When is an interest rate considered the high-interest rate?

When is an interest rate considered the high-interest rate?
Posted date: 06/04/2020

My name is Nguyen Van T and I currently live and work in Hanoi. A few months ago, a group of people came to my brother's house to collect debts while my younger brother did not borrow any money. As far as I know, the money was borrowed from my brother's wife (divorced) and used for her business. She did not discuss it in advance with my brother.

My brother's ex-wife borrowed VND 20,000,000 with a monthly interest of VND 3,000,000. This is a huge amount of money and we are unable to pay both principal and interest. My family wanted to ask her to pay but we could not find her. That group of people came to claim the money with weapons and threatened that they would harm my nephews if we didn't pay. My brother brought the children to stay with my family to avoid being threatened. However, the group of people came to my house and threatened such as using shrimp sauce, paint, dirty oil, ... thrown into the house to force us to pay the debt in full.

I would like to know if the interest rate is stipulated in the law. Is my brother responsible for the principal and interest that his wife borrowed while they were divorced? Can I sue or report to the police to handle the behaviors of throwing shrimp sauce, paint, and dirty oil into my house?

FDVN’s opinions:

Thank you for concerning and trusting in FDVN’s legal services. We have studied the law provisions to provide you with our advice. Please kindly see the answer below:

[1]. Current provisions of law on interest rate:

According to Clause 1, Article 468, Civil Code 2015, interest rate is regulated:

“1. 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. According to actual conditions and at the proposal of the Government, the Standing Committee of the National Assembly shall adjust the above interest and send the report to the National Assembly at the latest session.

If the agreed interest exceeds the maximum interest prescribed in this Clause, the agreed interest shall become invalid.”

Based on the provisions above, the interest rate agreed by the parties must not over 20%/year. Specifically, the maximum interest rate allowed by the law is 1,666%/month. Thus, the maximum interest rate prescribed by law that your sister-in-law has to pay is 333,200 VND/month (VND 20,000’000 x 1,666%/month).

Based on the information provided by you, your sister-in-law's loan was 20 million/month with an interest of 3 million/month. So, the interest rate (%) that she has to pay is 15%/month - 09 times higher than the maximum interest rate prescribed by law, which is contrary to the law.

Under Clause 1, Article 468, if the agreed interest exceeds the maximum interest prescribed in law, the agreed interest shall become invalid. Thus, your sister-in-law has to pay the interest of VND 332,000/month.

[2]. Usury in civil transactions:

According to Article 201 of the Criminal Code 2015, amended and supplemented in 2017 on usury in civil transactions:

“1. Any person who offers loans at an interest rate that is five times higher than the maximum interest rate specified in the Civil Code and earns an illegal profit of from VND 30,000,000 to under VND 100,000,000 or recommits this offense despite the fact that he/she has incurred an administrative penalty or has an unspent conviction for the same offense shall be liable to a fine of from VND 50,000,000 to VND 200,000,000 or face a penalty of up to 03 years' community sentence.

2. If the illegal profit earned is ≥ VND 100,000,000, the offender shall be liable to a fine of from VND 200,000,000 to VND 1,000,000,000 or face a penalty of 06 - 36 months' imprisonment.

3. The offender might also be liable to a fine of from VND 30,000,000 to VND 100,000,000, be prohibited from holding certain positions or doing certain works for 01 - 05 years.”

Thus, that the group of people who lent with the interest rate of 15%/month – 09 times of the regulated maximum interest rate is the sign of constituting the crime “Usury in civil transactions”.

Accordingly, depending on the nature and level of the acts, they shall be liable to a fine of from VND 200,000,000 to VND 1,000,000,000 or face a penalty of 06 - 36 months' imprisonment.

[3]. Repayment responsibility:

According to your information, we can clarify your case into the situations as below:

Firstly, if the aforementioned loan arose after your bother and his wife have divorced, your sister-in-law would be responsible for her debt.

Secondly, if the aforementioned loan arose in the marriage period, you must determine the purpose of the loan to determine if your younger brother is responsible for this debt.

According to Article 37 of the Law on Mariage and Family 2014:

“Article 37. Common property obligations of husband and wife

Husband and wife have the following common property obligations:

1. Obligations arising from transactions established under their agreement, obligations to pay damages under their joint liability as prescribed by law;

2. Obligations performed by a spouse in order to meet the family’s essential needs;

3. Obligations arising from the possession, use, and disposition of common property;

4. Obligations arising from the use of separate property for maintaining and developing common property or for generating major incomes for the family;

5. Obligations to pay damages caused by their children as prescribed by the Civil Code;

6. Other obligations as prescribed by relevant laws.”

Besides, it is stipulated Article 27 of the Law on Mariage and Family 2014 on the joint liability of husband and wife:

1. Husband and wife shall take joint liability for transactions prescribed in Clause 1, Article 30, which are made by either of them, or other transactions made in conformity with provisions on representation of Articles 24, 25 and 26, of this Law.

