The Hong Kong government is proposing a seven-day cooling-off period for prepaid contracts in industries such as beauty and fitness, with a cap on administrative fees set at 2% of the transaction amount. According to the Commerce and Economic Development Bureau, the policy aims to balance consumer protection with the operational needs of businesses, ensuring that merchants are not unfairly penalized or mischaracterized during the refund process.
Concerns over business operations
During a Legislative Council committee meeting, lawmaker (Wholesale and Retail Sector) Shiu Ka-fai expressed reservations regarding the impact of the cooling-off period on merchant operations. Shiu noted that if a customer uses services for an entire morning and subsequently requests a cancellation and refund, businesses still incur fixed costs such as rent, utilities, and labor. He questioned how companies could maintain operations under such conditions. Shiu further pointed out that the current proposal regarding administrative fees does not cover cash transactions, noting that deductions would only be feasible for credit card payments.
Government approach to balancing interests
Secretary for Commerce and Economic Development丘應樺 responded that the government intends to strike a balance to prevent industry losses during the cooling-off period. 丘應樺 stated that the bureau is currently considering how to handle cash payments and various credit card deduction mechanisms during the consultation period to ensure businesses remain protected. He emphasized that the government aims to prevent situations where merchants are unfairly labeled as “black shops” or where customers use unreasonable justifications to cancel contracts, promising to account for these concerns in the final framework.
The proposed administrative fee cap for prepaid contract cancellations is limited to a maximum of 2% of the total transaction amount.
The tension between consumer protection and merchant viability is a classic regulatory challenge. By setting a specific percentage cap on administrative fees, the government is attempting to standardize the cost of “buyer’s remorse,” though as pointed out in the legislative session, the logistical difficulty of recovering costs from cash-based transactions remains a significant hurdle for small-to-medium enterprises.
Frequently Asked Questions
What is the proposed length of the cooling-off period?
The government is proposing a seven-day cooling-off period for prepaid contracts in sectors like beauty and fitness.
Are there limits on administrative fees for cancellations?
Yes, the proposal limits the administrative fee a merchant can charge to a maximum of 2% of the transaction amount.
How will the policy affect cash transactions?
This remains under consideration. Lawmaker Shiu Ka-fai noted that the current proposal does not include a mechanism for deducting fees from cash payments, and Secretary 丘應樺 confirmed the government is still evaluating how to protect merchants regarding these specific payment methods.
How do you think the government should best address the disparity between credit card and cash transactions in this proposal?
Related reading