Its call comes after a study found that marketing tactics and misleading claims by money lenders have led to many young workers borrowing more than they can afford.
The watchdog said the money lending market is growing rapidly, with the number of licensed money lenders now standing at more than 2,200 – three times higher than a decade ago.
The amount of personal loans taken out each year has also tripled from a decade ago to HK$544 billion.
The council also cited a 2017 survey which found that one-third of workers aged between 18 and 29 were in debt. Their average debt level was HK$37,000, with many respondents saying they overspent on shopping and entertainment.
Currently, money lenders are only governed by one piece of legislation – the Money Lenders Ordinance – which was enacted more than 40 years ago.
The council said the law is outdated and ineffective, and fails to govern the behaviour of money lenders who tend to make exaggerated and misleading claims, such as “no credit report required”, “zero or low interest rate” and “instant approval in ten minutes”.
The watchdog such advertisements encourage irrational spending among young people and downplay the true costs of borrowing.
The council’s chairman, Paul Lam, called for more regulations to protect consumers.
“We are not trying to pass any judgement on the rights and wrongs of borrowing money or carrying out money lenders’ business. In a free capitalist society like Hong Kong, we do recognise that money lending plays a legitimate and perhaps important role. But what we wish to emphasise is that a balance needs to be struck between carrying out these activities or borrowing money on the one hand, and on the other hand to ensure and enhance consumer protection”, he said
Lam said the proposed regulator could raise the bar for vetting applications for money lender licences, with one licensing condition being that lenders must prudently assess the borrowers’ ability to repay loans.