Moneylenders have demanded she turn over almost all of her HK$3,740 ($483) monthly salary to pay debts totaling 11 times that amount that she incurred finding a job, she says. When she stopped paying in July after being told fees she had been charged are illegal in Hong Kong, debt collectors harassed her and the family that employs her as a live-in helper.
“I want to shout for help but don’t know where to complain,” Arida says, giving only her first name because she’s afraid of losing her job. “This loan will be impossible to repay. I fear this will never go away. I cry every day.”
Thousands of women in Hong Kong with similar stories, most from Indonesia and the Philippines, are working off debt by turning over almost all of their pay for months to loan companies and agencies that place them with families, according to interviews with a dozen workers, four nonprofit groups that handle complaints and academic researchers. The moneylenders, part of Hong Kong’s shadow-banking system, are helping circumvent laws intended to protect the women, they said.
“It is definitely indentured servitude, modern-day slavery,” said Holly Allan, founder of nonprofit Helpers for Domestic Helpers. “There are tens of thousands of them, not only working for no salary, but with no rest days. Each and every one believes it’s a normal thing. We have several clients who have worked for three years and never made any money.”
Hong Kong’s more than 300,000 domestic workers cook, clean and take care of children and the elderly. The city’s contract governing their employment doesn’t set a limit on hours or require they be given a private room. It grants them one day off a week and caps the commission that agencies can charge them at 10 percent of one month’s salary -- in Arida’s case, HK$374. Other fees, including those for medical checkups, insurance, visas and airline tickets, are supposed to be paid by employers.
To get around these restrictions, agencies often charge domestic workers for training fees and expenses incurred before they leave their home countries. Hong Kong’s employment contract doesn’t prohibit such practices or say anything about interest payments on loans the women take out to pay their debts. Licensed moneylenders, some of which offer free phones or TVs to encourage borrowing, can charge as much as 60 percent annual interest under Hong Kong law.
That leaves domestic workers burdened with thousands of dollars of loans and high interest rates. They often lose their jobs while still paying off debts and have to take on more to cover charges for a new placement, Allan said.
“Employment agencies are in collusion with moneylenders and with employers, and they’re all in it to save money or make money at the cost of domestic workers,” said Allan, whose organization handled 5,000 complaints last year. “All of it is illegal. The fact that they’re taken to a loan agency to pay the placement fee -- the purpose of the loan is illegal. It’s a cross-border crime.”
The Philippines banned commissions in 2006, allowing employment agencies to charge only fees, according to Manuel Roldan, labor attache at the country’s consulate in Hong Kong.
Indonesian law permits commissions and expenses charged by agencies, which house workers in dormitories and teach them Cantonese, Chinese cooking and cleaning skills. The country’s Ministry of Manpower and Transmigration on May 24 capped those fees at about HK$14,000, not including financing charges, about HK$4,000 less than what agencies had been charging, according to Teguh Wardoyo, Indonesia’s consul general in Hong Kong.
Agencies in the Philippines and Indonesia typically require prospective employees to take out loans to pay the fees, according to Allan and Cynthia Ca Abdon-Tellez, general manager of Hong Kong-based Mission for Migrant Workers, which also handles complaints by domestic workers.
Employment companies are able to hide commissions and fees by using moneylenders as intermediaries, a practice that took off after Philippine law changed, Allan and Abdon-Tellez said. Domestic workers usually aren’t given itemized breakdowns and often make payments to moneylenders in cash via 7-Eleven stores, which provide thermal-paper receipts with untraceable account numbers that sometimes fade too quickly to hold up in court, the heads of the nonprofit groups said.
Candy Law, a spokeswoman for 7-Eleven Hong Kong, which operates stores in the city, said her company acts as a contractor when it collects payments for utilities and other firms. She said it would “not be appropriate for us to comment on other merchants’ business activities.”
The number of licensed moneylenders listed in Hong Kong’s Companies Registry increased 20 percent to 938 over the past two years. The firms aren’t regulated by the Hong Kong Monetary Authority, which doesn’t track lending outside the city’s 23 loan-issuing banks and 25 deposit-taking companies. To obtain a license, lenders pay the equivalent of $1,382 for a one-year, renewable permit approved by Hong Kong’s Licensing Court.
No one tracks how much cash licensed moneylenders circulate in the shadow-banking system. In China, of which Hong Kong is a part, non-bank lending accounts for about a quarter of all loans, according to estimates by Societe Generale SA, and the government has made efforts to rein in risk.
At a meeting in Hong Kong in May, the Basel, Switzerland- based Financial Stability Board discussed measures to “strengthen oversight and regulation of shadow banking,” which it identified as a “vulnerability” in the global financial system because it lacks sufficient regulation.
