Intentional physical harm other than trespass to the person / Intentional infliction of emotional distress	37
Trespass to chattels	39
Defamation	40
Negligence	40
Liability for tortious acts committed by others	41
Master and servant	41
Employer’s liability for independent contractors	45
Principal’s vicarious liability for torts committed by agent	45
Personal Data (Privacy) Ordinance	49

5. Other types of control on debt collection	50

Administrative control	50
Self-regulation by authorized institutions	50
Code of Banking Practice – 1997	50
Code of Banking Practice – December 2001	50
Personal Data (Privacy) Ordinance (Cap 486) and the Code of Practice on Consumer Credit Data 2002	56
Personal Data (Privacy) Ordinance	56
Code of Practice on Consumer Credit Data 2002	57

6. Deficiencies of the existing controls on abusive debt collection practices	59

Criminal law	59
Civil claims	60
Self-regulation by authorized institutions	61
Code of Banking Practice – December 2001	61
Personal Data (Privacy) Ordinance (Cap 486) and the Code of Practice on Consumer Credit Data – 2002	62

7. Comparative Law	64

Introduction	64
United Kingdom	64
The criminal offence of unlawful harassment of debtors	64
Protection from Harassment Act 1997	66
England and Wales	67
Offence of harassment	67
Offence of putting people in fear of violence	67
Civil remedy	68
Scotland	68
Malicious Communications Act 1988	69
Australia	70
Federal legislation	70
Australian Competition & Consumer Commission v McCaskey & Cash Return Mercantile PTY Ltd	71
Other provisions against abusive collection tactics	74
The United States of America	75
The Fair Debt Collection Practices Act 1977	75
Harassment or abuse	75
False, deceptive, or misleading representations or means	77
Unfair practices	78
Communications in connection with debt collection	79
Acquisition of location information	79
Further protection to consumers	80
Canada	81
Federal	81
Alberta	81
Mainland China	83
Other jurisdictions	84

8. Licensing in other jurisdictions	85

Introduction	85
United Kingdom	85
Criteria for licensing	86
Criminal sanctions for operating without a licence	87
Civil sanctions for operating without a licence	88
Australia	88
New South Wales	89
Licensing Police, NSW Police	91
Review of the present NSW legislation	91
Victoria	92
Similar Legislation	93
Canada	95
Alberta	95
South Africa	97

9. Consumer credit data	100

Introduction	100
Personal Data (Privacy) Ordinance	100
Code of Practice on Consumer Credit Data	100
Sharing of positive credit data in other jurisdictions	101
US Fair Credit Reporting Act	102
US Equal Credit Opportunity Act	104
Australian Commonwealth Privacy Act	104
United Kingdom Data Protection Act 1998	105
Situation in Hong Kong	106

10. Proposals for reform	108

The criminal offence of unlawful harassment of debtors and others	108
Responses	109
General or specific	109
Modifications	110
Law Reform Commission Report on Stalking	111
Other features of the offence	113
Criminal sanctions for participation	114
Licensing	114
Responses	117
UK Office of Fair Trading’s review of the licensing system	117
Conclusion on Licensing	119
Whether a person who knowingly engages an unlicensed collection agency equally commits an offence	119
Civil liability of a creditor in respect of the acts of the debt collector	119
Commercial vs consumer debts	120
Responses	120
Licensing authority	121
Responses	122
Collection agencies and collectors	122
Responses	123
Exemptions from licensing	124
Responses	124
Should credit insurers be exempted?	125
Should companies within the same group be exempted?	125
Other exempted categories suggested	126
Named organisations	126
Collecting debts as a business or otherwise	128
Criteria for licensing	128
Responses	129
Residence status requirement	129
Other requirements	130
Appeal mechanism	130
Statutory powers and duties	132
Responses	132
Code of practice	134
Responses	134
Guideline of the Australian Competition and Consumer Commission	134
Consumer credit data	139
Responses	139
Revision to the Code of Practice on Consumer Credit Data – 2002	140
Credit application data	140
File activity data	140
Consumer credit scoring	141
Lenders’ participation in the sharing of information	141
Way forward	142
Efficiency of the judicial process	143
Responses	143
Interim Report and Consultative Paper on Civil Justice Reform December 2001	143
Self-regulation	144
Responses	144
Conclusion	145

11. Summary of recommendations	146

Annex 1 – Responses to Consultation Paper on Regulation of Debt Collection Practices	151

Annex 2 – ACCC’s Guidelines	153

Hong Kong Law Reform Commission

THE LAW REFORM COMMISSION OF HONG KONG

REPORT

July 2002

THE LAW REFORM COMMISSION
OF HONG KONG

REPORT

CONTENTS

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