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Cash Loan Interest Debunking: The Annual Interest Rate is 36% and "Two Lines and Three Zones"

Time: 2017-12-01         Source: Rong 360 original         Author: light

The rectification of cash loans by related departments will come as expected, and many non-compliant platforms have also started downline rectification. An important reason for non-compliance is that the actual interest rate of products is too high. In the end, how high interest rates are legally compliant? What?

As early as in the financial marketization reform in November 2013, the Supreme People's Court delineated the two red lines of 24% and 36%. The two red lines divided interest rates into three “regions”:

Judicial protection area

The interest rate agreed between the lender and the borrower does not exceed 24% of the annual interest rate. If the lender requests the borrower to pay interest at the agreed interest rate, the people's court will support it;

Invalid area

The interest rate agreed between the lender and the borrower exceeds the annual interest rate of 36%, and the excess interest agreement is invalid. If the borrower requests the lender to return the interest paid over 36% of the annual interest rate, the people's court shall support it;

Natural debt area

For the portion between 24% and 36%, if the lender petitioned the people's court for the protection of interest in this area pursuant to the contract, the people’s court would not be protected by the law; if the borrower repays this part of the interest, it will go back to the court. The court will also reject such a lawsuit if the court is sued for recovery;

Vernacular Summary

Interest within 24% is protected by law and must be returned; more than 36% of interest cannot be returned, but it can also be recovered through legal channels; interest between 24% and 36%, if not returned, The court will not accept the lender's request for money recovery. If it has already returned, the court will not accept the borrower's request for recovery;

The origin of 24% standard

For private lending, the government has long-term controls. After the founding of New China, the earliest approval of the Supreme Law for private lending was to the northeastern Liaoning Province in the early 1950s. The practice of quadrupling the interest rate was established. Since then, the quadruple-rate interest rate has been used in trial practice. In 1991, judicial interpretation was established. It continues to follow this practice.

In the recent 20 years, the benchmark lending rate promulgated by the Central Bank has changed significantly. The minimum is 2.0%, the highest is 12.0%, and the middle is 5%-8%. 6%, and with reference to the traditional four times the meaning, to get 24% of such a figure.

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