Collection of judgments on accepting loan interest rates above 20%/year in Vietnam

Hello, Lawnet would like to answer your questions as follows:

According to the provisions of Article 468 of Vietnam's Civil Code 2015 stipulates:

- The rate of interest for a loan shall be as agreed by the parties.

The rate of interest for a loan agreed by the parties may not exceed 20% per year, unless otherwise prescribed by law.

Thus, in the property lending relationship, the interest rate will be agreed upon by the parties but must not exceed 20% per year of the loan amount. However, also according to the above provisions, if "other relevant laws stipulate otherwise," the lending interest rate will comply with that provision.

Article 4 of the Law on Credit Institutions 2010 amended in 2017 stipulates: Non-bank credit institutions include finance companies, financial leasing companies and other non-bank credit institutions.

Therefore, financial companies are not only governed by the Civil Code 2015 but also by the Law on Credit Institutions and related documents.

In Article 9 of Circular 43/2016/TT-NHNN stipulates:

- Consumer loan interest rate fixed by a finance company shall conform to regulations of the State Bank on lending transactions of credit institutions and/or foreign bank branches with customers.

- Finance companies shall adopt regulations on the range of consumer loan interest rates to be used consistently in its entire network in specific periods of time, including the maximum and minimum interest rates applied to each consumer credit line.

Because the law does not specify the ceiling interest rate and the maximum interest rate of financial companies. Therefore, the maximum interest rate for consumption purposes at the financial company will be adjusted by the financial company and must be approved by the State Bank.

Also in, Circular 39/2016/TT-NHNN stipulates:

- A credit institution and its customer shall agree on the interest rate depending on capital demands and supplies on the market, loan demands and creditworthiness of customers, unless otherwise stipulated by the State Bank's regulations on the maximum interest rate set forth in Clause 2 of this Article.

- A credit institution and customer shall agree on the interest rate on short-term loan denominated in Vietnamese dong but shall not allow it to exceed the maximum interest rate decided by the State Bank’s Governor over periods of time in order to meet certain demands for borrowed fund as follows:

+ Loans taken out to support the agricultural and rural development sector under regulations of the Government on credit policies for agricultural and urban development;

+ Loans taken out to implement the export business plan in accordance with the Law on Commerce and other instructional directives thereof;

+ Loans taken out to finance business activities of small and medium-sized enterprises under the Government’s regulations on support for development of small and medium-sized enterprises;

+ Loans taken out to develop ancillary industries under the Government’s regulations on development of ancillary industries;

+ Loans taken out to finance business operations of high technology application enterprises under the provisions of the Law on High Technology and other instructional directives thereof.

Thus, the lending interest rate will be agreed upon by the parties, and the financial company will be able to set its own lending interest rate. Above all, when self-determining interest rates, financial companies must also obtain approval from the State Bank. Therefore, it is not illegal for financial companies to lend at interest rates higher than 20% according to the provisions of the Civil Code and cannot be sanctioned.

Here are some court judgments that accept loan interest rates above 20% per year, which you can refer to:

Judgment 50/2017/DS-ST dated August 15, 2017 on credit contract dispute

- Level of trial: First instance

- Judicial body: Hai Chau District People's Court, Da Nang City

- Quote from the content: "On September 7, 2014,Mr. Tran Hong H signed the loan application cum credit contract (referred to as credit contract) with Joint Stock Commercial Bank A (hereinafter referred to as the Bank). As agreed in the contract, the Bank lends Mr. H an amount of VND 31,430,184 (of which VND 1,496,675 is the contract insurance premium) at an interest rate of 4.59%/month for personal consumption. The loan term is 19 months, and the total amount of principal and interest to be paid is VND 47,771,000, payable on the 8th of every month, of which the first 19 months pay VND 2,515,000 and the last month pay VND 2,501,000.

