6. Reopening of extortionate transactions

6. Reopening of extortionate transactions

For the purpose of the Money Lenders Ordinance (Cap. 163), a transaction is regarded as extortionate if the loan agreement requires the borrower or a relative of the borrower to make payments that are grossly exorbitant, or if the transaction otherwise grossly contravenes the ordinary principles of fair dealing. As mentioned above in the discussion on interest rates regulation, a loan at an interest rate exceeding 36% per annum (but less than 48% per annum) is presumed to be an extortionate transaction.

In legal proceedings for enforcing a loan deemed extortionate, the court has discretion to reopen the transaction so as to do justice between the parties having regard to all the circumstances of the case. The court can make orders and give directions as it sees fit.