Implementation Arrangements for the Lowering of Statutory Limits of Effective Rates of Interests under the Money Lenders Ordinance

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Authored by: Simon Deane and Natalie Chan

On 26 October 2022, the Legislative Council (“LegCo”) passed a resolution to approve the lowering of the statutory interest rate cap under the Money Lenders Ordinance (Cap. 163; “MLO”) from 60 per cent per annum to 48 per cent per annum under section 24 of the MLO. The threshold for the extortionate rate (which may trigger the reopening of relevant loan transactions by the court) under section 25 of the MLO was lowered from 48 per cent per annum to 36 per cent per annum. The amendments will take effect from 30 December 2022 with no retrospective effect.

Although the MLO does not apply to authorised institutions (“AIs”), AIs are indirectly subject to the revised interest rate caps pursuant to section 12.3 of the Code of Banking Practice (“COBP”) which applies in respect of AIs’ retail businesses and makes reference to the interest rate limits under the MLO. Section 12.3 provides that AIs should not charge interest rates to retail customers beyond the extortionate rate threshold or statutory limit unless they are able to justify the charging of such rates.

The Hong Kong Monetary Authority (“HKMA”) issued a circular on 27 October 2022 to set out his expectations of AIs concerning communications with bank customers in relation to the new rate limits and the timeline to fulfil the relevant notification requirements. AIs are also expected to ensure sufficient resources are deployed to handle enquiries from customers as necessary. For more details on the circular, please refer to this link.

Key Contacts

Simon Deane

Consultant | Banking and Finance

Email or call +852 2825 9209