Judgment 45/2019/DS-ST dated July 25, 2019 on the dispute over a property loan contract

- Level of trial: First instance

- Judicial body: People's Court of Ben Luc District, Long An Province

- Quoting the content: "On October 25, 2017, Mr. Huynh Le Minh T1 signed the loan application cum credit contract No. 20171026-0004706 with the one-member limited liability financial company Bank V ( Company) to borrow the amount of 33,338,000 VND. The agreed interest rate is 3.92%/month for the purpose of borrowing money for personal consumption when Mr. T1 does not mortgage any assets for the company. As agreed in the contract, Mr. T1 is responsible for paying the company the principal and interest amount of VND 63,544,639. After that, he will pay consecutively within 36 months; specifically, in the first 35 months, each month pays an amount of VND 1,743,000, and the last month pays VND 2,539,639. The first payment period starts on December 1, 2017."

Judgment 34/2018/DSST dated April 6, 2018 on credit contract disputes

- Level of trial: First instance

- Judicial body: People's Court of Duc Hoa district, Long An province

- Quoting the content: "Through the petition of the Company, the Trial Panel found that: Based on the credit contract No. 20160407-105007-1009 dated 4/4/2016, Mr. B has borrowed from the Company an amount of VND 42,200,000 with a loan interest rate of 2.92%/month. Both capital and interest are 59,263,000 VND, and the form of loan is deferred payment within 24 months. Mr. B can pay the contract three times in the amount of 7,410,000 VND, but he did not pay any amount on April 20, 2017. Now, Ms. P represents the company and asks Mr. B to be responsible for paying the amount of 49,383,000 VND. In which the principal is 33,550,834 VND and the interest is 15,832,166 VND, Mr. B agrees on the amount of the debt but asks for a monthly payment of 2,470,000 VND until the debt is fully paid, which is not accepted by Ms. P on behalf of the company. Considering that Mr. B owes the company for a long time without goodwill, the Trial Panel considers it necessary to force Mr. B to pay the company an amount of VND 49,383,000. "In which the principal is 33,550,834 VND and the interest is 15,832,166 VND, which is consistent with the provisions of Article 466 of the Civil Code,"

Judgment 03/2019/KDTM dated October 25, 2019 on credit contract dispute

- Level of trial: First instance

- Judicial body: People's Court of Loc Ha district, Ha Tinh province

- Quoted content: "According to the Application for opening and using payment accounts, debit cards, e-banking services and loans (No. LDxxxxxxxxx), on November 28, 2016, the parties have agreed interest rate on debt in due date is 42%/year, no agreement on overdue debt interest rate. At the trial, the authorized representative of Joint Stock Commercial Bank V requested an interest rate of 42%/year for the term debt. The overdue debt interest rate is 150% of the debt interest rate within the term from October 1, 2017. The Panel found that the interest rate on debt within the term agreed by the parties, although higher than the limit interest rate specified in Article 468 of the Civil Code, was consistent with the provisions of Article 91 of the Law on Credit Institutions and Clause 5 of Article 466 of the Civil Code. Therefore, this decision is accepted."

Judgment on property loan contract dispute No. 78/2021/DS-ST

- Level of trial: First instance

- Judicial body: People's Court of District 11, Ho Chi Minh City

- Quoting the content: "On April 28, 2010, the defendant signed the Application for the issuance of a credit card cum contract and a copy of the Terms and Conditions for credit card issuance; agreed to the interest rate according to the Schedule of Fees for S card products and services issued in Vietnam and according to Notice No. 113/TB-TTT dated July 4, 2011 of S. The defendant accepted to apply the interest rate for credit cards. The application rate is 2.15%/month, the overdue interest rate is 150% of the announced interest rate applied at the present time, and the overdue interest rate is 3.225%/month. Considering that the loan interest rate agreement is consistent with the provisions of Clause 2, Article 91, and Article 95 of the Law on Credit Institutions 2010, and the provisions of Clauses 1 and 2, Article 13 of Circular 39/2016/TT-NHNN dated December 30, 2016, the State Bank of Vietnam regulates the lending activities of credit institutions and foreign bank branches to customers. The trial panel considers that the interest rate agreement between the plaintiff and the defendant is completely voluntary and not against the law. Therefore, S asks Mrs. P to pay the interest amount up to the trial date of June 16, 2021, of VND 53,999,936 (fifty-three million, nine hundred and ninety-nine thousand, nine hundred and thirty-six), which is reasonable. The trial panel accepted."

Best regards!

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