Crime of usury in Vietnam: Fine or Imprisonment?

Crime of usury in Vietnam: Fine or Imprisonment? (Illustrative image)

What is usury?

In asset loan contracts, Vietnamese law respects the agreements made between parties regarding the type of assets to be lent, loan period, loan interest rate, and other conditions (if any). However, regarding loan interest rates, in order to create a legal corridor to protect the weaker party, the law limits the loan interest rate that both parties can agree upon according to Article 468 of the Civil Code 2015 of Vietnam as follows:

Article 468. Interest rate

1. Loan interest rate agreed upon by the parties.

If the parties agree on an interest rate, the agreed interest rate must not exceed 20%/year of the loan amount, except for cases where other related laws provide otherwise. Based on the actual situation and at the proposal of the Government of Vietnam, the National Assembly Standing Committee shall decide to adjust the above interest rate and report to the National Assembly at the nearest session.

If the agreed interest rate exceeds the ceiling interest rate as stipulated in this clause, the excess interest rate shall not be effective.

2. In cases where the parties agree on interest payment but do not clearly specify the interest rate and there is a dispute over the interest rate, the interest rate shall be determined at 50% of the ceiling interest rate stipulated in Clause 1 of this Article at the time of payment.

The agreed loan interest rate between the two parties must not exceed 20%/year (~1.667%/month). Cases where the loan interest rate exceeds the stipulated rate will be considered a legal violation, and the excess portion will not be effective; however, this is not yet deemed usurious lending.

Usurious lending is lending at an interest rate five times or more than the maximum interest rate stipulated in the Civil Code, i.e., from 100%/year (8.33%/month) or more (Article 201, Criminal Code 2015 amended and supplemented in 2017).

Crime of usury in Vietnam: Fine or Imprisonment?

Depending on the severity, persons engaged in lending at interest rates beyond the legal limit will be subject to administrative penalties or criminal liability in Vietnam according to regulations.

Administrative Penalties

The lender will be fined between 5,000,000 VND and 15,000,000 VND for lending with collateral but at an interest rate exceeding 150% of the basic interest rate announced by the State Bank of Vietnam at the time of lending according to Point d, Clause 3, Article 11, Decree 167/2013/ND-CP.

Accordingly, this act is based on the basic interest rate announced by the State Bank of Vietnam at the time of lending. Currently, the basic interest rate in VND is 9.0%/year according to Decision 2868/QD-NHNN dated November 29, 2010. Thus, if lending with collateral at an interest rate exceeding 13.5%/year, the lender will be fined from 5,000,000 VND to 15,000,000 VND.

Criminal Prosecution

Article 201 of the Criminal Code 2015, amended and supplemented in 2017 stipulates the crime of usurious lending in civil transactions as follows:

- A fine from 50,000,000 VND to 200,000,000 VND or non-custodial reform for up to 03 years for lending at an interest rate five times or more than the maximum interest rate stipulated in the Civil Code, earning illicit profits from 30,000,000 VND to less than 100,000,000 VND, or having been administratively sanctioned for this act or having been convicted of this crime but has not yet had the conviction expunged.

- A fine from 200,000,000 VND to 1,000,000,000 VND or imprisonment from 06 months to 03 years for actions that earn illicit profits of 100,000,000 VND or more.

- The offender might also be fined from 30,000,000 VND to 100,000,000 VND, prohibited from holding certain positions, prohibited from practicing certain professions or doing certain jobs for 01 year to 05 years.

Thus, only when the interest rate is more than five times the highest legal interest rate does it constitute the crime of usurious lending under criminal law. Depending on the illicit profits obtained from the usurious lending act and the nature of the act, the lender of usurious loans may be fined up to 1,000,000,000 VND, non-custodial reform for up to 03 years, or imprisonment for up to 03 years, and might be prohibited from holding certain positions, practicing certain professions, or doing certain jobs for up to 05 years.

If the borrower is unable to repay the debt and the lender files a lawsuit in court, the law only protects the lender's rights within the legal interest rate. The portion exceeding the interest rate will not be protected by law.

Hoa Hong

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