Section 15: Prohibition of compound interest

15. Prohibition of compound interest (1) (a) Subject to this section, any contract made for the loan of money by a moneylender shall be illegal in so far as it provides directly or indirectly— (i) for the payment of interest in advance whether by deduction of any amount from the principal sum borrowed or otherwise; (ii) for the payment of compound interest on the loan; or (iii) for an increase in the rate or amount of interest by reason of any default in the payment of sums due under the contract. (b) The contract under paragraph (a) may provide that— (i) where default is made in the payment upon the due date of any sum payable to the moneylender under the contract, whether in respect of principal or interest, the moneylender shall charge simple interest on that sum from the date of the default until the sum is paid at a rate not exceeding the rate payable in respect of the principal apart from any default; and (ii) any interest which is so charged shall not be reckoned for the purposes of this section as part of the interest charged in respect of the loan. (2) Any moneylender who fails to comply with this section shall commit an offence and shall, on conviction, be liable to the penalties specified in section 14. 16. — M66 – 7 [Issue 1] Moneylenders Act