(Last of two parts)

Many Overseas Filipino workers (OFWs) in Hong Kong are hounded by their lenders from the Philippines, who even hire debt collectors to threaten and harass their employers.

The Philippine Center for Investigative Journalism (PCIJ) found that Hong Kong employers have received threatening calls and visits from the debt collectors demanding payment for the Filipinos’ mounting debts. 

In extreme cases, the employers receive snakes or photos of their pets with eyes crossed out in their mailboxes, or find their door smeared with red paint.

“Marami pong kasong ganyan (There are many such cases),” Dolores Balladares Pelaez, chair of the United Filipinos in Hong Kong, an alliance of Filipino migrant groups, told PCIJ. “Of course, the employers get angry and are stressed out.” 

Some Hong Kong employers have since required that applicants have no standing debt. For good measure, some confiscate the worker’s passport and contract on arrival, documents that can be used as loan collateral. Such confiscation is prohibited by Philippine and Hong Kong laws.  

In the Philippines, applicants take out loans at interest rates higher than 8% per annum—from lenders specifically referred by recruiters—to pay for a raft of excessive fees, including placement fees that are lumped with training and medical examination fees.  

As their debts pile up, the overseas Filipino workers (OFWs) are forced to take out new loans to pay for old ones, in an endless cycle of indebtedness. 

“The worker’s pay is small. A month’s salary isn’t enough to pay off a loan,” Pelaez said, noting that a migrant worker had to allot the monthly pay for loan payments, family expenses back home, and personal expenses. “It’s not really enough.’’ 

In China’s special administrative region, migrant domestic workers are paid a minimum monthly salary of HK$4,730, or P33,000. 

The problems are clear, but the solutions are not:

1. OFWs need more guidance during the recruitment process so they do not fall victim to unscrupulous recruiters. 

2. Not all violators are punished, promoting a culture of impunity among recruitment agencies and third-party services.

3. Some lenders impose high interest rates.

4. Some lenders shirk responsibility when the debts are sold to partners that harass OFWs to collect payment.

11 convictions in HK

The Hong Kong government, which has allowed the employment of foreign domestic helpers (FDHs) since the 1970s to meet the shortage of live-in helpers, acknowledged the risk of debt bondage among migrant workers. But it has no data on the matter.

In the past five years, it has prosecuted and convicted 11 employment agencies for overcharging commissions pegged at 10% of a worker’s monthly wage. It has also ensured that employers shoulder the workers’ medical examination and visa fees, among others.  

But the Hong Kong authorities said governments should also do their part in addressing the issue of excessive placement or training fees. 

In a joint response to PCIJ, the Hong Kong Labour Department, Immigration Department, and Police said the problem lies with “the indebtedness of the FDHs in their home countries before coming to Hong Kong.’’

The Hong Kong government cannot tackle this alone, they said, adding:  

“We have repeatedly appealed to the governments of FDH-sending countries to address the problem of excessive placement or training fees charged by intermediaries in the FDHs’ home countries so as to tackle the problem of debt bondage at source.” 

Migrante International, a global network of Filipino migrant organizations, cited the mandate and responsibility of the Philippines’ Department of Migrant Workers (DMW) “to coordinate with the other government agencies that can also put a stop to these cases.” 

“But still, [there’s no] strong enforcement and regulation on these lending agencies, and further investigation,” said Migrante International chair Joanna Concepcion. 

DMW Undersecretary Bernard Olalia admitted that there were regulatory “gaps” concerning agencies that collect illegal fees. He said even some compliant agencies bend the rules “just to find a way to charge the OFWs” even if the law clearly prohibits it.  

Olalia, however, said the DMW wasn’t treating these agencies with kid gloves. He said erring agencies with valid licenses are charged with administrative cases and violations of recruitment laws, and other agencies with expired or invalid licenses face criminal cases. 

From 2018 to 2022, a total of 35 recruiters operating without a license were convicted and 5,099 agencies were charged with recruitment violations, according to DMW data.

Related: Overseas Filipino workers are harassed, even jailed, for loans they’re forced to make to get jobs abroad

High interest rates 

Another factor in migrant workers’ debt bondage is the high interest rates in Hong Kong. 

