Office of The Ombudsman elaborates on its recommendation made to Working Family and Student Financial Assistance Agency
26 March 2015
The Office of The Ombudsman published a direct investigation report on March 24, in which the Office commented on the inadequacies of the Working Family and Student Financial Assistance Agency (“WFSFAA”) in tackling the serious default problems of its Non-means-tested Loan Scheme (“the Loan Scheme”).
In the report, the Office recommended that WFSFAA further deliberate with the Privacy Commissioner for Personal Data, with a view to implementing as soon as possible the measure of forwarding the negative credit data of the more serious defaulters to credit reference agencies for greater deterrence from loan default. Since that recommendation has generated much media discussions, the Office today (March 26) elaborates on the justifications leading to the recommendation.
The granting of low-interest, non-means-tested loans under the WFSFAA Loan Scheme is already very generous, with very lenient repayment arrangements. WFSFAA is duty-bound to ensure proper management of public funds. Hence, it is imperative for WFSFAA to devise effective measures to curb serious default cases involving large overdue amounts and long default periods, and in which the defaulters do not have sufficient grounds to apply for deferred repayment. Of course, the Office would welcome any concrete suggestions from any person for WFSFAA’s consideration. However, we deem it important that any punitive measures and means of debt recovery should be commensurate with the wrongs committed. For instance, following the practice of some private financial institutions in consigning debt recovery action to “debt collection agencies”, imposing fines, or even restricting defaulters from leaving Hong Kong are not appropriate measures in our view.
Another practice of private financial institutions, i.e. forwarding the credit data of loan borrowers to credit reference agencies, is nevertheless worthy of consideration by WFSFAA. The long-established practice has a strong deterrent effect as loan defaulters have to bear the consequence of having a negative credit record. Besides, the public at large well understands how that practice operates. As WFSFAA’s granting of loans to students has no difference in nature from the business of private financial institutions in advancing credit to borrowers, the Office believes that if WFSFAA applies that practice to the Loan Scheme, there will be a similar deterrent effect on serious loan default and the problem of loan default could be harnessed.
Regarding the personal data privacy of loan borrowers under the Loan Scheme, WFSFAA is in fact prepared to seek the prior consent of the loan borrowers for passing their negative credit data to credit reference agencies should they default on their loans. WFSFAA also stresses that only negative credit data of serious defaulters would be forwarded to credit reference agencies. The treatment of personal data of loan borrowers, therefore, would be well regulated.
The Office notes that some people have reservations about this proposed measure. They point out that the sharing of the negative credit data in the credit database is currently confined to private financial institutions within the industry. Their worry is that if WFSFAA is to be included in the system, other Government departments that may need to deal with outstanding payments (e.g. the Inland Revenue Department, Water Supplies Department, and Rating and Valuation Department) or private institutions (e.g. telecommunications companies) may also wish to be included as well, and that might have an adverse impact on protection of personal data privacy. From our perspective, the two situations should not be confused. The negative credit data relating to loan defaulters under the Loan Scheme of WFSFAA are clearly akin to the credit data collected and processed by private financial institutions, while what Government departments such as the Inland Revenue Department or telecommunications companies have to handle are statutory levies or service charges, which are totally different in nature from loan defaults. The reservations of those people are, therefore, unwarranted.
The Office is pleased to learn that WFSFAA has responded positively to the Office’s views and indicated that it will continue to deliberate with the PCPD on how the negative credit data of serious defaulters under the Loan Scheme can be forwarded to credit reference agencies to achieve greater deterrent effect.
Office of The Ombudsman
March 26, 2015
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