A new kind of loan is available in Hong Kong – and it is backed by designer handbags. Yes Lady Finance Co., a four-year-old company based in Hong Kong, with affiliate Milan Station Holdings Ltd (HKG:1150), offers loans with bags as collateral instead of the usual cars and homes. Perfect, since the city is known as a hub for luxury shopping.
Yes Lady Finance accepts purses on the spot, and then brings in assessors from Milan Station, a chain for luxury secondhand purses, to check the bags’ condition and authenticity. A loan is provided within half an hour at 80 percent of the bag’s value, as long as it is from Gucci, Chanel, Hermès or Louis Vuitton. Occasionally, a Prada bag is accepted, according to the Wall Street Journal.
A customer gets her bag back if she repays the loan at a 4 percent monthly interest rate within four months. YLF said almost all clients quickly pay off their loans and reclaim the bags. The company’s purse-backed loans start at about $200. Recently, a Hermès Birkin bag lent for about $20,600.
The company is unique in Hong Kong, a city with 200 licensed pawnbrokers and more than 900 lenders where the pawn industry usually targets low-income residents and domestic help from abroad, and accepts only watches, jewelry and electronics as collateral. YLF, unlike the rest, targets wealthy residents who could afford to pay thousands of dollars for luxury handbags, but whose assets may be tied up in stocks or other handbags.
Banks in Hong Kong are regulated by the Monetary Authority, while nonbank money lenders are only subject to the more flexible guidelines of the Monday Lenders or Pawnbrokers Ordinance. As such, YLF does not need to ask for proof of income, nor to carry out credit checks to provide loans to its customers. All it takes is a Hong Kong address, an identification card and, of course, a bag that meets the company’s criteria, according to the Wall Street Journal.
“I don’t want to go through all the complicated application procedures in the banks,” said Maggie Wong, a 30-year-old homemaker. She uses YLF’s services when her money is locked up in savings or the stock market to pay for daily expenses, or school fees for her 5-year-old son.
Wong has put up three purses in the past year for loans for a total of $1,290. She has since paid them off and gotten her bags back. Some customers of YLF, like office worker Angel Yam, however, are not as tied to their bags as collateral.
“I have too many idle handbags at home,” Yam said, estimating her collection at more than 40. She put up a Chanel purse for about $1,500 that she used to travel and buy stock. “I don’t feel any loss when I take some of them as collateral for loans.”
There are customers who bring in fake bags, but thanks to the expertise brought in by Milan Station, these fakes can be spotted. And the company is very diplomatic in its dealing with these customers.
“We don’t tell them we know,” said Irene Chu, Yes Lady’s manager, according to the Wall Street Journal. “We just say we can’t approve the loan.”