Based on Migrasia’s research, a third of surveyed OFWs took on debt “larger than their annual household income, in order to finance costs associated with migrating overseas.”  

“And then you’re talking about interest rates that in Hong Kong often exceed 100%,” Migrasia said. “We’ve seen them over 300%, which means that if you made the minimum payment, you would never get out from underneath that debt. So what do you do? You borrow more money, right? And then you have a debt cycle that you can’t get out of.” 

Lending agencies based in the Philippines have also grown wiser. Instead of going after their Filipino clients, they outsource debt collectors to do the job for them. In cases of “bad debts,” they sell loans to their counterparts in Hong Kong.

Advocacy groups said this was one way to collect excessive fees.

Nolivienne Ermitaño, assistant director of the Financing and Lending Companies Division of the Securities and Exchange Commission (SEC), said Philippine lenders and their third-party service providers “should be jointly liable, solidarily liable for that.”

“That won’t work,” he said. “You (the lender) are still part of it because you were the one who talked to the borrower in the first place. You can’t say you’re not responsible for that anymore.’’

On average, OFWs would take more than nine months and spend a fifth of their monthly salary for debt repayment. But some reported a repayment period of as long as three years, a year longer than the contract of household service workers, according to Migrasia data. 

More guidance 

Officials said migrant workers need to do due diligence before processing pre-employment papers, and verify the legitimacy of licenses of recruiters and lenders with the regulatory authorities.

The DMW website lists licensed recruitment agencies for both land-based and sea-based overseas jobs. The list includes closed or permanently banned agencies, and those with canceled or suspended licenses.

The SEC website also lists lending companies and financing companies that were issued certificates of authority.

Ermitaño acknowledged that OFWs’ circumstances may “induce [them] to suspend their financial prudential thinking.” He said migrant workers have to be “discerning” and “skeptical” in order to preempt predatory practices and debt bondage.

The Philippine Overseas Employment Administration (POEA), now absorbed by the DMW, has identified fees to be shouldered by household service workers and by employers, to serve as a guide to Filipino applicants. 

The DMW’s Olalia stressed that expenses that may be charged to the employer are neither reimbursable nor deductible from a worker’s pay.  

Seeking redress 

Advocacy groups have cited mechanisms for migrant workers to seek redress for their grievances.

The DMW offers legal assistance and conciliation services, the SEC accepts complaints on unfair lending practices, the Department of Labor and Employment processes money claims, and courts hear illegal-recruitment complaints.  

Workers living in far-flung areas can request assistance from the Public Employment Service Office, a multi-employment service facility maintained by local governments, community-based organizations, and state universities and colleges.

But here lies the problem: Not all migrant workers are aware of their options.

“They are not informed, they are not aware, and if you’re not aware of your rights, you cannot invoke your rights,” Olalia told PCIJ.  

According to Olalia, a migrant worker can file a complaint, and the DMW can provide legal aid from the preparation of the affidavit to the prosecution of the case. Otherwise, the DMW may investigate the complaint on its own, requiring the worker to serve only as a witness.     

But based on the SEC’s experience, many workers do not push through with their complaint once the issue is reported in the media and the harassment from lenders or recruiters stops.  

“Mabilis ba? (Is the action fast?) What will it take from my (the OFW’s) end? Gaano ba katagal ‘yan? (How long will it take?)” Ellene Sana, executive director of the nonprofit Center for Migrant Advocacy, said, citing the OFWs’ concerns.

She pointed out that the bureaucratic process requires the time, energy, and money of complainants, and that a host of issues “make the worker think twice or thrice whether to pursue [a case] or not.”  

Sana also agreed that many workers are aware of recruitment violations but sometimes go along with these out of “desperation to get the job.”  

This story was produced as part of the Trafficking Inc. investigation by journalists from the International Consortium of Investigative Journalists, The Washington Post, NBC, WGBH Boston, Arab Reporters for Investigative Journalism, the Philippine Center for Investigative Journalism, and the Investigative Reporting Program at the University of California, Berkeley.

The post In Hong Kong, gov’t falls short of protecting Filipino workers from debt burden appeared first on CoverStory.

(First of two parts)

In 2022, “Jessica” tried to apply for a local job and went to a police station to request a clearance certifying she has no criminal record. But she was arrested and thrown in jail right then and there.

