Many foreign domestic helpers are caught in a spiralling debt cycle due to employment-related fee loans that they owe to domestic helper loan sharks. And all that even before they start their job.
“When I got a job in Hong Kong, I paid US$300 in the Philippines and then another HK$11,000 in Hong Kong. I didn’t have the money, but then the agent told me I could give him my passport and loan the money. The interest was 60%, but I had no other choice. It took me 6 months to pay everything back, but it was very stressful.”
How do they operate?
But I thought agencies were not allowed to do this? Yes, legally speaking the Hong Kong law allows employment agents to only charge up to 10% of the first month’s salary. One way how agencies circumvent this is by charging the helper so-called training fees in their home country. Due to contradictory policies and no real collaboration between Hong Kong and the sending countries, domestic helper loan sharks can request helpers to pay before they can board the plane or after they arrive in Hong Kong.
Some Hong Kong agencies will take the helper directly to money lender companies so that they can take out loans. Helpers may not be aware of the conditions or exactly what she is agreeing to. Agencies and loan sharks, being fully aware that what they do is illegal, will avoid leaving a paper trail at all costs. This makes it difficult for helpers to fill a claim or to get their money back.
Employment agencies and domestic helper loan sharks take advantage of the loopholes and sometimes even cooperate with employers. Employers are asked to deduct commission payment before giving the helper her monthly wages. While in reality, they are taking part in debt bondage.
Why do helpers loan money?
There is a range of reasons why domestic helpers would loan money. Firstly, they do it in order to secure their jobs. There are many women in the Philippines and Indonesia who would like to come to Hong Kong and other countries to work as domestic helpers. Agencies take advantage of the market supply and charge the helper for it. The helpers themselves often don’t see it as a loan in this case because they are doing it to secure a job.
But helpers who are already in Hong Kong and looking for a new job, also become victims of unscrupulous agencies and domestic helper loan sharks. This is especially the case if the helper is a broken contract or when her contract has been terminated by her employer. The employment agencies take advantage of the market in which employers prefer to hire finished contract helpers for a variety of reasons. The helper is asked to pay x-amount up front before she is even listed and another fixed amount after the agency has found her a helper. Some helpers who have had their contracts terminated before they had been able to repay their first loan, will get even further indebted and are under immense pressure to find a new job.
Another reason why helpers may loan money is that a family member has suddenly gotten a serious illness and the hospitals require payment up front. Some helpers will do anything they can to secure the money so that their family member can get the needed medical treatment and attention.
Domestic helpers are generally also very caring and willing to help their friends. In many instances, your helper may not have needed money herself, but a friend did. She may have signed on as a debtor or guarantor and when her friend suddenly disappears, she is being held responsible.
What to do if a loan shark harasses you?
Most loan sharks require the employer’s telephone number before giving the helper a loan. You may feel like your helper has broken your trust when she has given it to them, though she may have acted in good faith with the intention of paying it back. If a domestic helper loan shark does suddenly start to call you, stay calm and don’t panic.
What you can do:
- Check with your helper if she still has her passport, if not then she should take legal action to get her passport back so that her identity doesn’t get stolen either.
- Encourage your helper to address the issue and sit down with her to devise an action plan. How much does she owe them? How should she allocate the money to pay them back? And so on.
- Contact a local NGO like Enrich that can advise you on what to do.
- Consider if you are willing to pay the loan for her if it’s a small amount. If you do this, make sure you discuss a repayment plan with your helper and never loan more than one month’s salary.
- Legally speaking, debt collection companies are not allowed to attempt to recover debts from anyone but the debtor or guarantor. They can also not physically intimidate or harass the debtor, their employer or family members to recover the debt. If they do harass or threaten you, file a case with the police. Even if the police do not act, next time the lender calls, let them know you have contacted the authorities and they have your file on record.
- If the concerned helper has already left, inform the loan company about this by sending them a copy of the termination letter. It’s not an absolute guarantee that they will stop, but it may deter them from continuing.
I’m planning to hire a helper, how do I ensure she has no debt?
Many helpers are indebted due to the illegal fees they pay to agencies. If you are planning to hire a helper, the best way to limit the possibility of her having debts is through a direct hire. In the case of a direct hire, you have found the helper yourself and you will be in charge of contacting the agencies. If you limit the contact that the agency has with the helper, you can ensure that she does not pay them anything except for training fees – ensure those are reasonable. HelperChoice makes a direct hire easy and efficient and we will never charge domestic helpers anything.
Even if you secured a direct hire, your helper may carry some level of debt due to her previous employment agency. Get to know your future helper and discuss her financial situation in a diplomatic, careful manner. Make her feel comfortable to talk about it. If she does have debt, ask her how she is planning to handle it and why she had one. Her having a debt doesn’t have to be a deal breaker, especially if she is open and honest about it. There are some resources like workshops and training in town to assist your helper with getting back on track. Finally, help your domestic worker to open a bank account where you deposit her salary every month.