NA agrees on need for cap rate on civil loans

Update: August, 25/2015 - 09:19
A line of pawn shops on Duong Lang Street, Ha Noi. A controversial draft regulation in the amended Civil Code to allow lenders to seize property pledged as guarantees by borrowers raised fears that loan sharks might take advantage of the situation. — Photo

HA NOI (VNS) — National Assembly (NA) deputies yesterday largely agreed to a proposal to establish a cap rate on civil-loan agreements, but questioned how high the rate should be.

The meeting, by a NA sub group, was aimed at ironing out questions remaining in draft laws before they were brought up for approval at the NA assembly in less than two months.

Debates revolving around draft amendments to the Civil Code were the main subject.

Deputy Chief Judge of the Supreme People's Court, Tong Anh Hao, said that although Viet Nam allowed people to freely reach mutual agreements on civil loans, a cap rate was essential to prevent illegal usury (lending money for interest).

He suggested choosing an option given out by the NA Standing Committee that the cap rate "must not be higher than 200 per cent of the basic interest rate".

The basic interest rate, adjusted by the State Bank of Viet Nam (SBV), is used as a tool by the Government to implement its monetary policy.

It is often a benchmark for other credit institutions to decide their business rates.

"If we adopt a cap rate based on the basic interest rate, it will be more flexible and easier for residents should a currency fluctuation happen," said Hao.

Hao said another option proposed by the NA Standing Committee that the rate ceiling be no more than 20 per cent per year could be troublesome.

"If the cap rate is stated clearly in the law, we would be left with no choice but to amend the Civil Code again and again to adapt to a constantly changing financial market", he added.

SBV Deputy Governor Nguyen Dong Tien had yet another idea. He argued the basic interest rate or any other rates issued by the SBV mostly unfamiliar to non-business people. He said it might be difficult for them to calculate their loan rates.

Tien also worried that the cap rate might be unstable as the basic interest rate was subjected to changes at different periods.

"Therefore, I think we should not follow any rates, but fix a cap rate at less than 20 per cent per year," he said.

Mortgage loans

Tien also supported another controversial draft regulation to allow lenders to seize property pledged as guarantees by borrowers, regardless of whether the lenders were credit institutions, such as banks, or ordinary citizens.

Although lenders were protected by law and had the rights to sue borrowers should they fail to pay back the loans or abide to the terms of their mutual agreement, court procedures were difficult and time-consuming, said Tien.

"This seizure measure will help banks lend to people, creating more opportunities for banking and economic activities," he said.

However, many participants were concerned that property seizure might create an unwanted legal framework for loan sharks, especially the mafia, take advantage of the situation.

No refusal

Another draft amendment to the Civil Code that bans courts from refusing to handle certain civil cases uncovered by current laws was hailed as "fundamental progress" by Hao.

NA Chairman Nguyen Sinh Hung seconded that, saying that the courts could not chase people away if they failed to solve their conflicts on their own.

"It is the best if the two sides can resolve their problems themselves," said Hung. "But when they can't and thus come to the courts for help, it is unacceptable for the courts to refuse them just because there is yet a relevant law to cover".

Final judgments for those special cases were to be given out by judges based on local custom, which in its turn raised concerns among the NA deputies about the consistency of the verdicts when each locality had a different custom.

NA's prompt responses

The afternoon session continued with the deputies discussing the draft Law on the Supervisory Activities of the National Assembly (NA) and People's Councils, urging for prompt response from the lawmaking bodies towards social issues.

Huynh Thanh Lap from HCM City said the conclusions reached regarding the supervisory work of the NA and People's Councils should be publicised to enhance its effectiveness.

"If the conclusions are not publicised, the issues raised in the society cannot be solved in a timely fashion," he said.

He cited the example of the overlapping fees in the poultry industry, in which a chicken was said to bear up to 14 kinds of charges and fees, thus adding to the cost of production and circulation in Viet Nam.

It was a hot topic in the month-long 13th NA's nine sessions, which ended in late June.

"The HCM City's NA delegation discovered this issue when conducting a supervisory trip in the localities. We had already sent the conclusion to the NA by late April but there was no response until the last NA meeting," he said.

Agreed with Lap, Nguyen Sy Cuong from the central province of Ninh Thuan said all issues were raised and solutions were sought at NA and NA Standing Committee's meetings, which slowed down the process to reach a solution.

"It should be regulated that all issues must be responded to within 30 days. It takes too much time to wait for NA meetings to solve the problems," he said.

The deputies asked for practical supervision, rather than just relying on reports.

They also said that each supervision must have separate resolution with implementation made compulsory for individuals and organisations.

The deputies will continue discussions on revisions to the draft Viet Nam Civil Procedure Code and the draft Criminal Code today. — VNS