She had no idea she was facing charges over a loan she had taken out over a decade ago, and that a warrant had been issued for her arrest. 

“Iyak ako nang iyak. First time kong pumasok sa kulungan (I cried and cried. It was my first time to be jailed),” she told the Philippine Center for Investigative Journalism (PCIJ). She was released after posting bail. 

In 2010, Jessica took out an P80,000 loan from moneylender Nittan Capital Finance Inc. (NCFI), a company referred to her by the recruitment agency when she applied for work as a domestic helper in Hong Kong. She needed the money to pay for the job requirements.  

Hong Kong didn’t work out. She was terminated after 10 days. “Walang explanation (There was no explanation),” she told PCIJ. 

She later found another job in Taiwan and worked there as a domestic helper for two years, which helped her pay off the bulk of her Hong Kong loan. Initially, she managed to pay P60,000 or 75% of the entire loan before interest. Then, she stopped paying and totally forgot about it—until that day she was arrested.

Jessica’s story is a cautionary tale for overseas Filipino workers (OFWs) who are forced into debt even before they leave the country.

It’s a problem crying for a comprehensive government solution. It demands the attention of the year-old administration of President Ferdinand Marcos Jr., according to migrant workers’ groups who are banking on his promise to protect migrant workers.

“Workers should not be required to take on debt to secure their job placement, as these fees are the responsibility of the employer, who should cover these costs,” said Migrasia, a Hong Kong-based nongovernmental organization which has helped migrant workers file complaints and seek legal recourse against possible exploitation. 

Related story:

In Hong Kong, gov’t falls short of protecting Filipino workers from debt burden

Postdated checks

Failure to pay a debt is not a crime. But, like Jessica, one can land in jail for issuing postdated checks.  

Jessica had a standing arrest warrant for five counts of alleged violation of the Batas Pambansa Blg. 22 (B.P. 22), or the Anti-Bouncing Checks Law. She said she was not aware of the charges and did not receive a court summons. The law, enacted in 1979, penalizes a person who issues a check knowing that the bank account has insufficient funds to cover the amount. 

Some workers sign blank checks, while others are coerced by their recruiters and lenders into doing so, according to migrant workers’ groups. 

Forcing workers to issue postdated checks for loan payments, “either personally or through a guarantor or accommodation party,” is prohibited under Republic Act No. 10022, which amended the Migrant Workers and Overseas Filipinos Act.

But the recruiters and some lenders know the law more than the workers, and have used it to their advantage.  When the workers fail to meet monthly payments, they are brought to court for violation of B.P. 22. Even their family members, who are their co-borrowers, are also charged in court.  

“It definitely is a tool that is very intimidating to migrant workers. Would agencies and lenders find some other way to intimidate clients if they couldn’t use B.P. 22? Probably,’’ Migrasia told PCIJ. “But it’s an effective tool that benefits lenders and agencies, who are well resourced and understand the legal system better than the migrant workers they are intimidating.”

In her case, Jessica said she didn’t know Nittan Capital had filed a case against her in court. She missed notices of court hearings and consequently skipped them, leading the court to issue a warrant for her arrest. 

Nittan is a subsidiary of Nittan Capital Holding Co. Ltd. Hong Kong. The Hong Kong-based firm is part of a group operated by Central Tanshi Co. Ltd., a financing company in Japan.

PCIJ reached out to Nittan Capital, but the moneylending company refused to be interviewed. Apart from Jessica, PCIJ confirmed at least three other Overseas Filipino workers who faced B.P. 22 charges filed by Nittan. 

Predatory lending, labor abuse 

A comprehensive government solution is needed to address why Overseas Filipino workers are forced into debt in the first place. 

A placement fee equivalent to a monthly salary may be charged against an Overseas Filipino worker. But in 2006, the Philippine Overseas Employment Agency (POEA) resolved to make an exception for domestic workers, “in recognition of the nature of their work and their vulnerability to exploitation and abuses.” 

POEA is a government agency that monitors and regulates the overseas employment of Filipinos. It has now been absorbed by the new Department of Migrant Workers.

