Original title: Quadruple LPR makes a comeback, the court ruled that the interest rate of Bank of China and Home Credit does not exceed 15.4%
Source: Consumer Finance Channel
Author:Gedong
The penetration of new regulations on private lending interest rates has not stopped, causing consumer finance companies to have difficulties in handling financial borrowing disputes, and even some institutions have turned from plaintiffs to defendants.
June 25, The Monetary Policy Committee of the People’s Bank of China will hold its regular meeting in the second quarter of 2021 (the 93rd in total) in Beijing.Continue to unleash the potential of interest rate reforms in the loan market to promote further reductions in actual loan interest rates. From the perspective of deposits and loans, the trend of lower interest rates is becoming more and more obvious.
On the one hand, the market-oriented reform of loan interest rates is still continuing, on the other hand, market players such as consumer finance companies have felt the pricing pressure brought about by the lowering of private lending interest rates. Although the scope of application of the new regulations on private lending interest rates has been limited many times, with the downward trend of interest rates in the loan market, the penetration of the new regulations on private lending to consumer finance suppliers is far from stopping.
‘Consumer Finance Channel’ learned from legal practitioners that there are currently many obstacles to the disposal of claims by some consumer finance companies, especially in cases two or three years ago. Most of the actual loans have exceeded 24% per annum. If you want to win the lawsuit, you must take the initiative to give up The part exceeding 24%. In addition, they may also face the risk of the borrower’s initiative to appeal, and they require the court to decide to pay interest at 15.4% (four times the current one-year LPR).
In the judicial collection of consumer finance companies, consumer finance companies argued that the cases involved are financial borrowing disputes and should not be applicable to the “Supreme People’s Court’s Provisions on Several Issues Concerning the Application of Laws to the Trial of Private Lending Cases.” When the disposal method is different, there will also be disputes over financial loan contracts with reference to the standards of private lending.
Whether from a market perspective or a judicial perspective, consumer finance companies are facing the situation of reshaping pricing rules. At present, most licensed consumer institutions have lowered their annualized product interest rate ceiling to less than 24%, and it is not clear how much room there is for price reductions in the future.
15.4% strong penetration
Since the introduction of the new regulations on private lending, banks and consumer finance companies have been unable to escape the continuous penetration of the financial sector.along withPing An BankAfter winning the case, the Supreme Law clarified that small loan companies do not apply the new regulations on private lending, and financial borrowing disputes rarely apply the quadruple LPR.
Nowadays, the quadruple LPR is making a comeback in financial borrowing disputes, adding a lot of trouble to financial institutions.‘Consumer Finance Channel’ inquired about the judgment and found that inPeople’s Court of Jianxi District, Luoyang City, Henan ProvinceIn the case of the Bank of China Consumer Finance Loan Contract Dispute heard on May 28, 2021, the interest and late fee rate standards claimed by Bank of China Consumer Finance were rejected.
BOC Consumer Finance requires borrowersRepayment of the loan principal and interest, late fees, but the court finally decidedLate payment fees are essentially losses arising from breach of contract.The sum of interest and late fees should not exceed the actual loss. Interest and late fees should be calculated based on four times the quoted interest rate on the one-year loan market, from the overdue date to the date when the loan is actually paid off.
Recently, the People’s Court of Qiaoxi District, Shijiazhuang City, Hebei Province also referred to the quadruple LPR enforcement when hearing an institution’s financial loan dispute. The borrower applied for a loan of 70,000 yuan from an institution in May 2018, and the loan was later overdue.
An institution in the loanThe monthly loan interest rate is 2%, the service rate is 0.833%, and the customer protection service package fee is 91 yuan, and the flexible repayment service package fee is 15 yuan. The total of the four fees is equivalent to the annual interest rate of 35.82%.
The court held that the contractual loan interest rates, service fees, etc. total equivalent to an annual interest rate of 35.82%, which has far exceeded the loan market quoted interest rate announced by the National Interbank Funding Center, and also significantly exceeded the loan interest rate normally agreed by ordinary financial institutions.Expenses other than the agreed interest rate exceeding 2% shall not be supported in accordance with the law.
At the same time, the court supported the borrower to pay interest in accordance with the upper limit of the private lending interest rate.For the interest portion from August 20, 2020 to the date when the loan is returned, the newly regulated interest rate protection standard shall be used. This means that the borrower can pay the interest after the new regulations take effect at 15.4%.
