A person carrying on business as a money lender in Hong Kong must obtain a money lender licence and operate in compliance with the licensing conditions and the Money Lenders Ordinance (Cap. 163) (“MLO“). The number of licensed money lenders has grown quickly in recent years, and there are more than two thousand licensed money lenders in Hong Kong.

Following a recommendation by the Consumer Council and having studied practice and development of money lending business, the Hong Kong government decided to amend the MLO to lower the statutory interest rate cap and the extortionate rate, which have not been revised since 1980. In October 2022, the Legislative Council passed the amendments to sections 24(1) and 25(3) of the MLO.

Effective from 30 December 2022, the statutory interest rate cap for lending has been lowered from 60% to 48% per annum, and the extortionate rate has been lowered from 48% to 36% per annum.

A person commits an offence if the person lends or offers to lend money at an effective rate of interest which exceeds the interest rate cap (which is now 48% per annum). Further, an agreement for the repayment of a loan or for the payment of interest on a loan in respect of which the effective rate of interest exceeds the extortionate rate (which is now 36% per annum) shall be presumed to be an extortionate transaction. Where the court is satisfied that the transaction is extortionate, the court may reopen the transaction so as to do justice between the parties having regard to all the circumstances.

It is to note that the reduced rates apply to loan agreements or lending arrangements subject to the MLO which are entered into on or after 30 December 2022.