When 30-year-old homemaker Maggie Wong is tight on cash, all she needs to do is reach for her designer purse—and then hand it over to a loan officer.
Say hello to the handbag-backed loan. While typical lenders often ask for cars and homes as collateral, Hong Kong’s Yes Lady Finance Co. deals in borrowers’ beloved handbags.
The four-year-old company accepts purses on the spot, bringing in assessors from affiliate Milan Station Holdings Ltd., 1150.HK +6.33% a chain for luxury secondhand purses, to check the bags’ condition and authenticity.
Yes Lady provides a loan within half an hour at 80% of the bag’s value—as long as it is from Gucci, Chanel, Hermès or Louis Vuitton. Occasionally, a Prada purse will do the trick. Secondhand classic purses and special-edition handbags often retain much of their retail prices.
A customer gets her bag back by repaying the loan at 4% monthly interest within four months. Yes Lady says almost all its clients quickly pay off their loans and reclaim their bags.
The company recently lent about US$20,600 in exchange for a Hermès Birkin bag, but Yes Lady’s purse-backed loans start at about US$200.
The company is carving out a niche in a city with 200 licensed pawnbrokers and over 900 more-typical lenders. The pawn industry, a common form of lending here, primarily targets low-income residents and domestic help from abroad. Pawnbrokers typically accept only watches, jewelry and electronics as collateral.
Yes Lady, its Cantonese name translates to “Rich Woman,” instead caters to wealthy residents whose money may be tied up in stock—or luxury accessories.
Many Hong Kong residents go to nonbank lenders for flexibility in loan size and type of collateral. While banks are regulated by the Hong Kong Monetary Authority, nonbank lenders are subject to the more flexible guidelines of the Money Lenders or Pawnbrokers Ordinance. As a result, Yes Lady doesn’t need to ask customers for proof of income or to undergo a credit check. All it requires is a Hong Kong address and identification card.
Ms. Wong says she uses the service when her money is locked up in savings or the stock market to pay for, say, daily expenses or her 5-year-old son’s tuition. “I don’t want to go through all the complicated application procedures in the banks,” she says.
In the past year, she has put up three purses—Guccis and Louis Vuittons—for a total of US$1,290. She paid off the loans and has the bags back.
Office worker Angel Yam says she doesn’t care if she gets back the Chanel purse she used for a roughly US$1,550 loan. “I have too many idle handbags at home,” she says, estimating her collection at more than 40 bags, including a dozen from luxury brands. “I don’t feel any loss when I take some of them as collateral for loans.” She used the Chanel-backed loan to travel and buy stock.
One Yes Lady customer brought in 40 or 50 Gucci purses at once, says company Manager Irene Chu. The client received a US$38,000 loan and later returned to reclaim the bags, which he sold in his own store. About one in five purse-loan customers is male at Yes Lady’s two offices in Hong Kong, she says.
According to Milan Station’s 2011 prospectus, there were more than 170 independent retailers in Hong Kong that primarily sold luxury purses. The company projected that revenue for luxury handbags would reach about US$4 billion in Hong Kong by next year.
Ms. Chu says some customers bring in fakes. “We don’t tell them we know,” she says, “we just say we can’t approve the loan.”
Source: The Wall Street Journal online, August 13, 2013