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Hong Kong Law Reform Commission |
6.1 We examined in Chapter 3 the criminal offences that are applicable
to debt collection activities. These include intimidation, criminal damage,
theft and blackmail, assault, false imprisonment, triad offences, and certain
offences under the Summary Offences Ordinance (Cap 228). We have also discussed
how both corporate and non-corporate employers of debt collectors may be held
criminally liable for the acts of debt collectors. There is thus a range of
criminal sanctions which can be deployed. These come with heavy custodial and
financial penalties to deal with abusive debt collection practices. Criminal
sanctions, however, are not a complete answer for the following reasons:
(a) Many crimes involving debt collection are not reported to the Police. Debtors and victims may also be reluctant to co-operate with the Police. There are several possible explanations for this -
(i) Debtors may fear reprisals and retaliation.
(ii) There are a considerable number of people who try to delay paying their debts and who are prepared to be pushed a considerable distance before they pay. Intimidation may be regarded as part of the negotiation process and debtors would therefore be unwilling to take the matter up with the Police.
(iii) Some debtors are unwilling to divulge the full picture. They make reports to the Police only with a view to fending off debt collectors for the time being, but with no intention of taking further action against the perpetrators.
(iv) Some debtors are genuinely hard-pressed financially and feel that they are in the wrong when they cannot repay their loans. Some debtors may even feel that debt collectors have the right to take some abusive action to recover debts.
(v) Some debtors may neither be aware of the extent of the protection afforded by the criminal law nor that intimidation and persistent nuisance calls may constitute criminal offences.
(vi) In cases where the abused person is not the debtor himself, he or she may not be able to provide sufficient information to the Police.
(b) Whilst the criminal law may be effective in dealing with the more extreme debt collection practices involving criminal acts, it is not effective against nuisances caused by non-criminal tactics or those activities on the borderline of propriety. These may include posting of posters and repayment notices outside the debtor’s home and office; alleging that the debtor is in financial difficulty or making false accusations; making persistent but non-threatening telephone calls and personal visits, and generally harassing debtors’ neighbours and family members. Such nuisance tactics fall within the grey areas which are not adequately defined or regulated. Such grey areas are undesirable, since debtors, creditors and debt collectors alike are not certain of their rights and obligations. The Police may be unable to follow up an allegation of an act on the borderline of legality.
(c) The onus of proving a crime is high and the prosecution has to prove beyond reasonable doubt all the required elements of the crime. Because of these safeguards, it may often be difficult to secure convictions.
(d) There are also enforcement problems. As mentioned by the representative of the police at a meeting of the Legislative Council Panel on Security meeting on 10 June 1996, there were problems “particularly in the identification of the offenders, because-: (a) these activities were normally conducted late at night; and (b) when debt collectors resorted to illegal tactics, the debtors would normally repay the debt immediately and would then be reluctant to pursue the case further.”
6.2 These
factors perhaps account for the relatively low detection rate of debt collection
related cases. In 1999, the detection rate of debt collection related cases was
only 8.4%, compared to 42.5% for overall crime. In 2000, the respective figures
were 22.2%[197] and 43.6%. In
2001, the respective figures were 9.6% and 44%.
6.3 We have also examined in previous chapters a number of civil
actions which may be of assistance to debtors, including assault and battery,
false imprisonment, intentional physical harm other than trespass to the person,
trespass to chattels, defamation, negligence, and employers’ liability and
principals’ liability in civil claims. It remains to be considered how
effective these remedies are as a control on abusive debt collection practices.
If an aggrieved debtor has the resources, alternatively qualifies for and
obtains legal aid, to bring a civil action, he may be awarded damages and an
injunction. On the other hand, he also faces the possibility of losing the case
and having to pay for his own legal costs and part of the opponent’s legal
costs.
6.4 Hence, civil remedies are not usually useful to the average
debtor. As stated by the Institute of Law Research and Reform of Edmonton,
Alberta:
“The legal system does not operate by itself; it must be triggered by the victim commencing and carrying forward a law suit against his defendant. Such an action will involve expense and delays, as well as uncertainties as to a successful outcome. Nor is the average debtor likely to have the courage, much less the means, to turn the tables on his creditor and sue for damages for excessive or unreasonable collection practices. The paucity of reported cases in Canada appears to support the conclusion that most cases of creditor harassment are unlikely to lead to a lawsuit, unless the facts are extraordinary and the potential damage award is large.
