1. The Act shall be applicable on the date on which the State Government will notify.
2. Money lending is the business of advancing loans. – Sec. 2(3)
Definition of the term “loan” is of wide import and inclusive:
Sec. 2(9) – “loan” means – an advance whether of money or in kind at an interest
with or without security.
Further, every agreement under any law for the time-being in force (whatever its terms or form may be) which is in substance or effect a loan of money is included.
An agreement of Hire Purchase (which essentially is a Finance Lease) is in substance a loan of money and is included in the definition of the term “loan”
3. Obligations and Duties of Moneylenders
b. Renewal of Registration after every 5 years
c. i. Maintain Accounts – Cash Book, Ledger, Register of Debtors / Register of Securities, etc in the prescribed form
ii. On the day of advance of loan – Deliver to the debtor
a. A Statement showing the Name and Address of Money lender and of the debtor, date & amount of loan, date of maturity, nature of security and rate of interest.
b. A Pass Book containing an up-to date and true account of all transactions relating to the loan.
iii. Issue Receipt – On receipt of a payment from a debtor – or On Receipt of any security from the debtor
iv. Every year within 30 days of the end of the year, – Issue Statement of Yearly accounts to the Debtors, every year.
All documents referred to in para C. are to be issued in local language (or if the debtor, so demands, in Hindi or English).
d. Audit of Accounts by a Chartered Accountant.
e. Not to dispose of any security from a debtor – before a period of two years from the date stipulated for the final repayment of the loan.
i.e, If date of loan is 1 April 2011 for 24 installments – last repayment is due on 1 April 2013 – two years after i.e., 1 April 2015 – you cannot dispose of the security.
f. Charge Simple Interest. Interest on Interest cannot be charged.
g. Cannot charges Expenses such as file charges, etc. Only expenses for investigating the title of the property, mortgage, stamp duty, etc. can be charged.
4. State Government will fix the Maximum rates of interest.
5. In Suits
a. Stay of suits of money lender not holding a valid registration.
b. If money-lender has not complied with the requirement of account and audit, then,
i. Interest recovery, wholly or partly, disallowed.
ii. Cancellation or suspension of registration.
c. Interest cannot be recovered in a Suit. (No court shall order/ decree recovery of sum greater than the principal of the loan due on the date of decree.)
6. Penalties & Prosecution provided for under the act for various non-compliance.
7. The State Government has the power to Exempt by General or Special Order – a class of Money lenders from all or any of the provisions of the Act – subject to such conditions & for such period as may be specified in the Order.