Ask the law: Bank demands excessive interest in civil lawsuit
Concerned individual seeks guidance after facing a civil lawsuit from a bank
Question:
A questioner asks: 4 years ago, I took a loan from the bank and used to pay the installments regularly. After a year, I stopped paying the installments because I was fired from my job. Currently, the bank has filed a civil lawsuit against me to claim the value of the loan with interest.
It turned out to me that the value of the amount requested by the bank is greater than the value of the loan and greater than the interest rate agreed upon in the contract. My question: Does the bank have the right to demand an interest rate greater than the rate agreed upon in the loan contract? Are loans interests calculated once the case is filed in court? Please advise.
Answer:
To answer such question, I would advise the questioner that:
The bank doesn’t have the right to demand an interest rate greater than the rate agreed upon in the loan contract.
3 kinds of interests are applied:
(a) the agreed-upon interest rate (as per contract) will be calculated during the use of the account until the account is closed, then
(b) the interest at its simple rate (as decided by the court) will be calculated yearly from the date the account is closed until the suitcase is filed, then
(c) The default interest that will be calculated (as decided by the court) from the date the case is filed until the full payment.
If the contract does not include an agreement to specify the interest rate, it must be calculated at the rate prevailing in the market at the time of dealing, provided that it does not exceed 9 per cent in accordance with the provisions of Articles 72 of the Commercial Transaction Law, which consecutively states: “The creditor shall have the right to charge interest on the commercial loan as per the rate stated in the contract. If the interest rate is not determined in the contract, it shall be calculated as per the interest rate prevailing in the market at the time of transaction.
However, in this case, the rate shall not exceed (9 per cent) per annum until full payment.
The court may reduce the interests or judge no interest according to clause 2 of Article 87 of the law (“If the creditor, while claiming his right, causes in bad faith the prolongation of the litigation, the court may reduce the interests or judge no interest at all for the period in which the litigation was unduly prolonged.”)
Moreover, the creditor as per Article 88 of the law, shall neither claim compound interest – the interest on the accumulated interests – nor claim such interests as supplementary compensation.
As a piece of advice, you have to request to transfer the matter to an expert to re-calculate the interest rate with the whole loan amount the bank should claim.
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