The Supreme Law lowers the upper limit of judicial protection of private lending interest rates
Not more than 4 times the LPR, currently 15.4%; it is clear that “professional lenders” who have not been approved by law are engaged in illegal financial business activities
On August 20, the Supreme People’s Court (hereinafter referred to as the "Supreme Law") issued the newly revised "Regulations on Several Issues Concerning the Application of Law in the Trial of Private Loan Cases" (hereinafter referred to as the "Regulations"), which will be effective from August 20, 2020 Officially implemented. The adjustment of the upper limit of the judicial protection of private lending interest rates in the Regulations has aroused great concern in the market.
The Supreme Law stated that it will determine the upper limit of judicial protection for private lending interest rates based on the standard that the People’s Bank of China authorizes the National Interbank Funding Center to issue four times the one-year loan market quote rate (LPR) on the 20th of each month, replacing the original " The Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Laws to the Trial of Private Loan Cases (implemented on September 1, 2015, hereinafter referred to as the “formerly “Regulations”) of the “two lines and three districts based on 24% and 36%” Provisions are to significantly reduce the upper limit of judicial protection for private lending rates, and to promote private lending rates to gradually adapt to the actual level of China's economic and social development.
According to the latest data released by the central bank on August 20, the LPR remained unchanged in August, and the one-year LPR was 3.85%. That is to say, based on 4 times the current one-year LPR, the upper limit of judicial protection for private lending rates will be adjusted to 15.4%. This is a significant drop in comparison with the “red line” of 24% and the “bottom line” of 36%, which have been implemented in the past five years for judicial protection of private lending interest rates.
Private lending red line delineated: interest rate does not exceed 4 times LPR
Regarding the “prohibition of usury”, it is worth paying attention to the two determinations that “the people’s court does not support”.
First, the "Regulations" will continue to implement more stringent principal and interest protection policies. That is, the sum of the principal and interest that the borrower should pay after the expiration of the borrowing period exceeds the interest during the entire borrowing period calculated on the basis of the initial borrowing principal and the initial borrowing principal and 4 times the quoted rate of the one-year loan market when the contract was established. The people’s court shall not support the sum.
Secondly, the sum of overdue interest rates, liquidated damages, and other expenses claimed by the parties shall not be higher than the upper limit of judicial protection of private lending interest rates in accordance with the "Regulations." That is, the lender and the borrower have agreed on both the overdue interest rate and the liquidated damages or other expenses. The lender can choose to claim overdue interest, liquidated damages or other costs, or both, but the total exceeds the one-year period when the contract was established The People’s Court does not support the 4 times the LPR.
According to He Xiaorong, a deputy ministerial full-time member of the Supreme Court Judicial Committee, since 2017, the Supreme Court has successively visited Zhejiang, Jiangsu and other places to investigate the problems in the implementation of judicial interpretations on private lending, and extensively listened to private enterprises and individual industrial and commercial households. opinion. When discussing with private entrepreneurs and individual industrial and commercial households, most representatives suggested that on-lending should be strictly restricted. That is, some enterprises re-lending after obtaining loans from banks, especially a small number of state-owned enterprises that changed hands to engage in loan channel business after obtaining loans from banks. Violated the value orientation of financial service entities.
The Supreme People’s Court Adjudication Committee adopted this opinion after serious discussions and decided to deal with the first item of Article 14 of the original "Regulations", which "takes out the credit funds of financial institutions and then lends them to the borrower at high interest, and the borrower knows or should know in advance. "The invalidity of the contract was revised to the first item of Article 14 of the "Regulations", which is "to take out loans from financial institutions on loan", which further strengthened the clear attitude of judicial assistance to financial service entities.
According to Chen Wen, director of the Digital Economy Research Center of the School of Finance of Southwestern University of Finance and Economics, the Supreme Law’s amendment to prohibit usury and boost financial service entities related content, “The macro background is that the real economy is more difficult, especially after the epidemic. Finance must transfer profits to the real economy, including the formal financial inclusive loan requirements and the 1.5 trillion yuan'profit transfer' requirement made by the State Council, as well as the adjustment of judicial interpretations related to private lending. Reasonable upper limit of interest rates Design can prevent shocks to the supply of private loans."
Clarify that the behavior of “professional lenders” without legal approval is an illegal financial business activity
Liu Min, deputy chief of the Supreme Court of the People’s Republic of China, introduced that in recent years, with the rapid development of private lending, the professionalization of lenders has become increasingly obvious, and so-called "professional lenders" have emerged. Liu Min explained it popularly as, "It means that the lender's lending behavior is repetitive and frequent, and the purpose of borrowing is also business."
In April 2018, the China Banking and Insurance Regulatory Commission, the Ministry of Public Security, the State Administration for Market Supervision and Administration, and the People’s Bank of China jointly issued the “Notice on Regulating Private Lending and Maintaining Economic and Financial Order”, which clearly stated that “without the legal approval of the competent authority, any Units and individuals shall not establish institutions that are engaged in or mainly engaged in loan granting business or take loan granting as their daily business activities".
The Supreme Law believes that the behavior of professional lenders actually violates the regulations in disguised form and is an illegal financial business activity. If the amount and amount are too large, it may harm the normal financial order.
