Money Lenders Ordinance
Money Lending Ordinance
Money Lenders Ordinance (this "Ordinance")
Money Lenders Ordinance (this "Ordinance")
Format of the summary of provisions of this Ordinance to be included in or annexed to a loan agreement abstract or memorandum
Summary of Provisions of this Ordinance Required for Facility Agreement Memoranda/Notes
The following summary of provisions from the Moneylenders Ordinance is crucial for protecting all parties entering into loan agreements and should be read carefully. This summary is not part of the law. If you have any doubts, you should refer to the relevant provisions of the Moneylenders Ordinance.
The following summary of the provisions of the Money Lenders Ordinance is essential for the protection of all parties entering into a facility agreement and should be read carefully. This summary is not part of the law. If in doubt, you should refer to the relevant provisions of the Money Lenders Ordinance.
https://www.elegislation.gov.hk/hk/cap163
Part III of the Moneylenders Ordinance Summary: Transactions by Moneylenders
Summary of Part III of the Money Lenders Ordinance: Money Lenders’ Transactions
Article 18 of this Ordinance - Lists provisions regarding money lenders making loans.
Section 18 of this Ordinance – Provisions regarding loans made by money lenders
Each loan agreement must be in writing and signed by the borrower within 7 days of the agreement being made. Upon execution of the agreement, a signed copy of the agreement, together with a copy of this summary, shall be given to the borrower. The memorandum shall contain full particulars of the loan, including the terms of repayment, the form of security, and the rate of interest. An agreement which does not comply with the foregoing shall not be enforceable, unless the court is satisfied that it would be inequitable to withhold enforcement of the agreement.
Every facility agreement must be made in writing and signed by the borrower within 7 days after the agreement is made. At the time of signing the agreement, a signed memorandum of the agreement, along with this summary, must be given to the borrower. The memorandum must contain detailed particulars of the loan, including the repayment terms, the form(s) of security and interest rate. Any agreement that does not comply with the aforementioned provisions will not be enforceable, unless the court is satisfied that non-enforcement of that agreement would be inequitable.
Article 19 of this Ordinance – Moneylender's duty to provide information to borrower
Section 19 of this Ordinance – Duty of money lender to give information to borrower
Section 19 of this Ordinance stipulates that upon the borrower making a written request and paying the prescribed fee for the relevant expense, the lender shall provide the borrower with the original and one copy of a statement of the borrower's indebtedness under the loan agreement at that time (including amounts repaid, due, or soon to be due, and interest rates). The borrower shall sign the copy of the statement, acknowledging receipt of the original statement, and return the signed copy to the lender. The lender shall retain the returned copy of the statement for the duration of the agreement related to the statement. Failure by the lender to comply is an offence. Upon the borrower's written request, the lender shall also supply copies of any documents relating to the loan or any security, provided that such a request shall not be made more than once in any month. If the lender fails to comply with the requirements set out in this section without reasonable excuse, the lender shall not be entitled to receive interest during the period of non-compliance.
Section 19 stipulates that the money lender shall, upon written demand by the borrower and tender of the prescribed fee for expenses by the borrower, provide the borrower with an original and a copy of a statement detailing the current debt situation under the facility agreement (including amounts repaid, amounts due or about to become due, and interest rate). The borrower must acknowledge receipt of the original statement by signing a copy and returning the signed copy to the money lender. The money lender must retain the returned copy during the continuance of the agreement to which that statement relates. Failure to comply constitutes an offense. If the borrower makes a written demand, the money lender must also provide copies of any documents relating to the loan or security provided for the loan. However, such demand cannot be made more than once a month. If the money lender fails to comply without reasonable excuse, it cannot claim interest for the period during which the demand was not fulfilled.
Article 20 of this Ordinance - Moneylender's duty to provide information to guarantor
Section 20 of this Ordinance – Duty of money lender to give information to surety
Section 20 of this Ordinance stipulates that unless the guarantor is also the borrower, the guarantor must be given a signed agreement memorandum, a guarantee document (if any), and a statement of account detailing the total amount payable within 7 days of the agreement being made. If the guarantor makes a written request at any time (not exceeding one request per month), the money lender shall provide him with a signed statement of account detailing the total amount paid and the total amount outstanding. If the money lender fails to comply without reasonable excuse, the guarantee shall not be enforceable during the period in which the request was not complied with.
Section 20 stipulates that unless the surety is also the borrower, the money lender must provide the surety with a signed memorandum of the agreement, a copy of the security instrument (if any), and a statement detailing the total sum payable within 7 days after the agreement is made. If the surety makes a written demand at any time (not more than once a month), the money lender must provide a signed statement detailing the total amount paid and the total amount outstanding. Failure to comply without reasonable excuse means the money lender cannot enforce the security during the period of non-compliance.