2. Husband and wife shall take joint liability for the obligations prescribed in Article of this Law.

Accordingly, your brother did not know about the loan and the purpose of that loan and your brother and his wife did not discuss that loan in advance. The loan would be considered the wife’s loan if it was established by herself and was not used for:

“1. Obligations arising from transactions established under their agreement, obligations to pay damages under their joint liability as prescribed by law;

2. Obligations performed by a spouse in order to meet the family’s essential needs;

3. Obligations arising from the possession, use, and disposition of common property;

4. Obligations arising from the use of separate property for maintaining and developing common property or for generating major incomes for the family;

5. Obligations to pay damages caused by their children as prescribed by the Civil Code;

6. Other obligations as prescribed by relevant laws.”

And your younger brother is not jointly liable for the transaction made by a party if the transaction is not subject to the provisions of Clause 1, Article 30: “Husband and wife have the right and obligation to conduct transactions to meet the family's essential needs” or other relevant transaction as represented in Articles 24, 25, and 26 below:

“Article 24. Bases for determination of representation between husband and wife

1. The representation between husband and wife in establishing, making and terminating transactions shall be determined in accordance with this Law, the Civil Code and other relevant laws.

2. Husband and wife may authorize each other to establish, make or terminate transactions which, as prescribed by this Law, the Civil Code and other relevant laws, shall be agreed upon by both spouses.

3. A spouse may represent the other when the latter loses his/her civil act capacity while the former is eligible to act as the guardian or when the latter has his/her civil act capacity restricted while the former is designated by a court to act as the at-law representative of his her spouse, unless the latter is required by law to perform by himself/herself related rights and obligations.

When a spouse loses his/her civil act capacity and the other requests a court to settle divorce, the court shall designate another person to represent the partner who has lost his/her civil act capacity for settlement of divorce in accordance with the Civil Code’s provisions on guardianship.

Article 25. Representation between husband and wife in business relations

1. When husband and wife jointly run a business, unless otherwise agreed by the husband and wife before taking part in the business relationship or otherwise prescribed by this Law and other relevant laws, the spouse directly involved in the business relationship is the lawful representative of the other in that relation.

2. In case husband and wife put their common property into business activities, the Article of this Law shall apply.

Article 26. Representation between husband and wife in case only one spouse is named in the ownership or use right certificate of common property

1. Representation between husband and wife in establishing, making and terminating transactions related to their common property with ownership or use right certificates on which only one spouse is named must comply with Articles 24 and 25 of this Law.

2. In case the spouse named in the property ownership or use right certificate establishes, makes and terminates on his/her own a transaction with a third party in contravention of this Law’s provisions on representation between husband and wife, that transaction is invalid, unless the interests of the third party in good faith are protected as prescribed by law.”

As such, your sister-in-law has the obligation to repay the loan she has established. Your brother will not have to pay the above principal and interest if the information you provide is accurate and complete.

[4]. Is the act of throwing shrimp paste, oil, oil, etc. into other people's houses considered illegal? How to handle?

According to point a, Clause 2, point b Article 7 of the Decree No. 167/2013/NĐ-CP on sanction of administrative violation in social security, order and safety, prevention and fighting of the social evils, fire and domestic violence:  

Article 7. Violation of regulations on keeping general sanitation

[…]

2. A fine of between VND 1,000,000 and 2,000,000 shall be imposed for one the acts as follows:

a) Pouring or throwing waster, dirt or other substances to smear houses, offices, workplaces and business and production place of others;

3. Remedial measures:

a) Coercively taking remedial measures of environmental pollution for the acts specified at Point b, c, d, dd, e, Clause 1 and Point b, d, Clause 2 of this Article;

b) Coercively restoring the initial condition for the acts specified at Point a and c, Clause 2 of this Article;

Therefore, the group of people who threw wastes and dirt into your house might be subject to administrative sanctions of between VND 1,000,000 and VND 2,000,000, and they must also take remedial measures to restore to the original state.

That is the advice of FDVN to your request, based on the study of legal regulations. Hopefully FDVN's advice will be useful to you.

Legal expert: Dinh Thi Thong

FDVN Law Firm


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