The Licensed Money Lenders Association Ltd., which represents about 40 Hong Kong companies, didn’t return four phone calls asking for data and responses to questions. It said in an e-mail that its members abide by a code of conduct designed to promote “good money-lending practices.”
Almost 8,000 domestic workers arrived in Hong Kong in the first six months of the year, according to Immigration Department statistics. If the trend continues, that will bring the total to more than 310,000 by the end of December, an increase of 6 percent from 2011, the data show.
Of the more than 4,200 newly arrived Indonesian domestic workers, almost all will have signed contracts pledging them to turn over HK$3,000 of their HK$3,740 monthly salary for at least seven months, Abdon-Tellez and Allan said. Most of the 3,700 Filipinas will have paid the same amount for four or five months to agencies or moneylenders, leaving little for clothing, transportation and other expenses, they said.
“So they have to borrow more money,” Abdon-Tellez said. “The family back home is pressuring them, but they don’t want to tell them because they don’t want them to worry.”
If the women stop paying, debt collectors harass them and call their employers on mobile-phone numbers they could have obtained only from the employment agencies, she and Allan said.
“All Indonesians must sign a loan agreement to pay the recruitment fees and can’t escape this thing,” said Eni Lestari, spokeswoman for the Asian Migrants Coordinating Body, which says it represents 20,000 domestic workers in Hong Kong. “Wherever you go, they have all the data of your family and employer. If you decide to run away from the agency, they will continue harassing you, sending all these letters.”
About 2,000 complaints a year since 2010 have been filed with the Philippine consulate in Hong Kong by workers who have lost jobs and want help getting back illegal placement fees, according to Roldan, the labor attache. The fees, which violate Philippine law, are added to charges including those for medical exams and security clearance that add up to an average of HK$21,000, he said. Those who don’t have enough cash are forced to take out a loan to pay the agency before departing, he said.
“It’s not only circumvention, it is direct violation” of Philippine law, Roldan said.
Hong Kong’s Labor Department received 54 complaints last year and 27 in the first nine months of 2012 about overcharging for employment-agency commissions, according to Lily Chan, a spokeswoman. Two firms were found guilty, resulting in fines of HK$50,000 and a loss of licenses, she said.
“There have been claims that some domestic helpers incur huge debts because of the high level of fees and commissions charged by employment agencies and training schools in their home country,” Chan said in an e-mail. “We are concerned about this situation and have raised this issue to the relevant governments’ attention.”
Anna, 32, another Indonesian domestic worker, says she spent 27 months paying almost her entire salary to moneylenders after losing her first job, being charged placement fees for a second and then needing to borrow more money. She had to pay HK$3,000 of her HK$3,480 monthly salary for seven months to Hong Kong moneylender Niaga Finance Co., she says. After she lost that job, she took on more debt to get a second placement for a total of HK$36,000. When she needed money to send home and help out a friend, she borrowed HK$27,000 more from another firm.
The friend disappeared, and Anna says she spent 15 more months paying HK$3,000 installments on the second loan, a premium of 66 percent on her principal because of penalties for missing the fourth month’s payment.
“For two years I didn’t have any money,” she says, because she had to live on the equivalent of $62 a month after debt payments. “No shopping. I was very scared, crying. I was afraid to call home because they ask for money, and I just say, ‘Later, later.’”
Anna, a native of Semarang in central Java who asked that her last name not be used because she’s afraid of losing her job, said she took out the second loan from Public Finance Ltd., a Hong Kong moneylender. The company’s parent, Public Financial Holdings Ltd. (626), is 73 percent owned by Public Bank Bhd. (PBK), Malaysia’s third-largest lender.
Public Finance representatives pass out cards in Victoria Park on Sundays, when thousands of domestic workers congregate on their day off, offering free phones or TVs to borrowers. A secretary who answered the phone of the firm’s general manager and a person in the office of Ofelia Umali, who oversees lending to domestic workers, both said their managers declined to be interviewed. Haslinda Othman, a spokeswoman for Public Bank in Kuala Lumpur, declined to comment or to arrange an interview.
Paul Lie, Niaga’s chief executive officer, said that while he used to have a thriving business making loans to domestic workers in Hong Kong, charging between 40 percent and 48 percent interest, “it’s getting more troublesome because a lot of the maids were told by the pressure groups not to pay.”
About 40 percent of his interest income -- HK$3,000 on the HK$21,000 that a typical Indonesian worker would borrow -- is being written off as nonperforming, he said. Profit declined to HK$7.9 million in 2010 from HK$11.9 million in 2009, he said. He didn’t disclose figures for last year.
