The Hong Kong Monetary Authority (HKMA) has further enhanced consumer protection by issuing a circular prescribing a 7-day cooling-off period for customers to reconsider credit products.
Retail banks (including digital banks1) offering unsecured consumer credit products to individual customers are required to comply with the requirements set out in the circular as soon as practicable – and in any case no later than the end of June 2025.2
The cooling-off period arrangement aims to promote responsible borrowing while reducing the risk of impulsive and excessive borrowing by giving individual customers a reasonable time period to carefully reconsider their financial obligations and assess their repayment capacity after entering into a credit agreement.
In formulating the requirements, the HKMA has made reference to international standards such as the Recommendation on Consumer Protection promulgated by the Organisation for Economic Co-operation and Development, as well as taking into account good banking practices.
Scope of Cooling-off Period
- Retail banks should provide the cooling-off period on all unsecured consumer credit products offered to individual customers.
- During the cooling-off period, individual customers may repay/redeem the loans concerned with full principal repayment. Individual customers should be allowed to repay/redeem the loans without providing reasons.
- The cooling-off period is not applicable to secured lending.
Duration of Cooling-off Period
The cooling-off period must not be shorter than seven (7) calendar days immediately following the day of loan drawdown.
Fees and Charges
- Individual customers should not be charged any handling fee or prepayment or early settlement fee or other fees of similar nature due to the loan repayment/redemption.
- Any interest payable by customers who have made repayment/redemption should not be at a rate higher than the rate which would otherwise be charged if the customers had not made repayment/redemption within the cooling-off period.
Channels for Repayment/Redemption
- Retail banks should provide customers with accessible, timely and efficient channel(s) to facilitate customers who wish to repay/redeem their loans during the cooling-off period to make repayment/redemption.
- Retail banks should also process any relevant requests from individual customers without undue delay.
Disclosure and Transparency
- At the time of loan application and notification of loan approval, retail banks should set out and clearly communicate to customers the cooling-off period arrangement and the key features (e.g. duration, no fees and charges for exercising cooling-off, any interest payable when exercising cooling-off, etc.), as well as the available channel(s) for repaying/redeeming the loans.
- The communication should be made in a prominent manner to ensure that customers are well informed of the details about the cooling-off period.
Implementation Timeline
Retail banks (including digital banks) offering unsecured consumer credit products to individual customers should review and revise as necessary their systems and documentation – and comply with the requirements as soon as practicable and in any case no later than the end of June 2025.
If retail banks (including digital banks) have difficulty in observing the implementation timeline, they may discuss with the HKMA through their usual contacts at the Banking Conduct Department.
Link to HKMA Circular:
Cooling-off Period for Unsecured Consumer Credit Products
Link to other Mayer Brown Insights on consumer protection in Hong Kong:
Hong Kong Monetary Authority Issued Two Circulars to Authorized Institutions Regarding Payment Cards
HKMA Enhanced Consumer Protection in the Use of GenAI by Authorized Institutions in Hong Kong
Footnotes
1 Formerly, virtual banks
2 In the circular, HKMA strongly encourages authorized institutions (AIs) to arrange their subsidiaries in Hong Kong which carry on retail banking business and offering unsecured consumer credit products to follow the requirements. HKMA also encourages other AIs to adopt similar consumer protection measures if they are offering such products to individual customers.
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