Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases

The "Regulations on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases" was adopted at the 1655th meeting of the Judicial Committee of the Supreme People's Court on June 23, 2015, and is hereby promulgated, effective from September 1, 2015.

Supreme People's Court

August 6, 2015

Fa Shi [2015] No. 18

Regulations on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases

(Adopted at the 1655th meeting of the Judicial Committee of the Supreme People's Court on June 23, 2015)

In order to correctly adjudicate private lending disputes, these regulations are formulated based on the provisions of the "General Principles of Civil Law of the People's Republic of China", "Property Law of the People's Republic of China", "Guarantee Law of the People's Republic of China", "Contract Law of the People's Republic of China", "Civil Procedure Law of the People's Republic of China", "Criminal Procedure Law of the People's Republic of China", and other relevant laws, combined with judicial practice.

　　Article 1 Private lending referred to in these regulations means the act of financing between natural persons, legal persons, and other organizations.

Disputes arising from loans issued by financial institutions and their branches approved by financial regulatory authorities are not applicable to these regulations.

　　Article 2 When the lender files a lawsuit in the people's court, they should provide evidence of the debt relationship, such as loan receipts, receipts, and IOUs, as well as other evidence that can prove the existence of the lending legal relationship.

If the debt certificates held by the parties, such as loan receipts, receipts, and IOUs, do not specify the creditor, the people's court shall accept the lawsuit filed by the party holding the debt certificate. If the defendant raises a fact-based defense against the plaintiff's creditor qualification, and the people's court finds that the plaintiff does not have creditor qualification after trial, it shall rule to dismiss the lawsuit.

　　Article 3 If the parties to the loan have not agreed on the place of contract performance or the agreement is unclear, and no supplementary agreement has been reached afterwards, and it cannot be determined according to the relevant terms of the contract or trading habits, the place of performance shall be the location of the party receiving the currency.

　　Article 4 If the guarantor provides joint liability guarantee for the borrower, and the lender only sues the borrower, the people's court may not add the guarantor as a co-defendant; if the lender only sues the guarantor, the people's court may add the borrower as a co-defendant.

If the guarantor provides a general guarantee for the borrower, and the lender only sues the guarantor, the people's court shall add the borrower as a co-defendant; if the lender only sues the borrower, the people's court may not add the guarantor as a co-defendant.

　　Article 5 After the people's court accepts the case, if it finds that the private lending behavior itself is suspected of illegal fundraising crimes, it shall rule to dismiss the lawsuit and transfer the clues and materials suspected of illegal fundraising crimes to the public security or procuratorial organs.

If the public security or procuratorial organs do not file a case, or withdraw the case after filing an investigation, or the procuratorial organs decide not to prosecute, or the people's court determines through a valid judgment that it does not constitute illegal fundraising crime, and the parties file a lawsuit with the people's court based on the same facts, the people's court shall accept it.

　　Article 6 After the people's court accepts the case, if it finds clues and materials suspected of illegal fundraising or other crimes that are related to but not the same facts as the private lending dispute case, the people's court shall continue to hear the private lending dispute case and transfer the clues and materials suspected of illegal fundraising or other crimes to the public security or procuratorial organs.

　　Article 7 The basic facts of private lending cases must be based on the results of criminal case trials, and if the criminal case has not been concluded, the people's court shall rule to suspend the litigation.

　　Article 8 If the borrower is suspected of a crime or a valid judgment finds them guilty, and the lender sues to request the guarantor to bear civil liability, the people's court shall accept it.

　　Article 9 If any of the following circumstances exist, it can be regarded as meeting the effectiveness requirements of the loan contract between natural persons as stipulated in Article 210 of the Contract Law:

(1) If paid in cash, from the time the borrower receives the loan;

(2) If paid by bank transfer, online electronic remittance, or through online loan platforms, from the time the funds arrive in the borrower's account;

(3) If delivered by bill, from the time the borrower legally obtains the rights to the bill;

(4) If the lender authorizes the borrower to control a specific fund account, from the time the borrower obtains actual control over that account;

(5) If the lender provides the loan in other ways agreed upon with the borrower and completes the actual performance.

　　Article 10 Except for loan contracts between natural persons, if the parties claim that the private lending contract takes effect from the time the contract is established, the people's court shall support it, unless the parties have other agreements or laws and administrative regulations provide otherwise.

　　Article 11 Loan contracts concluded between legal persons, other organizations, and between them for production and business needs, shall be supported by the people's court if the parties claim the private lending contract is valid, except in cases specified in Article 52 of the Contract Law and Article 14 of these regulations.

　　Article 12 If a legal person or other organization raises funds from employees through loans for production and operation within the unit, and there are no circumstances specified in Article 52 of the Contract Law and Article 14 of these regulations, the people's court shall support the parties' claim that the private lending contract is valid.

　　Article 13 If the borrowing behavior of the borrower or lender is suspected of a crime, or if a valid judgment has determined that it constitutes a crime, the private lending contract is not automatically invalid when the parties file a civil lawsuit. The people's court shall determine the validity of the private lending contract according to Article 52 of the Contract Law and Article 14 of these regulations.

If the guarantor claims not to bear civil liability on the grounds that the borrowing behavior of the borrower or lender is suspected of a crime or has been determined to constitute a crime by a valid judgment, the people's court shall determine the civil liability of the guarantor according to the effectiveness of the private lending contract and the guarantee contract, and the degree of fault of the parties.

