Chanel as collateral: Hong Kong firm gives handbag-backed loans

HONG KONG: In designer-obsessed Hong Kong, keeping up appearances can be hard on the pocketbook. One company has an answer: cash-strapped shoppers can get money quickly by pawning their Gucci, Chanel, Hermès or Louis Vuitton luxury handbags.

Yes Lady Finance, a mortgage brokerage, offers loans within half an hour of up to 50 percent of the new bag's value, giving customers four months to repay at an interest rate of 4 percent.

If the client fails to pay back the loan, the bag is sold by the company's retail arm Milan Station Holdings Ltd at one of its second-hand designer stores.

But most people repay to retrieve their prized possessions, said Byron Yiu, Yes Lady Finance's chairman and chief executive.

"Milan Station buys handbags. We give cash to our clients to buy their items for good. And then we realized many clients attach a sentimental value to their bags," he said.

"They don't want to sell them for good but they need money. So we came up with the idea of running a financial company that lets people use their handbags to borrow money ... It turns out to be a very popular service."

Loans start at the equivalent of around $200 and can go far higher, depending on the quality of the bag. This month, Yiu said, one client brought in a crocodile-skin handbag and got a loan for $32,200.

"We have both male and female clients. The majority bring relatively posh handbags," he said. "We have seen people bringing several of these handbags here to get a big sum."

Every designer bag is assessed for authenticity by an expert from Milan Station. If it is a fake - which Yiu says is seldom - staff at Yes Lady Finance do not reveal that, shielding the customer from embarrassment by making up another reason for not authorizing the loan.

One client, Benson Chan, said his wife owns a dozen luxury bags and he has pawned three of them for a total of $51,500, claiming it was with her consent to get money for investments. "This is the fastest way to get cash," he said. "Also, my wife wants these bags back."

There are about 180 pawn shops in the Asian financial centre, the website of the Hong Kong & Kowloon Pawnbrokers' Association shows. But Chan prefers the flexibility of Yes Lady Finance's approach for his wife's bags.

"Why don't I bring them to traditional pawn shops? It's because those don't give you any grace period," he said. "Here I can also get my bag back any time."

In central Hong Kong, surrounded by designer stores, shoppers liked the idea. "I would consider pawning a handbag," said one woman, declining to give her name.

She said does not buy as many bags as she used to but still gets three or four a year costing around $4,000 each.

Yiu said Yes Lady Finance makes most of its money by broking mortgages but the handbag business is growing fast and carving out a niche in the pawn industry across Asia.