Article 21 of these Regulations – Borrower's Early Repayment
Section 21 of this Ordinance – Early repayment by borrower
Article 21 of these Regulations stipulates that the borrower may repay the loan and interest calculated up to the repayment date at any time upon written notice to the lender, and the lender shall not charge a higher interest rate for early repayment by the borrower.
Section 21 stipulates that borrowers may repay the loan and interest calculated up to the repayment date at any time by giving written notice. The money lender cannot charge a higher interest rate due to early repayment.
Article 22 - Illegal Agreements
Section 22 of this Ordinance – Illegal agreements
Section 22 of this Ordinance states that any loan agreement that stipulates compound interest or provides that the loan may not be repaid in installments is illegal. In addition, any loan agreement that stipulates a higher interest rate on amounts not paid by the due date is also illegal, but the agreement may stipulate that simple interest, at a rate not exceeding the interest rate payable in the absence of default, shall be charged on the outstanding principal and interest; provided that the court may declare the whole or part of an illegal agreement to be legal if it is satisfied that it would be unfair for such agreement to become illegal by reason of non-compliance with this section.
Section 22 states that any facility agreement requiring the payment of compound interest or prohibiting the repayment of the loan by installments is illegal. Additionally, any facility agreement stipulating a higher interest rate for overdue amounts is also illegal. However, the agreement may stipulate that unpaid principal and interest shall bear simple interest, but the rate must not exceed the rate payable in the absence of default. If the court is satisfied that it would be inequitable for the agreement to be illegal due to non-compliance with this section, it may declare the agreement wholly or partially legal.
Article 23 of this Ordinance - No recovery of loans, etc. unless the moneylender is licensed
Section 23 of this Ordinance – Loans, etc. not recoverable unless money lender licensed.
Section 23 of this Ordinance states that if a moneylender is not licensed at the time of entering into a loan agreement or accepting a loan guarantee, the loan agreement and the guarantee given to him shall not be enforceable; however, if the court is satisfied that it would be inequitable for the agreement or guarantee to be unenforceable by reason of this section, the court may declare the agreement or guarantee, or any part of it, to be enforceable.
Section 23 states that if the money lender does not hold a license at the time of making the facility agreement or accepting the security of the loan, the facility agreement and the security are unenforceable. However, if the court is satisfied that it would be inequitable for the agreement or security to be unenforceable due to this provision, it may declare the agreement or security wholly or partially enforceable.
Part IV of the Moneylenders Ordinance: Excessive Interest Rates
Part IV of the Money Lenders Ordinance addresses excessive interest rates. This legislation aims to protect borrowers from predatory lending practices by setting limits on the amount of interest that money lenders can charge. It also outlines procedures for lenders to follow when calculating and disclosing interest, as well as consequences for non-compliance.
Article 24 - Prohibition of Excessive Interest Rates
Section 24 of this Ordinance - Prohibition of Excessive Interest Rates
Section 24 of this Ordinance sets the maximum effective interest rate for any loan (the “effective interest rate” shall be calculated in accordance with Schedule 2 to this Ordinance). Any loan agreement that stipulates a higher effective interest rate is unenforceable, and the lender may be prosecuted.This maximum rate may be amended by the Legislative Council, but existing agreements shall not be affected. This section does not apply to loans made to, or by, a company with a fully paid-up share capital of not less than HK$1,000,000.
Section 24 sets the maximum effective interest rate for any loan (“effective interest rate” must be calculated in accordance with Schedule 2 of this Ordinance). Any facility agreement stipulating a higher effective interest rate is unenforceable, and the moneylender may be prosecuted. This maximum rate may be amended by the Legislative Council, but existing agreements remain unaffected. This section does not apply to loans made to companies with a paid-up share capital of not less than HK$$1,000,000 or to persons making such loans.
Article 25 - Reconsideration of Certain Transactions
Section 25 of this Ordinance – Reopening of certain transactions
Section 25 of this Ordinance provides that, in court proceedings for the enforcement of a loan agreement or a loan guarantee, or when the borrower or guarantor personally applies to the court for relief, the court may examine the terms of the agreement to determine whether such terms are grossly unfair or the interest rate is excessive(if the effective interest rate exceeds the rate specified in this section, it shall be presumed to be excessive on that ground alone), and the court, after taking all circumstances into account, may vary the terms of the agreement to make them fair to all parties to the agreement.This section does not apply to loans made to, or by, a company with paid-up capital of not less than HK$1,000,000.
Section 25 provides that in legal proceedings to enforce a facility agreement or security, or upon an application by the borrower or guarantor for relief, the court may examine the terms of the agreement to determine whether they are grossly unfair or whether the interest rate is excessively high (an effective interest rate exceeding the rate specified in this section is presumed to be excessively high). The court, taking all circumstances into account, may modify the terms of the agreement to make them fair to all parties. This section does not apply to loans made to companies with a paid-in share capital of not less than HK$$1,000,000 or to persons making such loans.