Niaga, once a part of Indonesia’s PT Bank CIMB Niaga (BNGA) and now closely held, buys 90 percent of its loans from employment centers in Indonesia that train domestic workers, Lie said.
“We’re just collecting money in Hong Kong,” he said. “We don’t deal with the maid directly and have no connection with the agency. If the training center pays the agent, this transaction is not our deal.”
Still, Lie said Hong Kong’s law limiting employment fees to 10 percent of a month’s salary is “unrealistic” because it doesn’t take into account the expense of training workers.
“From the finance companies’ point of view, we’ve helped the Indonesians to find jobs here and made the system work,” Lie said. “Nothing is free. It’s hard work for us, too.”
A six-inch-thick folder in the office of Helpers for Domestic Helpers is stuffed with complaints against Niaga. There are even fatter files for other moneylenders. The group sought to block Niaga’s license renewal this year saying the firm made loans in the Philippines in violation of that country’s law. Lie, who denied knowledge of the case, said he no longer makes loans in the Philippines. His license was renewed on Oct. 19.
Arida, the domestic worker who stopped paying her loan in July, said her employment agency, Hong Kong-based Wang Fullco Co., made her sign papers before leaving Indonesia that she wasn’t allowed to read and that pledged her house as collateral. She said she was told that some of the money she agreed to pay was for expenses incurred during six weeks at a boarding school learning Cantonese and how to use a washing machine.
A mother of three from the island of Java, Arida said she received a signing bonus of 2.5 million rupiah ($260), which she later was told was included in the amount she had to repay. She wasn’t given any receipts or allowed to keep copies of the papers she signed, she said.
After her first job in Hong Kong ended, Wang Fullco employees took Arida to Toyo Finance & Credit Ltd., a licensed moneylender, and made her borrow more money to give to the agency, she said. Loan payments were made at a 7-Eleven.
McLean Ng, a director at Wang Fullco, denied in an interview that his agency has taken any workers to moneylenders. He said his firm only handles debts incurred in Indonesia and the Philippines, and only accepts payments on behalf of workers to send money to finance companies abroad. His agency keeps 10 percent of one month’s salary as payment, as allowed by law, and charges the same amount if there’s a new contract, he said.
“What we do in Hong Kong is remind domestic workers to pay their installments” owed to firms in Indonesia, Ng said.
Gilbert Ng, a manager at Toyo Finance who isn’t related to McLean Ng, declined to comment, saying he doesn’t “accept or need media interviews.”
Paul O’Connor, a lecturer at Chinese University of Hong Kong and author of “Islam in Hong Kong: Muslims and Everyday Life in China’s World City,” published in September, said the Indonesians he studied considered their first months or year in Hong Kong to be like a “prison sentence” that they have to get through in order to get a greater payoff.
While the monthly minimum wage for domestic workers is set by the Hong Kong government at HK$3,920 for contracts signed as of Sept. 20, workers often are underpaid after their debt is discharged, according to Allan and Abdon-Tellez.
Dwi, a 26-year-old Indonesian who declined to give her last name because her case is pending, said she received no pay for the first three months that she worked for a family in Hong Kong. For the next six months she got only HK$200 and, after that, HK$2,200, less than the minimum wage.
She had to stop working last year after asking Helpers for Domestic Helpers to lodge a complaint because the government requires those pursuing claims to halt employment -- “an appalling policy of treating victims as offenders,” Allan said.
After a wait of a year, a hearing was scheduled for October and then postponed until December, she said. All she wants is to be paid what she’s owed so she can go back to her husband and five-year-old child on the island of Java.
The Labor Department said it doesn’t comment on cases under investigation. In the meantime, the Immigration Department temporarily detained her for signing a contract for less than the minimum wage, which she wasn’t aware of at the time, she said. They took HK$20 as bail, leaving her only HK$30.
“I don’t accept this situation,” Dwi said by phone from a shelter where she’s living on donations while waiting for her case to be heard. “The government is just playing around. It makes me sad.”
Another worker, Widy, 27, also from central Java, said the women quickly realize they’re on their own and that governments don’t help. She spent nine months in training in Indonesia before arriving in October 2011 and paying off a debt of HK$21,000 over seven months to a Hong Kong-registered moneylender, she said. After sending HK$600 home to her family each month to keep her two brothers in school, she had only HK$140, the equivalent of $18, for living expenses.
“This system isn’t right,” Widy said in an interview in Victoria Park, tears streaming down her face. “No one helps us. I say to the government to wake up, not to be like this, feeding off our sweat from working here like slaves. We aren’t here having fun. We are here working hard, so how come the government and the rich people still dare to take our money?”
To contact the editor responsible for this story: Chitra Somayaji at firstname.lastname@example.org