The Law of Moneylenders (Credit Community Lending)

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Details Information
Author R. K. Nandy, Kong Ah Sing & Chia Kee Chun
Publication Date October 2026
ISBN 9786299501589
Format Hardback
Country Malaysia

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What the Expert Says

“The law relating to moneylending occupies a distinctive and important place within the Malaysian legal landscape. It lies at the intersection of commercial necessity, access to credit, consumer protection and the regulation of financial conduct. The manner in which credit is obtained and extended is changing: technological developments, digital transactions, new forms of financial intermediation and changing commercial practices present questions which could not readily have been contemplated when much of the existing legislative framework was first conceived.

One of the principal strengths of a work such as this is that it enables the reader to see the law not merely as a collection of statutory provisions and judicial pronouncements, but as a coherent body of principles governing the relationship between lender and borrower. Its particular focus on credit community lending is especially useful because it addresses an area of lending which is of considerable practical significance. It is against this background that The Law of Moneylenders (Credit Community Lending) is a timely and valuable contribution to Malaysian legal literature.”

— Judge Collin Sequerah
From the Foreword

This book, Moneylending under the Moneylenders Act 1951 & Regulations (Act 400), provides a comprehensive legal framework for the regulation and control of moneylending business in Malaysia. It integrates the principal legislation with subsidiary regulations and relevant case law to guide practitioners through the complexities of credit community lending.

Key Insights:

  • The “One-Off” Trap: In the modern landscape, section 10OA of Act 400 creates a rebuttable presumption that a single interest-bearing loan by an unlicensed party constitutes the “business of moneylending.” This significantly elevates the risk for private lenders, as the burden of proof shifts to the lender to prove they are not conducting a business.
  • The “Sham” Doctrine: The text emphasizes that courts are increasingly willing to look beyond the “four corners” of formal documents (such as Sale and Purchase Agreements or “Investment” contracts) to uncover illegal moneylending. If a document is a sham meant to camouflage a loan, the court will declare it void and unenforceable under section 15 of Act 400.
  • The Limits of Restitution: While section 66 of the Contracts Act 1950 (Act 136) allows for the restoration of benefits, practitioners must navigate the “Detik Ria Guidelines.” Courts now apply a proportionality test—evaluating the centrality of the illegality and the culpability of the parties—before deciding whether to order the return of a principal loan sum in a voided moneylending transaction.
  • Strict Regulatory Compliance: The text highlights that “magic bullet” errors—such as using a Schedule J (unsecured) form for a secured loan—can render an entire agreement void and unenforceable. However, it also explores judicial discretion where a lender has complied with the “spirit and principle” of the Act, especially if the Registrar has granted specific waivers.

Essential Information:

Jurisdictional Scope: Since the 2011 amendments, Act 400 applies across the whole of Malaysia.

Prohibited Conduct: The Act strictly prohibits compound interest, mandates the use of prescribed forms (Schedules J and K), and requires the attestation of agreements by specific professionals (e.g., Advocates and Solicitors).

Practitioner Risk: Lawyers must be wary of Rule 14.26 of the Malaysian Bar Council’s Rulings; involvement in moneylending transactions can lead to serious professional misconduct charges and potential criminal liability under section 29AA of Act 400.


Chapters Contents
Part One – Introduction to the Moneylenders Act 1951 (Act 400)
– Overview and Regulatory Framework of Act 400
– Recent Amendments; Significance of the 2003 (Act A1193) and 2011 (Act A1390) Amendments
– Core Issues in Moneylending Transactions: Legislation, Terminology, Principles and Practice
– Loans by Persons Other Than a Licensed Financial Institution or Licensed Moneylender
– “Moneylending”, “Friendly Loan” and “Carrying On Business as a Moneylender”
– Revealing a “Sham” Sale & Purchase Agreement in Illegal Moneylending
– Sham S&P as “Security Documentation” – The National Land Code (Act 828)
– Misuse of Two Contemporaneous Contractual Documents as Security
– Misuse of “Return on Investment”, “Dividends” etc. to Camouflage Illegal Moneylending
– S&P Agreement Forbidden by Law, Voidable or Void
– Applying the Principles of Restitution
– Section 66 Contracts Act 1950 and the Detik Ria Guidelines
– Total Failure of Consideration; Rescission and Restitution after Lim Swee Choo
– Allegation of Forgery and of Blank Documents – Burden of Proof
– Adverse Inference – Section 114(g) Evidence Act 1950
– The Parol Evidence Rule
– Malaysian Bar Council’s Rules & Rulings
– Prohibition of Assisting Unlicensed Moneylending (s. 29AA); Employing Agents or Canvassers (s. 27A)
– Moneylender’s Actions under Order 79 Rules of Court 2012
– Enforcement of Act 400
– E-Moneylending
– The Consumer Credit Act 2025 (Act 873): Credit Community Companies and the Consumer Credit Commission of Malaysia; Schedules; Application; Jurisdiction
Part Two – The Moneylenders Act 1951 (Act 400): Principal Legislation & Practice
Part I – Preliminary
s. 1 Short Title, Scope and Purpose; Strict Adherence; Presumption of Settlement; Order 14 Summary Judgment
s. 2 Interpretation: “Interest”, “Moneylender” and Proving the Business of Moneylending
ss. 2A–4A Non-application and Exemption; Registrar, Inspectors and Delegation of Powers
Part II – Licensing of Moneylenders
s. 5–5F Licence, Application, Grant, Duration, Conditions, Renewal, Display; Compounding of Offences
ss. 6–8 Particulars on Licences; Offences; Void Agreements under the Contracts Act 1950
ss. 9–9H Refusal, Revocation and Suspension; Hearing and Appeal; Surrender, Transfer and Change of Profile
Part III – Investigation, Search, Seizure and Arrest
ss. 10A–10K Inspectors’ Powers; Examination; Search by Warrant; Arrest; Seizure; Computerised Data; Release of Property
Part IV – Evidence
ss. 10L–10OC Accomplice and Agent Provocateur; Informers; Statements; Presumption as to the Business of Moneylending; Previous Convictions
Part V – Conduct of Moneylending Business
s. 10P Licensee and Borrower Must Enter into Moneylending Agreement
ss. 11–12 Advertisement, Advertisement Permits and Renewal; No Circular Implying Banking
s. 15 Contract by Unlicensed Moneylender Unenforceable; Dishonoured Cheques
s. 16 Moneylending Agreement: Signing, Stamping, Delivery; False or Blank Amounts (s. 27B); Attestation (s. 27)
ss. 17–17A Prohibition of Compound Interest; Interest on Secured and Unsecured Loans
s. 18 Duty to Keep Original Agreement and Accounts; Wrong Use of Prescribed Form
ss. 19–21 Information on State of Loan; Bankruptcy Proceedings; Accounts Produced When Suing
ss. 23–26 Charges for Expenses; Assignment of Debts; Application of Act to Assignees
Part VI – Miscellaneous
ss. 27–27B Attestation; Prohibition of Agents or Canvassers; Untrue or Blank Amounts
ss. 29–29B False Statements; General Offences; Assisting Unlicensed Moneylending; Harassment of Borrower
ss. 29C–29K Offences by Bodies; Prosecution; Compounding; Jurisdiction; Regulations; Informer Rewards; Sabah & Sarawak
ss. 30–31 Deleted and Omitted Provisions
– Index
Weight 2 kg
Dimensions 30 × 28 × 5 cm

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