4. Interest rates regulation

4. Interest rates regulation

The Money Lenders Ordinance (Cap. 163) prohibits any person from lending at an interest rate exceeding 48% per annum. Any person who contravenes this requirement commits an offence. The maximum penalty is: (i) on summary conviction, a fine of HK$500,000, and imprisonment for 2 years; or (ii) on conviction on indictment, a fine of HK$5,000,000, and imprisonment for 10 years.

A loan at an interest rate exceeding 36% per annum (but less than 48% per annum) is presumed to be extortionate and shall not be enforceable in court. That said, a court has the discretion to re-open the transaction and declare that the loan is not extortionate if the court is satisfied that the interest rate charged is not unreasonable or unfair having regard to all the circumstances of the case. 

The Money Lenders Ordinance (Cap. 163) also provides that a loan made by a money lender which charges compound interest (including compound default interest) is illegal and unenforceable in court, except where the court decides that it would be inequitable (i.e. unfair) not to enforce the loan having regard to all the circumstances of the case.