The upshot is that a debtor who has been subjected to unreasonable collection efforts is unlikely to commence a common law action and carry it to judgement unless the case is an extraordinary one. Effective controls over the collection practices of creditors or their agents must be sought elsewhere.”[198]
6.5 We have examined in a previous
chapter[199] the non-statutory
voluntary code issued jointly by the Hong Kong Association of Banks and the DTC
Association, the Code of Banking Practice – 2001.
6.6 The effectiveness of the guidelines in the Code of Banking
Practice, albeit practical and useful, suffer from its limited scope of
application. The Code regulates only a fraction of debt collection activities.
It applies only to authorized institutions, that is, banks, restricted licence
banks, and deposit-taking
companies.[200] Other creditors
including individuals, trading companies, mobile telephone companies, estate
agents and money lenders are not subject to the Code. It is clearly anomalous
for debt collection agencies to abide by the guidelines only in those cases
where the clients are authorized institutions. This may also result in unfair
competition. Take the example of a debtor with $100,000 worth of assets. He
borrows $100,000 from Creditor A, which is not bound by the Code, after
borrowing $100,000 from a bank. As Creditor A is not bound by the Code, it will
be able to engage a debt collector who does not comply with the relevant
requirements of the Code[201] than
one acting for the bank, which is bound by the Code. In such circumstances, the
debtor is more likely to satisfy the debt owed to Creditor A first, given the
potentially more compelling collection tactics, and the bank may not be repaid
at all. This would be all the more unfair to the bank which may have acted
prudently when the bank loan was granted, especially since the debtor had at
that time $100,000 worth of assets. Creditor A might have been aggressive in
granting the subsequent loan since the debtor’s indebtedness had
increased; yet, it is more likely to get his money back. This limited
application of the Code may thus also lead to unfair competition among debt
collectors. Accordingly, as most debt collectors earn their fees on a
contingency basis, the restricted scope of application of the Code may work
unfairly against those working for authorized institutions.
6.7 We examined in the previous
chapter[202] the Personal Data
(Privacy) Ordinance (“the Ordinance”) and the Code of Practice on
Consumer Credit Data (“the Code”). Given that the primary
legislative intent of the Ordinance is to protect the privacy of individuals in
relation to personal data, the Ordinance, and hence the Code, are not intended
to be a comprehensive means of regulating debt collection activities. The
requirements of the Ordinance are by no means applicable to the whole range of
abusive behaviour in which some debt collection agencies engage as such
behaviour does not necessarily involve the use of personal data. Further, the
requirements of the Ordinance that are most likely to apply to improper debt
collection practices are the requirements of the data protection principles.
However, these are stated in broad terms giving wide scope for interpretation.
Even where it is clear that the requirements of the data protection principle
apply and have been breached, the Ordinance may not always be an effective means
of protecting individuals from the abusive practices concerned. First, the only
sanction for such a breach is a civil action to which the drawbacks identified
above in relation to pursuing civil actions generally apply. Secondly, while
the individual whose personal data is the subject of the breach may make a
complaint to the Privacy Commissioner, his investigative powers are limited: he
has no power, for example, to seize evidence of the breach. In addition, while
the Privacy Commissioner has the power to prevent the repetition or continuation
of a breach of the Ordinance through the issuing of enforcement notice, he has
no power to award any compensation to the victim of such a breach or to
institute civil proceedings in the victim’s name to obtain such
compensation.
[197] The high detection
rate was attributed to the arrest of a large-scale syndicate in a police
operation.
[198] Debt
Collection Practices, (Report No. 42, 1984), at paragraphs 4.2,
4.6.
[199] See paragraphs 5.4
– 5.7.
[200] The HK
Association of Banks and the DTC Association have recently set up a Code of
Banking Practice Committee which would provide guidance on interpreting the Code
and undertaking future review of the Code. Although, the Committee will not
enforce the Code as such, the guidance it offers on interpreting the Code should
help improve compliance in general. Note that the Finance Houses Association
has a code of practice, and the Moneylenders Association may issue one
shortly.
[201] Although the
risk of this should be reduced to some extent by the provisions of clause 3.9 of
the Privacy Commissioner’s Code of Practice on Consumer Credit Data. In
summary, this requires all credit providers using debt collection agencies to
instruct them to follow the debt collection guidelines of the Banking Code. It
also requires a credit provider not use a debt collection agency unless the
credit provider is satisfied, on good grounds, that the debt collection agency
will comply with the said
guidelines.
[202] See
paragraphs 5.8 – 5.14 above.