You may have heard of employers being harassed by loan sharks because their domestic helpers used the residence address for taking out loans and are not able to repay the debts. But why are many domestic helpers in debt and how can you prevent your helper from getting into debts?
Why do domestic helpers borrow money?
Because of recruitment debts charged by unethical employment agencies
Legally, placement fees employment agencies in Hong Kong charged to domestic helpers can only be as much as 10% of their first month's salary.
In reality, there are employment agencies charging illegal placement fees and thus domestic helpers end up sending their first few months' paychecks to those agencies, as much as HK$24,000! And they might even have to take loans from loan sharks. Some of these employment agencies also confiscate the workers' passports as a measure to stop them from returning to their home countries and ensure they will repay the loans.
Because of a family request
For an emergency happened back home
Domestic helpers usually send money back home every month to support their families. Unfortunately, health issues can happen and your domestic worker's family might suddenly need money because a relative is in critical medical condition. In this case, your domestic helper will have no choice but to send a large amount of money back home to pay for the medical fees.
Because they don't know how to say “no” to family
Domestic helpers working in Hong Kong are often wealthier than their families back home, leading some relatives to ask for money for no legitimate reason. Many domestic helpers don't know how to say no to these requests and will send money although they cannot always afford it.
Because of an expensive lifestyle
The temptation is everywhere in Hong Kong when it comes to shopping, whether it is food, clothes, or a new mobile phone, it can be hard for domestic helpers to manage their budget and save money. Spending more money than what they can afford will lead some domestic workers to borrow money.
Where can your helper borrow money?
From a loan shark
What is a loan shark?
Loan sharks are money lenders charging extremely high interest rates, usually under illegal conditions. One of their main targets is domestic helpers as most of them will need to borrow money at some point during their employment contract and are not aware of the risks involved with loan sharks. The interest of these debts borrowed from loan sharks can be as high as 60% per annum!
Is a loan shark harassing you?
When borrowing money to a loan shark, your domestic helper will likely provide your address as her residential address because of the live-in rule. In some cases, she might not be able to pay her debts back and even leave Hong Kong.
Your domestic helper might also have agreed to be a guarantor for a friend. If her friend runs away she will have to bear the responsibilities and pay the money back.
If that has happened, you might receive a lot of calls and letters in your house, usually threatening. Report the loan shark's behaviour to the authorised financial institution, the Money Lenders Unit of Hong Kong Police (tel: 2860 3574) or the Anti-Scam Hotline (tel: 18222).
From a bank
Banks can lend money to domestic helper in Hong Kong, if she discussed this topic prior with you, you can help her ask for more information directly at the banks to see which bank can lend her money.
Ask you for a favour
Sometimes domestic helpers will discuss their financial problems with their employers and even ask them if they can directly lend her the money. Having a relationship good enough to be able to discuss this.
If you want to prevent your helper from taking out loans
What you should do
Use an ethical employment agency
When hiring a new domestic helper, you should check with the helper how much she is asked to pay for placement fees. Do not use an employment agency that charges helpers illegal placement fees.
Educate your helper about the risks of getting loans
Educate her about the risks that she might take, for example, discuss online scams with her, encourage her to do research before committing to anything, and tell her you can always double check with her the company's identity.
Help your helper open a bank account
Register your helper for financial management classes
You should encourage your helper to save up, and devise a plan with her calculating her monthly expenses and how much she can put aside every month. If you need a little help, there are 2 NGOs in Hong Kong helping domestic helpers with Financial Management by providing them training. The first one is Enrich HK, they do personal counselling and workshops in Hong Kong. The other is Uplifters, an NGO that runs online financial management classes for domestic helpers, not exclusively in Hong Kong.
What you should not do
Retain your helper's passport or identity card
Some employers keep their helpers' passports to avoid them from borrowing loans, but remember that this is illegal, your helper should be able to keep her passport at all times.
Terminate the helper's contract
Terminating your domestic helper should not be the first option and it will not stop loan sharks contacting you. If you find out your helper is in debt, sit down with her and discuss the overall situation – how much she borrowed and why. And help her figure out a plan for repayment if possible.
Pay off the helper's debts
You could decide to pay off her debts, but this is not an ideal situation, this will not help her be financially responsible in the long term.
How to discuss loans and financial management with your domestic helper?
Addressing the subject
Being able to discuss potential financial issues is a win-win situation for both you and your domestic helper. If a problem ever comes up, you will be able to help her and avoid further issues for your family if she is responsible for an unpaid loan.
Keeping an open dialogue is the key to every healthy employer-domestic helper relationship.
Finding the right time
So how can you bring up the money subject? Find a quiet moment and tell her that you heard about domestic helpers facing financial problems and tell her that if she ever finds herself in this situation she can trust you and talk about it.