Therefore, in July 2019, the Supreme Law, the Supreme People’s Procuratorate, the Ministry of Public Security, and the Ministry of Justice jointly formulated the “Opinions on Several Issues Concerning the Handling of Criminal Cases of Illegal Lending”, which stipulates that “I. Violation of national regulations without the approval of regulatory authorities , Or beyond the scope of business, for the purpose of making profits, regularly grant loans to unspecified social objects, disrupt the order of the financial market, and the circumstances are serious, in accordance with the provisions of Article 225, Item (4) of the Criminal Law, illegal Conviction and punishment for business crime."
"The "Opinions on Several Issues Concerning the Handling of Criminal Cases of Illegal Lending" stipulates that'recurring loans to unspecified people in society' refers to lending to unspecified persons (including units and individuals) in loans or other names within 2 years Funds for more than 10 times. If the repayment period is extended after the loan expires, the number of loans issued shall be counted as one time." Liu Min introduced the criteria for determining criminal acts of "professional lenders" at that time.
And four months later, Article 53 of the "Minutes of the National Court Civil and Commercial Trial Work Conference" issued by the Supreme Law in November 2019 stipulates: "A legal person that has not obtained the qualifications for lending in accordance with the law and engages in private lending, and Private lending activities undertaken by unincorporated organizations or natural persons whose private lending is a business shall be deemed invalid in accordance with the law. If the same lender repeatedly engages in paid private lending activities within a certain period of time, it can generally be regarded as a professional lender. Private lending comparison The higher people’s courts in active places or the intermediate people’s courts authorized by them may formulate specific standards for determination based on the actual conditions of the region.”
In accordance with the aforementioned judicial interpretations and judicial policy documents, Liu Min stated that when the "Regulations" amended the judicial interpretations this time, in Article 14 "Determination of Private Lending Contracts Invalid", item (3) was added. Lenders who have obtained the qualifications for lending in accordance with the law provide loans to unspecified social objects for the purpose of making profits", which is a restriction on professional lending behavior.
"For the professional lending behaviors added in Article 14 (3), the private lending contract shall be deemed invalid." He Xiaorong further explained that during the preliminary investigation and consultation process of the Supreme Law, all sectors of society have In the name of "private lending", the behavior of issuing loans to the public without the approval of the financial regulatory authorities has relatively large opinions. Such behaviors are easily intertwined with "routine loans" and "campus loans", which seriously affect the local financial order and Social stability has seriously damaged the legitimate rights and interests of the people and the peace of life. After careful study, the Supreme Law absorbed this opinion and added one of the five situations in which the People's Court found the loan contract invalid.
■ Focus
How did 4 times the LPR come from?
In this revision of the judicial interpretation of private lending, the Supreme Law adjusted the upper limit of the judicial protection of private lending interest rates from 24% to 36% per annum to the "One-year Loan Market Price Rate (LPR) issued monthly by the National Interbank Funding Center authorized by the Central Bank." 4 times as much".
Zheng Xuelin, member of the Supreme Court Judiciary Committee and President of the First Civil Division, told reporters that such a provision mainly takes into account the social and economic development of my country, the historical evolution of judicial protection of private lending interest rates, market demand, and relevant regulations of foreign countries and regions.
The earliest regulation on private lending that can be found now is the answer to the Northeast Branch of the Supreme People’s Court of the Supreme People’s Court on November 27, 1952, "Answers on Urban Lending Exceeding Several Dividends into Usury", the main content of which is "About urban According to the current national bank lending rate and market price conditions, private lending rates should generally not exceed three cents."
Article 6 of the "Several Opinions of the Supreme People's Court on the Trial of Lending Cases by the People's Courts" implemented on August 13, 1991 stipulates that the interest rate of private loans shall not exceed four times the interest rate of similar loans of banks. "For a long time, this regulation has been known and accepted by all walks of life." Zheng Xuelin said that people's courts at all levels also tried a large number of private lending cases based on this judicial interpretation.
However, the “two-tier and three-zones” in the original “Regulations” that were implemented on September 1, 2015 based on 24% and 36% are still taking four times the interest rate of similar bank loans as an important factor in considering the upper limit of interest rate protection. The Reply of the General Office of the People's Bank of China on the Legal Nature of Lending Funds to Unspecified Objects in the Society on April 26, 2001 once again clarified that the standard for identifying usury is 4 times the interest rate of similar bank loans. Zheng Xuelin believes that it can be seen that the upper limit of interest rate protection stipulated in the judicial interpretation of the Supreme Law and the relevant approval of the People's Bank of China are four times the interest rate of similar loans.
"Therefore, the determination of four times the quoted interest rate of the one-year loan market as the upper limit of the judicial protection of the private lending interest rate helps the people understand and accept this standard, and also reflects the continuity of judicial policies. At the same time, this standard is also close to The relevant regulations of most countries and regions." Zheng Xuelin said.
Regarding the adjustment of the upper limit of the private lending interest rate by the Supreme Law, in the view of Bi Yanguang, a senior researcher at Qicai Think Tank, private lending will enter the era of floating interest rates. "In layman's terms, it used to be a'Buy It Now', more than 36% of the violations are illegal, and it is negotiable between 24% and 36%. Now it has become within 4 times of the LPR benchmark interest rate, from a'Buy it Now' to a'floating interest rate'. '."He says.
Huang Xinyu, Shell Financial Reporter, Beijing News