The following summary of the provisions of the Money Lenders Ordinance is crucial for the protection of all parties entering into loan agreements and should be read carefully. This summary is not part of the law; in case of any doubt, reference should be made to the relevant provisions of the Money Lenders Ordinance.

Summary of Part III of the Money Lenders Ordinance – Money Lenders

Section 18 of this Ordinance sets forth the requirements for lending by money lenders. Each loan agreement must be in writing and signed by the borrower within seven days of the agreement being made and before the loan is disbursed. At the time of signing, a summary of the signed agreement, together with this summary, must be given to the borrower. This summary must contain detailed terms of the loan, including repayment terms, form of guarantee, and interest rate. Agreements that do not comply with the foregoing shall not be enforceable unless the court is satisfied that it would be unfair not to enforce it.

Section 19 of this Ordinance stipulates that, upon a written request from the borrower and payment of the prescribed fees, the money lender shall provide the borrower with an original and a copy of a statement of account showing the borrower's current debt situation under the loan agreement (including repaid amounts, due or impending amounts, and interest). The borrower shall sign the copy of the statement to acknowledge receipt of the original and return the signed copy to the money lender. The money lender shall retain the returned copy of the statement for the duration of the agreement relating to it. Failure to do so is an offence. Upon a written request from the borrower, the money lender shall also provide copies of any documents relating to the loan or guarantee. However, such requests may not be made more than once in any month. The money lender shall not collect interest for the period during which such requests are not complied with without reasonable excuse.

Section 20 of this Ordinance stipulates that, unless the guarantor is also the borrower, the lender must, within seven days of the agreement being made, provide the guarantor with a signed summary of the agreement, a guarantee instrument (if any), and a statement of account detailing the total amount payable. If the guarantor makes a written request (not more than once in any month), the lender must provide him with a signed statement of account detailing the total amount paid and the total amount outstanding. The lender may not enforce the guarantee during the period of non-compliance without sufficient justification.

Section 21 of this Ordinance stipulates that a borrower may repay the loan and interest calculated up to the repayment date at any time upon giving written notice, and the lender shall not charge a higher interest rate for early repayment by the borrower.

The above provisions do not apply if the money lender is a money lender recognized by the Financial Secretary in accordance with section 33A[4] of the Money Lenders Ordinance by gazette announcement or a member of a recognized society.

Section 22 of this Ordinance states that any loan agreement that stipulates the payment of compound interest or prohibits repayment in installments is illegal. Furthermore, any loan agreement that stipulates a higher interest rate on overdue payments is also illegal, may stipulate that simple interest be charged on the outstanding principal and interest, but the interest rate shall not exceed the rate payable in the absence of default; however, if the court is satisfied that it would be unfair for the agreement to be illegal due to non-compliance with this section, it may declare the illegal agreement legal in whole or in part.

Section 23 of this Ordinance states that if a money lender was not licensed when entering into a loan agreement or when accepting a loan guarantee, the loan agreement entered into with that money lender and the guarantee given to him shall not be enforceable; however, if the court is satisfied that it would be unfair if the agreement or guarantee were not enforceable under this section, it may declare that the agreement or guarantee, in whole or in part, be enforceable.


Summary of Part IV of the Money Lenders Ordinance – Excessive Interest Rates

Section 24 of this Ordinance provides for a maximum effective interest rate of 60% per annum for any loan (the “effective interest rate” shall be calculated in accordance with Schedule 2 of this Ordinance). Any loan agreement that provides for a higher effective interest rate shall not be enforceable, and the lender may be prosecuted. This maximum interest rate may be changed by the Legislative Council, but existing agreements shall not be affected. This section does not apply to loans made to companies with paid-up share capital of not less than $1,000,000, or to persons making such loans. [Section 3 of Ordinance No. 23 of 1999]

Section 25 of this Ordinance provides that, in court proceedings to enforce a loan agreement or loan guarantee, or when the borrower or guarantor applies to the court for relief, the court may examine the terms of the agreement to determine whether such terms are grossly unfair or the interest rate is excessive (an excessive interest rate may be presumed solely on the grounds that the actual interest rate exceeds 48% per annum or other interest rates set forth by the Legislative Council), and, after taking all circumstances, the court may amend the terms of the agreement to make them fair to all parties. This section does not apply to loans made to companies with paid-up share capital of not less than $1,000,000, or to persons making such loans. [Section 3 of Ordinance No. 23 of 1999]