Review of the evolution of regulations on private lending interest rates

In August 2015, Article 26 of the "Regulations on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases" issued by the Supreme People's Court determined that " "Two Lines and Three Areas" rule. In layman's terms, the two lines are "24%" and "36%", while the three zones refer to:

1. Private lending with an annual interest rate not exceeding 24% is protected by law. The People's Court will also support the lender's claim.

2. If the annual interest rate of private loans exceeds 24% but does not exceed 36%, the interest portion shall be subject to the voluntary performance of the parties. If the borrower has paid this part, it cannot get it back. If the borrower has not paid this part, the lender cannot force the borrower to pay.

3. Interest exceeding 36% is a “red line” that is expressly prohibited by law. The borrower sued the court and claimed that the interest exceeding 36% should be returned, and the court supported it.

On August 4, 2017, the Supreme People’s Court issued a notice on “Several Opinions on Further Strengthening Financial Trial Work”, in which Article 2, Item 2, clearly stated: “Financial Trial If a borrower in a loan contract requests that the interest, compound interest, penalty interest, liquidated damages and other charges simultaneously claimed by the lender be too high and significantly deviate from the actual losses, the borrower shall request a reduction of the portion exceeding 24% of the annual interest rate. Support to effectively reduce the financing costs of the real economy. ”

During this year’s two sessions, Gong Fuwen, a member of the National Committee of the Chinese People’s Political Consultative Conference and vice president of the Shaanxi Provincial Higher People’s Court, proposed to protect private lending. The interest rate ceiling is reduced from 24% to an annual interest rate between 12% and 15%, and the natural interest rate is cancelled. Narrow the gap between financial interest rates and private lending rates, reduce financing costs, and support the development of the real economy.

Gong Fuwen believes that the current profits of Chinese enterprises are generally 3%-15%, while the upper limit of private lending interest rates is 24%. Few corporate profits can reach such a high level, resulting in a large amount of funds flowing into the private lending field. Not in the real economy.

On May 28, 2020, in the "People's Republic of China and Civil Code" passed at the third session of the 13th National People's Congress, usury was clarified prohibit. Article 680 stipulates: Usury lending is prohibited, and the interest rate for borrowing must not violate relevant national regulations. If the loan contract does not stipulate the payment of interest, it will be deemed that there is no interest. If the loan contract does not clearly stipulate interest payment, and the parties are unable to reach a supplementary agreement, the interest will be determined based on factors such as local or party transaction methods, transaction habits, market interest rates, etc. Borrowing between natural persons will be deemed to have no interest.

On July 22, the Supreme People's Court and the National Development and Reform Commission jointly issued the "Opinions on Providing Judicial Services and Guarantees for Accelerating the Improvement of the Socialist Market Economic System in the New Era", which clearly stated that , revise and improve the judicial interpretation of private lending, significantly reduce the upper limit of judicial protection of private lending interest rates, and resolutely deny the effectiveness of high-interest on-lending and illegal lending.

At a press conference held that day, Zheng Xuelin, member of the Judicial Committee of the Supreme People's Court and president of the First Civil Tribunal, revealed that the Civil Code passed this year clearly stipulates that the state prohibits usury lending and the interest rates for borrowings must not violate the state's relevant regulations. Currently, the Supreme People's Court is revising the judicial interpretation of private lending in conjunction with the latest provisions of the Civil Code, and adjusting the upper limit of judicial protection for private lending interest rates is an important part of it.

National financial industry companies can sell: financial leasing, commercial factoring, fund management, asset management, investment management, investment guarantee, financing guarantee, insurance agency, small loan, Internet finance, financial services, finance Holding, loan agency company, non-performing asset disposal, asset liquidation, credit repair and other financial industry company shells, apply for private equity fund manager registration license, sell ready-made manager registration license