Your Domestic Helper Asked For A Loan. Now What? Answers To Financial Situations

The experts at HelperChoice offer general advice when it comes to requests from domestic helpers for extra money.

Discussing finances with your helper can be complicated, and often times we are dealing with situations we’ve never encountered previously. For those of you who are new to hiring a domestic helper, or if you haven’t faced these kinds of situations before, we’ve paired with HelperChoice to answer those tricky questions about finances, asking for a loan and more.

There are several situations for which you helper could ask you for a loan or a salary advance. To help you navigate these situations, we’ve highlighted various reasons why she may need them and advice on what to do in those situations.

Does she need to pay recruitment fees?

By law, employment agencies in Hong Kong are only allowed to charge foreign domestic helpers no more than 10% of their first month wage as placement fees. However, some agencies charge the domestic helpers, especially overseas helpers or pre-terminated helpers, illegal fees directly, and many employers have a limited knowledge of such practices because they aren’t affected by them.

Your helper might be forced to take a loan to pay off these fees, which could amount to more than six months’ salary.

What you should do: Open the dialogue and ask her. Find a moment when you can sit down and listen, and try not to be judgmental. Explain that you have recently heard that some agencies charge high fees to domestic helpers, and that this practice is illegal. Tell her that you would like to try to help fight against these fees. Then, ask, “Has an agency ever charged you fees?”

If she says yes, ask for the name of the agency, and how what the fees are. If she does not feel comfortable answering, there is no need to push. Suggest that she reports the case at the Hong Kong Labour Department via its 24-hour hotline: 852 2717 1771; email: [email protected] or on its website. Reassure her that you will support her if she wishes to take legal action.

Did she borrow money from a loan shark?

First, check with your domestic 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. Do not hesitate to call the police (999).

Encourage her to address the issue and sit down with her to come up with an action plan. How much does she owe them? How should she allocate the money to pay them back?

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 salary.

Contact a local NGO such as Enrich (leading Hong Kong charity promoting the economic empowerment of migrant domestic workers) that can advise you on what to do.

Is the loan shark harassing you?

Sometimes a helper will agree to be a guarantor for a friend who is borrowing money. If the friend runs away with the money, your helper has to shoulder all her friend’s debts. The interest of these debts borrowed from loan sharks can be as high as 60% per year! If this happens, you might receive a lot of calls and letters to your house, usually threatening in nature, which can be both irritating and frightening for you and your family.

Most loan sharks require the employer’s telephone number and address before giving a 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 loan shark does suddenly start to call you and send you letters, stay calm and don’t panic.

Legally speaking, debt collection companies are not allowed to attempt to recover debts from anyone but the debtor or guarantor. Also, they cannot 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.

Does she need money for family emergency back at home?

If the helper’s family suddenly needs a large amount of money because a relative is in critical medical condition, sometimes the helper has no choice but to take a loan from loan sharks, especially if she does not want to ask you. Sometimes families ask the domestic worker for money she cannot afford without any legitimate reason, and she doesn’t know how to say no.

What to do if you want to pay for the medical expenses of a relative: If your helper asks you for a large amount of money for a relative’s medical expenses, you should ask a few questions: Is it an emergency? Has there been an accident? Is this a long-term illness?

In many cases, there is an actual medical problem that requires her sending more money back home, but in some rare cases she might also want to have more money, leave and go home. There is no right or wrong answer when you face this situation. You should consider your relationship with your helper, and whether you trust her, and we suggest you trust your instincts on this one. If you decide to pay, we recommend avoid giving cash as much as possible, and suggest you pay the expenses yourself.

Always keep an open dialogue, explain that you trust her but that you have heard a lot of bad stories about employers getting shafted. Tell her you are willing to help, but you would need proof (hospital name, patient name, registration form, etc.) and invoices (hospital and/or medication bills.).

Does she just want extra money for personal reasons or for leisure?

Another reason would be for a lifestyle she cannot afford on her salary. If the helper is borrowing money to buy new clothes or handbags, which is, in fact, spending her future income, you may want to help her budget better.

How to help her with a budget: There are a few things you can do to help your helper budget her money better. Help her open a bank account. That way, you can transfer her salary directly to this account. Encourage her to save. For example, she can auto-transfer her savings every month to a second account, and pay herself first before sending her remittance.

When it comes to bank accounts, there is no special service for domestic workers, but usually employers will consider saving accounts in these three banks: HSBC, Bank of China and Hang Seng Bank. The required documents are: a valid passport, an HKID and an original employment contract. Keep in mind that they might require a deposit at the account opening and a minimum balance. You should check all the terms with them according to your helper’s situation.

Talk about loans with her, as this is a very common issue for domestic workers. If she ever wants to take one, make sure she raises the right questions: what does she need it for? Is it important? Can she afford the monthly charge? And warn her about illegal money lenders.

Discuss online scams with her, encourage her to do research before committing to anything. Reassure her by saying that you can help by verifying if the company is licensed and the terms are fair.

We also recommend you send your helper to financial management courses. In Hong Kong, Enrich is an NGO dedicated to this area. The courses usually include budgeting, and even entrepreneurship and investment. Your helper will not only learn how to save and spend her money more wisely, she will also be able to put these skills into use when she returns to her home country, and will get a better return from the money she earned in Hong Kong. The HelperChoice Academy organises classes with Enrich regularly.

What you should NOT do:

Keep her passport and/or other identity documents
Your helper usually needs to use a copy of her passport and/or HKID and the employment contract to be able to borrow or be a guarantor. Some employers keep their helpers’ passports to avoid them from borrowing loans, but it is illegal, and your helper should be able to keep her passport at all times.

Pay off her debts
Some employers decide to pay off their helper’s debts first and deduct these payments from her salary for a period of time. But it is not sustainable if she does not learn the lesson and decides to borrow again.

Terminate her contract if she borrows a loan
Some employers include (as one of the unofficial conditions of employment) that if the helper is found borrowing loans and being a guarantor, she will be terminated. It can be a good deterrent, and it’s a good excuse if she does not want to be a guarantor for her friend. However, without understanding your helper’s financial situation, it might be too rigid and harsh for her.

In any case, always keep an open dialogue about money issues, state the conditions very clearly, but keep in mind that many times, she might feel as if she did not have a choice and might suddenly need money due to unforeseeable circumstances. In this case she should be able to tell you and you two will come up with a plan together.