The first enactment of Thailand’s Interest Overcharging Law, which came into effect in 1932, prohibited any person from loaning money to another person and subsequently charging them interest at a rate that exceeded the rate prescribed by the law.
Eighty-five years later, Thailand finally promulgated a new law focused on this topic called “The Act Prohibiting the Collection of Interest at an Excessive Rate B.E. 2560 (2017)” on January 15, 2017. The new law was made effective the following day, repealing the 1932 version.
A key element of this new law is the enhanced stringent penalties imposed on any person who loans money to an individual and then levies interest on repayments at a rate exceeding that permitted by law. This action will result in the offender facing criminal sanctions amounting to imprisonment for no more than two years, a fine of not more than THB 200,000, or both. These penalties are significantly stricter than those meted out under the previous Act, which only imposed up to a one-year imprisonment term, a fine of not more than THB 1,000, or both.
The enactment of this new legislation is aimed at preventing and suppressing loan shark debts and usury loan problems, whereby a lender charges the borrower unreasonably high interest rates. This mostly occurs between individual lenders and individual borrowers (i.e., an informal debt), which can later cause social and criminal problems within society.
Apart from prohibiting the practice of overcharging interest, the legislation also deems that any act which has the intention of concealing such borrowing/loan activities, in any of the following ways, should also be subject to legal sanctions:
- Interest overcharging;
- Including any false statements concerning the loan amount, or other matters relating to evidence pertaining to loan evidence, or other negotiable instruments, in order to conceal interest overcharging actions; or
- The lender prescribes to take or accept benefits other than the interest (whether in the form of money, property, or by any other means), which show that he/she will gain excessive benefits that are more than those typically accrued by the normal practice of a lender and an individual that borrows money.
Nonetheless, it should be observed that the interest rates permitted by Thai laws can differ. For example, loans for consumption under the Civil and Commercial Code must not exceed 15 percent per year, while loans with commercial banks could be higher, as permitted by specific legislation, such as the Interest Rates for Loans from Financial Institutions Act B.E. 2523 (1980) and the BOT’s notification subject on interest, fees, surcharge for personal loan.