B. Regulation on interest rates

B. Regulation on interest rates

A pawnbroker may demand and take simple interest (calculated on a monthly basis) over and above the principal paid or advanced by him upon any goods pawned with him. 

The payment of principal and interest to the pawnbroker shall be accepted in full satisfaction of all charges for or in connection with the loan advanced by the pawnbroker. 

The Pawnbrokers Ordinance (Cap. 166) prohibits a pawnbroker from demanding and taking an interest that exceeds the maximum rate specified in the Second Schedule to the Pawnbrokers Ordinance (Cap. 166) (currently at 3.5% per month). Any person who contravenes this requirement commits an offence punishable by a maximum fine of HK$25,000 and imprisonment of up to 1 year. 

In relation to any loan, a pawnbroker cannot demand or take:

1. Simple interest in excess of the rate specified in the Second Schedule to the Pawnbrokers Ordinance (Cap. 166); 
2. Compound interest; or 
3. Any payment other than principal, interest or the prescribed sum for expenses specified under section 14 of the Pawnbrokers Ordinance (Cap. 166) (i.e. for a duplicate ticket).

Any agreement for a loan made with the features specified above is not enforceable and in such case:- 

1. The borrower or the owner of the goods so pawned to the pawnbroker is entitled to redeem the goods without payment of interest or any charges; 
2. The pawnbroker is only entitled to recover the principal amount of the loan; and 
3. The pawnbroker will have committed an offence and is liable for a maximum fine of HK$25,000 and imprisonment for 1 year.