One makes a loan unlawful. The other lets a court reopen it years later. Lenders who treat them as a single number tend to price against the wrong one.
Since 30 December 2022 the Money Lenders Ordinance has set the statutory effective interest rate cap at 48% per annum. Lending above it is an offence. That much is widely understood, and most operators price well clear of it.
The second number is the one that gets missed. At 36% per annum, a rate becomes presumptively extortionate, and section 25 gives a court power to reopen the transaction and reset the terms. That is not a criminal threshold; it is a commercial one. A loan written at 40% is lawful and, if challenged, may not survive in the form it was written.
The practical difference matters because the two rules bite at different moments. The 48% cap is tested when the agreement is made. The 36% threshold can be tested long afterwards, by a borrower in default, with the file as it then stands rather than as anyone remembers it.
That puts weight on the record rather than the rate card. What was the effective rate on this specific loan, including fees, on the day it was approved? Which version of the product configuration applied? Who approved the exception, and on what stated basis? A lender that can answer those three questions from the loan file is in a different position from one reconstructing them from memory and a spreadsheet.
The operational implication is unglamorous. Compute the effective rate per loan rather than per product, store it against the loan, and keep the approval reason attached to it. Configuration changes should carry effective dates, so a loan written in March is judged against March's policy and not against whatever the settings say today.
None of this is advice about where to price. It is the difference between a threshold you design around and a threshold you can evidence you stayed inside.
Covenant Desk publishes regulatory context for Hong Kong lending operations, not legal advice. Confirm how anything here applies to your licence with your own advisers.