Usurious lending: How are illicit gains determined according to Vietnam's regulations?

How is the illegal profit from usury determined under the law in Vietnam? (Illustration)

1. Determining the illegal profit for criminal liability in Vietnam

Ciminal Code 2015 regulates the Crime of Usury in civil transactions under Article 201. To be specific:

1. Individuals in civil transactions who lend with interest rates five times higher than the highest rate prescribed in the Civil Code, illicitly profit from 30,000,000 VND to less than 100,000,000 VND, or have been administratively sanctioned for this act or have been convicted of this crime, yet have not cleared their criminal record and still commit violations, shall be fined from 50,000,000 VND to 200,000,000 VND or undergo non-custodial reform for up to 03 years.

2. Committing the crime of illegal profit of 100,000,000 VND or more, shall be fined from 200,000,000 VND to 1,000,000,000 VND or imprisoned for 06 months to 03 years.

3. Offenders may also be fined from 30,000,000 VND to 100,000,000 VND, prohibited from holding certain positions, prohibited from practicing professions or certain jobs from 01 year to 05 years.

In Official Dispatch 212/TANDTC-PC, 2019, the Supreme People's Court's Council of Judges provided guidance on determining illegal profits as follows:

According to Clause 1, Article 468 of the Civil Code: “Loan interest rates shall be agreed upon by the parties. Where the parties have an agreement on interest rates, the agreed interest rate shall not exceed 20% per year of the borrowed amount...”. Therefore, the illegal profit for determining criminal liability is the amount of interest received after deducting the amount of interest corresponding to the prescribed interest rate in the Civil Code.

Moreover, according to the guidance of the Supreme People's Court's Council of Judges in Article 9 of Resolution 01/2019/NQ-HĐTP, if a loan contract stipulates foreign interest rates, overdue principal interest, overdue interest higher than the allowed rates, the portion exceeding the allowed interest rates has no effect. Thus, is this excessive amount considered illegal profit under the Crime of Usurious Loan in Civil Transactions?

This was guided by the Supreme People's Procuracy in Official Dispatch 4688/VKSTC-V14 dated October 9, 2020. The excessively high interest amount ineffective under Article 9 of Resolution 01/2019/NQ-HĐTP is still counted as illegal profit for determining the criminal liability of the lender in usurious loans.

2. Handling principal and illegal profits from Usury

For principal and interest within 20%/year:

The principal is the means of the crime of the lender, thus it shall be confiscated under Point a, Clause 1, Article 47 of the Ciminal Code 2015. In cases where the borrower has not repaid the principal, they must be compelled to pay it into the state budget.

The interest amount up to 20%/year shall be considered as criminal proceeds and confiscated for the state budget accordingly.

For illegal profits:

According to Clause 2, Article 468 of the Civil Code: “If the agreed interest rate exceeds the capped rate prescribed in this Clause, the excessive portion shall have no effect”. Therefore, the interest amount exceeding the 20%/year rate is the illegal profit acquired by the lender from the borrower and should be returned to the borrower. Except for cases where the borrower uses the borrowed money for illegal purposes (such as gambling, illegal drug trading...), the illegal profit shall be confiscated for the state budget.

If the borrower has not paid the interest exceeding the 20%/year rate to the lender, hence no illegal profit has been generated, the act of lending as mentioned does not fully constitute the crime under Article 201 of the current Ciminal Code regarding the Crime of Usury in civil transactions. Thus, in such cases, criminal liability of the lender will not be considered. This is crucial guidance from the Supreme People's Procuracy for determining the crime of usury in Official Dispatch 4688/VKSTC-V14.

For cases of different interest rates in different loan phases:

If the initial loan was at an interest rate exceeding 20%/year and the illegal profit meets the conditions in Article 201 of the Ciminal Code 2015 (phase 1), the borrower has not paid interest for this phase but adds the interest to the principal to continue borrowing at a legally allowed interest rate (phase 2). By the time of prosecution, the borrower still has not repaid the principal and interest of phase 1 but has only paid interest on the total due. In this case, the lender could be held criminally liable for usury starting from the point of lending with an interest rate over 20%/year in phase 1. Because the nature of the loan agreement in phase 2 is an agreement to consolidate debt between both parties with a loan agreement to conceal the illegal profits of the lender in this transaction.

Duc Thao

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