There are recruiters, however, that circumvent POEA policy by lumping the placement fee with payments for training centers and medical clinics, according to Ellene Sana, executive director of the Center for Migrant Advocacy, a Quezon City-based nonprofit promoting the welfare of Overseas Filipino workers and their families.

The acceptable training fee is around P11,000, but many Overseas Filipino workers are being charged between P80,000 and P90,000, she said.

Said Migrasia: “It’s very common for Overseas Filipino workers to think that training is required because that’s what they’re told in the Philippines. It’s important to know that payment for training is where the majority of the debt comes from, so Overseas Filipino workers should know whether it’s actually required in the first place. 

“For example, if migrant domestic workers are required to take training, their employer or agency is supposed to pay for it, which rarely happens. It’s frustrating that so much of the debt originates from a service that often isn’t required, and is something Overseas Filipino workers aren’t supposed to be paying for.” 

Two in five Overseas Filipino workers reported “either feeling that they had no choice at all or were pressured” to use a medical clinic, training center, or lending firm, according to Migrasia data.

“Overseas Filipino workers go abroad wanting the best for their families, and often are willing to do whatever it takes to care for them. The agencies who are supposed to help them take advantage of that, and make them pay,” Migrasia said.

4 out of 5 surveyed

In many cases, the workers are aware of the agency’s illegal requirements, but still go ahead because they believe “there’s no other way for them to migrate,’’ it said.

A 2022 Migrasia study showed that four out of every five surveyed Overseas Filipino workers, or 80.5%, went into debt to finance their job placement abroad. 

“Although the recruitment fees or placement fees specifically were banned in 2006, there was really a shift in fees from agencies to other migration intermediaries, like training centers. Migrant workers are required by the agencies to go to specific training centers and medical clinics, who charge fees that far exceed what those services should cost, and which are often unnecessary in the first place,” Migrasia said.

It added: “Even though the Philippine government outlawed most recruitment fees many years ago, Overseas Filipino workers are being required to pay to migrate. To finance these illegal fees, they are referred to money lenders who grant excessive interest loans. When they are unable to repay these loans, workers and their families face all forms of harassment from both Philippine and Hong Kong money lenders, and collection agencies. In the most egregious cases on the Philippine side, we’ll see migrant workers that are directed by the agency and money lender to a bank, required to open a bank account and sign a number of blank checks, which will be held over their head as a threat—to be cashed with the intention of triggering a B.P. 22 violation—if they’re unable to pay back an installment of their loan.”

The same study stated that a third of them “took on debt that was larger than their annual household income.” A substantial part of this debt went to training and medical examination fees. Training fees contributed to more than half of the debt incurred by Overseas Filipino workers, according to the study.

The Overseas Filipino workers surveyed by Migrasia also reported being “required” by recruiters to get services from preferred facilities. Of those surveyed, 44% reported being mandated to use a specific training center, and 53% reported the same for the medical clinic.

The imposition of “a compulsory and exclusive arrangement” requiring Overseas Filipino workers to take out a loan, undergo health examinations, and join training is prohibited under POEA rules.  Even so, the prevailing overseas employment system traps Overseas Filipino workers in debt before they even depart for their work abroad.  

Drowning in debt 

Jessica was released from jail after her husband posted bail of P12,500, an amount that her family borrowed and that exceeded her gross monthly income. She’s now forced to make monthly payments or risk future jail time. 

Her case is pending in court. For the arraignment in May, Jessica had to travel more than 22 hours by sea from Leyte, a province about 1,000 kilometers south of the Philippine capital. She had to borrow money for her fare. 

Lugging a suitcase, a duffel bag, and a backpack, Jessica was in tears as she walked along the hallways of the court in Pasig City. The rain did not let up that afternoon, as if to sympathize with the 41-year-old mother of five. 

She knew no one in the city. She came without any means of returning home.

This has been a familiar scene in courts. 

This story was produced as part of the Trafficking Inc. investigation by journalists from the International Consortium of Investigative Journalists, The Washington Post, NBC, WGBH Boston, Arab Reporters for Investigative Journalism, the Philippine Center for Investigative Journalism, and the Investigative Reporting Program at the University of California, Berkeley.

The post Overseas Filipino workers are harassed, even jailed, for loans they’re forced to make to get jobs abroad appeared first on CoverStory.