THE SUPREME PEOPLE’S PROCURACY OF VIETNAM PROVIDES GUIDANCE ON THE USURY IN CIVIL TRANSACTIONS

Pursuant to the 2020 Official Dispatch No. 4688/VKSTC-V14 issued by the Supreme People’s Procuracy of Vietnam dated October 9, 2020 guiding and solving problems arising in the process of applying Article 201 of the 2015 Criminal Code (as amended and supplemented in 2017). In which:

1. For illegal profits to determine criminal liability

According to Clause 1, Article  468 of the 2015 Civil Code: “The rate of interest for a loan agreed by the parties may not exceed 20% per year of the loan amount… If the agreed interest exceeds the maximum interest prescribed in this Clause, the agreed interest shall become invalid”. Accordingly, such excess interest shall become invalid and shall be deemed to as the illegal profits in determining criminal liability.

2. For the disposal of the illegal principal and profits earned by the offender from the usury

2.1. The disposal of the principal and interest at an interest rate of 20% per year

(i) The principal amount is the means used for commission of the crime, so it must be confiscated and remitted to the state fund as stipulated in point a, Clause 1, Article 47 of the 2015 Criminal Code (as amended and supplemented in 2017). If the borrower has not yet paid the principal, he/she shall be obligated to pay this amount the state budget.

(ii) For the interest with its interest rate of 20% per year, it shall be deemed to as amount illegally earned from the crime and must be confiscated and remitted to the state budget.

2.2. The disposal of the illegal profits (the amount of interest corresponding to the interest rate of more than 20% per year)

The amount of interest corresponding to the interest rate of more than 20% per year is the amount the offender illegally earned from the borrower and must be repaid to the borrower. In which:

(i) In case the borrower has paid the amount of interest corresponding to the interest rate of more than 20% per year to the lender, such amount shall be repaid to the borrower;

(ii) In case the borrower has not paid the amount of interest corresponding to the interest rate of more than 20% per year to the lender, that means there is no illegal profits have arisen, so the lending acts of the lender at this time does not constitute a criminal offense as specified in Article 201 of the Criminal Code (as amended and supplemented in 2017).

2.3. In case the lender who offers loans with the different interest rates in each stage, including a loan at an interest that is at least five times higher than the maximum interest rate specified in the Criminal Code and earns an illegal profit as specified in Article 201 of the Criminal Code (Stage 1): If the borrower fails to pay the interest of stage 1 but adds this interest to the principal in order to continue to borrow at a statutory interest (Stage 2): Until being handled by the competent authority, the borrower has not yet paid the principal and interest of stage 1, but only paid interest on the total principal and interest of stage 2.

The act of entering into a contract for adding the interest to the principal in order to continue to borrow at a statutory interest (stage 2) is the fact that the two parties have mutually agreed with an usury amount through this loan agreement in order to conceal an illegal profit.

In this case, it is necessary to consider the criminal prosecution for the offender on his/her usury act at an interest that is at least five times higher than the maximum interest rate specified in the Criminal Code (at stage 1) if he/she acts in a way that fulfills every element of an offense as prescribed in Article 201 of the 2015 Criminal Code (as amended and supplemented in 2017).

Best regards,