Annual Interest Rates in Excess of 36% Criminalised by Chinese Supreme Court

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China’s top judicial and police authorities have made lending at annualised rates above 36% a criminal offence, amidst a crackdown on underground banking.

A ruling issued on Monday mandates that persons or entities lending money to over 10 borrowers within a two year period for profit whose annualised interest rate exceeds 36% could be charged with the criminal offence of conducting an “illegal business operation.”

Under the ruling all fees that are paid by borrowers to lenders, such as agency fees, consulting fees, management fees and default penalties, are to be included as part of interest payments.

The ruling was jointly issued by China’s Supreme Court, the Supreme People’s Procuratorate, the Ministry of Public Security and the Ministry of Justice, and is dated to 23 July, yet was only publicly issued on 21 October.

Penalties for the new offence include up to five years imprisonment for loans of 2 million yuan or profits of over 800,000 yuan, and prison sentences of over five years for loans of over 10 million yuan, loans that generate profits of over 4 million yuan, or loans to over 250 borrowers.

Organised crime is a special target of the ruling, which reduces the above thresholds for punishment by half for members of mafia-style gangs.

The ruling also outlines punishments for loans that result in suicide, death or insanity on the part of the borrower or his or her family members.

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