Handbag-backed loans

by on August 14, 2013 at 3:46 am in Economics | Permalink

Say hello to the handbag-backed loan, a unique Hong Kong phenomenon. While money lenders typically ask for cars and homes as collateral, Hong Kong’s Yes Lady Finance Co. seeks its customers’ beloved handbags.

The four-year-old company accepts handbags on the spot, assesses them for their condition and authenticity and then procures loans within half an hour, as long as the bags are Gucci, Chanel, Hermès or Louis Vuitton. Occasionally, they’ll consider a Prada.

Until you repay, you have to give up the bag:

One customer, Ms. Chu recalls, brought in 40 or 50 Gucci purses at once. The client received an advance of roughly US$38,000, and later returned to reclaim the bags which he sold in his own store.

Almost all clients at Yes Lady pay the loan back quickly and reclaim their bags, Ms. Chu says.

Here is more, Google “Riva Gold handbag-backed loans Hong Kong” if need be for an open link.

Addendum: Izabella Kaminska offers comment.

dearieme August 14, 2013 at 5:20 am

It’s a pawn shop that takes handbags: so what? I dare say many take rolexes. It’s what pawn shops do.

ohwilleke August 14, 2013 at 3:11 pm

Agreed. Hand bags loans are just an ordinary pawn shop transaction.

From an economics perspective, the more interesting case is the use of what is in the handbag, such as a drivers’ licenses or passport or ATM card without a PIN provided, as a form of collateral, even though the collateral has no intrinsic value to the person in possession of it. Typically, this kind of collateral is used for people who want to test drive a car, walk through an apartment, borrow some experience enhancing thing in a museum, need to go to an ATM to get money to pay for lunch charges already incurred, etc. This kind of collateral is like “mortgaging your cat”, or turning an illegally parked car into collateral by putting a “boot” on it, or (in Chinese collection practice) having your top local executive held hostage. This collateral’s works by depriving someone of something, rather than by providing a benefit to the person given the collateral through sale to a third party upon default as in traditional mortgage, car loan and pawn shop lending.

Edward Burke August 14, 2013 at 9:26 am

If 40 to 50 Gucci bags can be pawned for c. $38,000 (US), what could one Jennifer bag purchased in Zurich for c. $38,000 (US) get pawned for? (Or would the brand be deemed not upscale enough to pawn in Hong Kong?) Our poor harried celebrities! (and what if orange alligator is not in style next season?!?)

Rich berger August 14, 2013 at 10:23 am

I believe it was a Tom Ford crocodile bag that was 38k. I think the clerk was steering The Oprah to the less costly Jennifer Anniston bag. How insulting to TO.

Engineer Dad August 15, 2013 at 12:25 am

A more likely reason was that the shopgirl was a PETA member and recognized Oprah Winfrey as PETA’s 2008 Person of the Year.

Which brings up the question, why would Oprah Winfrey be shopping for a crocodile bag?
And will PETA criticize her for it?

Engineer Dad August 15, 2013 at 12:29 am

Could it be that the shopgirl was a PETA member and recognized Oprah Winfrey as PETA’s 2008 Person of the Year?

Which brings up the question, why would Oprah Winfrey be shopping for a crocodile bag?
And will PETA criticize her for it?

Marie August 15, 2013 at 9:06 am

They did. It was great.

charlie August 14, 2013 at 10:15 am

Watches, rugs, other art objects are all useful ways to avoid the tax man.

Rahul August 14, 2013 at 1:58 pm

Wonder if they entertain black customers…….

Engineer Dad August 15, 2013 at 12:32 am

“I believe it was a Tom Ford crocodile bag that was 38k. I think the clerk was steering The Oprah to the less costly Jennifer Anniston bag. How insulting to TO.”

A more likely reason was that the shopgirl was a PETA member and recognized Oprah Winfrey as PETA’s 2008 Person of the Year.

Which brings up the question, why would Oprah Winfrey be shopping for a crocodile bag?
And will PETA criticize her for it?

finsa August 19, 2013 at 8:43 am

Handbag backed loan is unique and new Hong Kong phenomenon.One of the company accepts handbags on the spot, assesses them for their condition and authenticity and then procures loans within half an hour, as long as the bags are Gucci, Chanel, Hermès or Louis Vuitton.

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