How to Respond to Loan Queries

Your domestic worker asked you for a loan. How do you handle it?

Responses to Financial Statements.

Discussing finances with your domestic worker can be difficult, and we as employers are often faced with situations that we have never encountered before. We've asked some financial professionals to answer these tough questions about finances, loans, and more for those new to hiring a domestic helper or who have never faced this type of situation before.

There are several situations in which your domestic worker may ask you for a loan or a payday advance. To help you navigate these issues and concerns, we've highlighted several reasons why you might need tips on what to do in these situations.

Does your domestic helper need to pay recruitment fees?

By law, Hong Kong employment agencies can only charge foreign domestic workers up to 10% of their first month's salary as placement fees. However, some agencies levy illegal fees directly on domestic workers, especially those from a foreign country, or have been redundant. Many employers have limited knowledge of these practices because they are not interested in them.

Your domestic worker may need to take out a loan to pay for these costs, which can amount to more than six months' salary.

What you need to do: Open the dialogue box and ask your domestic worker to tell you what they are into. Find a time to sit down and listen, and try not to judge. Explain that you recently heard that some agencies charge high fees to domestic workers and that this practice is illegal. Inform the helper that you're on their side and will like to take up the issue and fight for their course. Then asks, "Did an agency charge you any commissions?"

If your domestic worker answered yes to the above question, ask for the agency's name and what the fees are. If you are uncomfortable answering, there is no need to push. Suggest that they report the case to the Hong Kong Ministry of Labor via the 24-hour hotline: 852 2717 1771; e-mail: fdh-inquiry@labour.gov.hk or on their website. Assure your domestic helper that you will support them if they want to take legal action.

Did your domestic helper borrow money from a loan shark?

First, check with the worker if they still have their passport. Otherwise, it would be best if you took legal action to recover their passport and prevent their identity from being stolen. Call the police if this is the case.

Encourage your helper to address the issue and stick with her to develop a plan of action. How much does the helper owe? What is the repayment allocation plan like? 

Determine if you are ready to repay the loan (if it is a small amount). If you do, discuss a repayment plan with your helper and never loan them more than a month's salary.

Contact a local NGO that can advise you on what to do next.

Is your domestic helper being harassed by the loan shark?

Sometimes a domestic worker agrees to be a friend's guarantor. If the friend absconds with the money, her guarantor has to take on all debtors' debts. Interest on these debts borrowed by loan sharks can reach 60% per year! If this happens, they could receive numerous calls and letters to your home, often of a threatening nature, which can be irritating and frightening for you and your family.

Most lenders ask for their employer's phone number and address before granting a loan to help them. You may feel like your helper broke your trust when she gave out your contact to the loan shark, even though they might have acted in good faith to return your money. If a lender suddenly starts calling you and sending you letters, stay calm and don't panic.

From a legal point of view, loan shark companies cannot attempt to collect the debt from someone other than the debtor or the guarantor. They cannot intimidate or harass the debtor physically, the employer or family members to collect their debt. If you are harassed or threatened, take a case to the police. Even if the police do not act, the next time the creditor calls, let them know you have contacted the authorities and have your file on record.

If the domestic worker in question has already stopped working for you, notify the credit company by sending a copy of the termination letter. It is not a guarantee that they will stop, but it can discourage them from continuing.

Does your domestic worker need emergency money for their family at home?

If the domestic worker's family suddenly needs a large sum of money because a loved one is in critical condition, sometimes the helper has no choice but to borrow money from loan sharks, especially if they don't want to borrow from you. Sometimes families ask the domestic helper for money that they can't afford for no legitimate reason, and because they are the breadwinners, they can't say no to the request.

What should your domestic helper do if they want to pay the medical expenses of a loved one at home?: If your domestic worker asks you for a large sum of money for the medical expenses of a loved one, you should ask yourself a few questions: Is it an emergency? Has an accident happened? Is it a long-term illness?

In many cases, there is a real medical issue that requires your domestic helper to send more money home, but in rare cases, your domestic helper may want to have enough money at hand to go home. There is no wrong or right answer to this situation. You have to consider your relationship with your helper and whether you trust them, and we suggest that you trust your gut in this case. 

Always have an open dialogue with your domestic helper; explain that you trust them but have heard many negative stories about employers getting shafted. Tell your helper that you are ready to help but that you need proof (name of hospital, name of patient, registration form, etc.) and bills (hospital bills and/or medication).

Does your domestic worker want the extra money for personal or pleasure reasons?

Another reason would be a lifestyle that they cannot afford with the salary they earn. If the helper borrows money to buy new clothes or bags, which wastes future income, you can help her budget better.

How to help your domestic helper improve her budget: You can do a few things to improve your domestic worker's budget: help her open a bank account. This way, you can transfer their salary directly to this account. Encourage her to save. For example, you can get your helper to automatically transfer her savings each month to a second account and pay herself before sending her remittance.

There is no exceptional service for domestic workers when it comes to bank accounts. The required documents are a valid passport, HKID, and original employment contract. Please note that they may require a deposit when opening an account and a minimum balance. Also, you should check all the terms with them according to the status of your domestic worker.

Talk to your helper about loans as this is a very common problem for domestic helpers. If you want to bring one, make sure you ask the helper the right questions: How much does she need? Is it important? Can she afford the monthly fee? And inform the helper about illegal loans.

Tell her about online scams, encourage her to research before committing to anything. Make sure you can help by verifying that the loan shark is licensed and the terms are correct.

 

 

What you should not do:

Hold on to her passport and/or other identity documents.

Your helper will usually need a copy of her passport and/or HKID and employment contract to apply for a loan or be a guarantor. Some employers keep their domestic helpers' passports to prevent them from taking loans, but this is illegal, and your helper must be with her passports at all times.

Pay off your helper's debts.

Some employers might decide to pay off the debts of their helpers and deduct these payments from their wages over some time. But it is not tenable if she does not learn her lesson and decides to borrow again.

Terminate the contract once the helper takes a loan.

Some employers include (as one of the unofficial working conditions) that if the domestic helper is caught taking loans and being a guarantor, they will be fired. This can be a good deterrent and a good excuse if the helper does not want to be her friend's guarantor. However, without understanding your helper's financial situation, it can be very rigid and difficult for her.

Bottom Line.

Either way, always maintain an open dialogue on financial matters, set the terms very clearly, but keep in mind that she may often feel like she has no choice. Suddenly she may need the money due to unforeseeable circumstances. If so, they should be able to tell you so that you can help her come up with a feasible and workable plan together.