Abstracts of the ordinance below serve as a principal protection to both of the contractual parties; please do read carefully. Abstracts do not treat as a piece of the Law. Please refer to the corresponding sections of the Money Lenders Ordinance should you have any query.
Abstract of Part III of the Money Lenders Ordinance – Money Lenders’ Transactions
1. Section 18 – Form of agreement
Except the court considers equitable, agreement for the repayment of money shall not be enforceable unless a note or memorandum containing all the terms of the agreement including the terms of the repayment of the loan, the term of security for the loan and the rate of interest charged on the loan is made to be signed personally by the borrower within 7 days after the making of the agreement and before the money was lent.
2. Section 19 – Duty of money lender to give information to borrower
For the repayment of money lent by a money lender, the money lender shall, on demand in writing being made by the borrower, supply to the borrower a statement (consisting of the original and a copy) showing the amount of any payment already received by the money lender, the amount of every sum due to the money lender but unpaid and the amount of every sum not yet due which remains outstanding. The borrower must endorse on the copy of the statement that he has received the original of the statement and to return the copy as so endorsed to the money lender, who shall then retain it during the continuance of the agreement to which that statement relates. The above does not apply to a request made by a borrower less than 1 month after a previous request thereunder relating to the same agreement was complied with. If a money lender to whom a demand has been made under this section fails without reasonable excuse to comply therewith within 1 month after the demand has been made, he shall not be entitled to sue for or recover any sum due under the agreement on account either of principal or interest
3. Section 20 – Duty of money lender to give information to surety
A money lender who makes any agreement for the loan of money in relation to which security is provided shall within 7 days after the making of the agreement give to the surety (if a different person from the borrower) A money lender who makes any agreement for the loan of money in relation to which security is provided shall within 7 days after the making of the agreement give to the surety (if a different person from the borrower) a copy of the note or memorandum in writing made under section 18, a copy of the security instrument and a statement in writing showing the details of repayment amount. The above does not apply to a request made by a surety less than 1 month after a previous request under that subsection relating to the same agreement was complied with. If a money lender fails to comply with this section, he shall not be entitled to enforce the security so far as provided in relation to the agreement.
4. Section 21 – Early payment by borrower
A borrower under any agreement for the loan of money by a money lender shall be entitled at any time by notice in writing to the money lender and the payment to the money lender of all amounts payable as principal by the borrower which are outstanding under the agreement, together with interest computed up to the date of such payment, to discharge his indebtedness under the agreement provided that the effective rate of such interest shall not exceed the effective rate at which interest would have been payable under the agreement if the borrower had not exercised his right under this section to discharge his indebtedness.
5. Section 22 – Illegal agreement
Any agreement made for the loan of money by a money lender shall be illegal if it provides for the payment of compound interest, prohibiting the repayment of the loan by instalments or the rate or amount of interest being increased by reason of any default in the payment of sums due under the agreement. However, the money lender shall be entitled to charge simple interest on that sum at an effective rate not exceeding the effective rate payable in respect of the principal apart from any default. If the court before which the legality of any agreement comes in question is satisfied that in all the circumstances it would be inequitable that any such agreement which does not comply with this section should be held to be unenforceable, the court may order that such agreement is enforceable to such extent, and subject to such modifications or exceptions, as the court considers equitable.
6. Section 23 – Loan etc. not recoverable unless money lender licensed
No money lender shall be entitled to recover in any court any money lent by him or to enforce any agreement made or security taken in respect of any loan made by him unless he satisfies the court by the production of his licence. Provided that if the court is satisfied that in all the circumstances it would be inequitable if a money lender who did not satisfy it that he was licensed at the relevant time was thereby not entitled to so recover such money or interest or to enforce such agreement or security, the court may order that the money lender is entitled to recover such money or interest or to enforce such agreement or security to such extent, and subject to such modifications or exceptions, as the court considers equitable.
Abstract of Part IV of the Money Lenders Ordinance – Excessive interest rates
7. Section 24 – Prohibition of excessive interest rates
Any person (whether a money lender or not) who lends or offers to lend money at an effective rate of interest which exceeds 60 per cent per annum commits an offence (Appendix II of Money Lenders Ordinance serves as the standard for the calculation of “Effective rate of interest”). The Legislative Council may by resolution alter the rate specified above. Provided that in relation to any agreement for the repayment of any loan or for the payment of interest on any loan which is in force at the date when such rate is so altered, the rate so specified as at the coming into force of such agreement shall continue to apply. This section does not apply to any agreement made for the loan of money to corporation with fully paid capital less than $1,000,000.
8. Section 25 – Reopening of certain transactions
Concerning proceedings for the recovery of any money lent or the enforcement of any agreement or security in respect of any loan, the court may reopen the transaction so as to do justice between the parties having regard to all the circumstances, and, for that purpose, make such orders and give such directions in respect of the terms of the transaction or the rights of the parties thereunder as the court may think fit. This section does not apply to any agreement made for the loan of money to corporation with fully paid capital less than $1,000,000.