The court explained that in accordance with the principles and spirit of financial services to the real economy and reduction of financing costs, financial lending and private lending should be treated differently, and different rules and interest rate standards should be applied.Although the existing laws and judicial interpretations do not clearly stipulate the upper limit of the interest rate of financial borrowing, the interest rate of financial borrowing is lower than that of private borrowing.Therefore, generally speaking, the interest rate of financial lending should not be higher than the interest rate of private lending.
Prior to this, the new regulations on private lending have penetrated into consumer finance company lawsuits. The People’s Court of Pidu District of Chengdu City and the People’s Court of Yuelu District of Changsha City required interest, penalty interest, compound interest, and liquidated damages when they heard the disputes over the financial loan contract between Sichuan Jincheng Consumer Finance and Changyin 58 Consumer Finance. To not exceed four times the LPR of the same period.
In August last year, the Supreme Law officially issued the “Supreme People’s Court’s Amendment<关于审理民间借贷案件适用法律若干问题的规定>“Decision”, clarified that four times the one-year loan market quote rate (LPR) is the standard to determine the upper limit of judicial protection for private lending rates. The one-year LPR has been stable at 3.85% for a long time, so the interest rate cap standard is still stable at 15.4%, which is a significant reduction in the interest rate of consumer finance companies.
Commercial banks, licensed consumer finance companies, small loan companies, and lending institutions are all worried that the 15.4% standard will apply to them.untilIn its reply on December 29, 2020 on the scope of the new private lending judicial interpretation, the Supreme Law clarified that seven types of local financial organizations, including microfinance companies, do not apply the new private lending judicial interpretation. Financial institutions only breathed a sigh of relief, but in reality The penetration of new regulations on private lending in judicial trials continues.
Interest rate cut
The penetration of new private lending interest rate regulations and the downward trend of loan interest rates continue to affect the consumer finance market, especially the impact on pricing, profit, collection, and customer groups.Zhang Tao, deputy general manager of the Bank of China Consumer Finance, previously publicly disclosed that although the new regulations on private lending clearly mention that financial institutions are not applicable, But it will still be gradually transmitted to the consumer finance industry through judicial precedents and public opinion guidance.
At the pricing level, the interest rate ceiling of consumer finance companies will also be lowered. Since the ceiling on private lending interest rates has been significantly lowered, the ceiling on interest rates for most consumer finance companies’ cash loan products has dropped to 24%, which was mostly maintained at 36%. If the downward trend in interest rates continues to move forward, it is likely to trigger a second interest rate adjustment in licensed consumer finance. After all, licensed institutions must play an exemplary role.
According to industry insiders, the decline in interest rates of consumer finance companies is seemingly market-oriented behavior. In the future, with the reduction of deposit interest rates, the cost of inter-bank funds will decrease, and the pricing ceiling may be further reduced.Therefore, consumer financial institutions should quickly adapt to the pace of downward interest rates and adjust their product operation strategies in a timely manner, so as to turn passiveness into activeness.
Consumer finance companies’ concerns about the decline in interest rates are not nonsense. First of all, the decline in interest rates will affect the disposal of non-performing assets, and lawsuits will also be blocked.Consumer financial stock assetsThe medium interest rate exceeds 4 times the LPR in the trillions. If the private lending rate standard is adopted for financial institutions, the claims involving stock assets may face invalidation.
Second, the profitability of licensed consumer gold will also be affected. At present, the main profit model of the consumer finance companies that have opened is interest income, which uses pricing to cover risks to gain more profits.In the pricing structure of the product, it generally includes capital cost, system technology cost,Bad debt costs, customer acquisition costs, data risk control costs, and labor costs are not easy to drop, and lower pricing means lower profit levels.
Finally, the pricing ceiling is compressed, high interest rates cover high risks are not feasible, and sustained and reliable interest income is the kingly way. In the downward trend of private lending interest rates and the pricing of the entire consumer financial market, choosing to penetrate into high-quality customer groups covered by low interest rates has become a future trend. At present, leading consumer finance companies have begun to deploy products with high-quality customer groups.
From the perspective of regulatory policy orientation, the marketization of financial lending interest rates is the future direction. No matter how the rules of interest rate marketization change, it is impossible to justify higher interest rates than private lending.
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Editor in charge: Chen Jiahui
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