　　Article 14 In the following circumstances, the people's court shall determine that the private lending contract is invalid:

(1) Obtaining credit funds from financial institutions and then lending them to borrowers at high interest rates, and the borrower knew or should have known this in advance;

(2) Lending funds obtained from borrowing from other enterprises or raising funds from employees of the unit to the borrower for profit, and the borrower knew or should have known this in advance;

(3) The lender knew or should have known that the borrower was using the loan for illegal activities but still provided the loan;

(4) Violating social public order and good customs;

(5) Other violations of laws and administrative regulations with strong mandatory provisions.

　　Article 15 If the plaintiff initiates a private lending lawsuit based on debt certificates such as IOUs, receipts, or promissory notes, and the defendant raises defenses or counterclaims based on the underlying legal relationship and provides evidence proving that the debt dispute is not caused by private lending behavior, the people's court shall adjudicate according to the established facts of the case and the underlying legal relationship.

Agreements on debts reached by the parties through mediation, reconciliation, or liquidation are not subject to the provisions of the preceding paragraph.

　　Article 16 If the plaintiff initiates a private lending lawsuit solely based on debt certificates such as IOUs, receipts, or promissory notes, and the defendant defends that the loan has been repaid, the defendant shall provide evidence to support their claim. After the defendant provides corresponding evidence to support their claim, the plaintiff still bears the burden of proof regarding the establishment of the lending relationship.

If the defendant defends that the lending behavior has not actually occurred and can provide reasonable explanations, the people's court shall comprehensively judge and verify whether the lending facts have occurred based on the amount of the loan, payment delivery, the economic capacity of the parties, local or inter-party transaction methods, transaction habits, changes in the parties' property, and witness testimonies.

　　Article 17 If the plaintiff initiates a private lending lawsuit solely based on transfer vouchers from financial institutions, and the defendant defends that the transfer is for repaying previous loans or other debts between the parties, the defendant shall provide evidence to support their claim. After the defendant provides corresponding evidence to support their claim, the plaintiff still bears the burden of proof regarding the establishment of the lending relationship.

　　Article 18 According to the provisions of the second paragraph of Article 174 of the Interpretation on the Application of the Civil Procedure Law of the People's Republic of China, if the plaintiff who bears the burden of proof refuses to appear in court without justifiable reasons, and after reviewing the existing evidence, the main facts of the case such as lending behavior, loan amount, and payment method cannot be confirmed, the people's court shall not recognize the facts claimed by the plaintiff.

　　Article 19 When the people's court hears private lending dispute cases and finds the following circumstances, it shall strictly examine the reasons, time, place, source of funds, payment methods, flow of funds, and the relationship and economic status of both parties to comprehensively judge whether it constitutes a false civil lawsuit:

(1) The lender obviously lacks the ability to lend;

(2) The facts and reasons on which the lender bases the lawsuit are obviously unreasonable;

(3) The lender cannot submit debt certificates or the submitted debt certificates may be forged;

(4) Both parties have participated in private lending lawsuits multiple times within a certain period;

(5) One party or both parties refuse to appear in court without justifiable reasons, and the agent's statements about the lending facts are unclear or contradictory;

(6) There is no dispute between the parties regarding the occurrence of lending facts, or the statements and defenses are obviously unreasonable;

(7) The borrower's spouse or partner, or other creditors of the case, raise objections with factual basis;

(8) The parties have engaged in low-price transfers of property in other disputes;

(9) The parties improperly waive their rights;

(10) Other circumstances that may indicate a false private lending lawsuit.

　　Article 20 If it is determined that it constitutes a false private lending lawsuit, and the plaintiff applies to withdraw the lawsuit, the people's court shall not permit it, and shall rule to dismiss its request according to the provisions of Article 112 of the Civil Procedure Law.

If participants in the lawsuit or others maliciously create or participate in false lawsuits, the people's court shall impose fines or detention in accordance with Articles 111, 112, and 113 of the Civil Procedure Law; if a crime is constituted, it shall be transferred to the competent judicial authority for criminal responsibility.

If a unit maliciously creates or participates in false lawsuits, the people's court shall impose fines on the unit and may impose fines or detention on its main responsible person or directly responsible personnel; if a crime is constituted, it shall be transferred to the competent judicial authority for criminal responsibility.

　　Article 21 If someone signs or seals on debt certificates such as IOUs, receipts, or promissory notes, or on loan contracts without indicating their guarantor status or assuming guarantee responsibility, or if other facts cannot imply their status as a guarantor, the people's court shall not support the lender's request for them to assume guarantee responsibility.

　　Article 22 If both parties to the loan form a lending relationship through an online loan platform, and the provider of the online loan platform only provides intermediary services, the parties' request for it to assume guarantee responsibility shall not be supported by the people's court.

If the provider of the online loan platform explicitly states through a webpage, advertisement, or other media, or has other evidence proving that it provides guarantees for the loan, the people's court shall support the lender's request for the provider of the online loan platform to assume guarantee responsibility.

　　Article 23 If the legal representative or person in charge of an enterprise signs a private lending contract with the lender in the name of the enterprise, and the lender, the enterprise, or its shareholders can prove that the borrowed funds are used for the personal use of the legal representative or person in charge of the enterprise, the lender's request to list the legal representative or person in charge of the enterprise as a co-defendant or third party shall be permitted by the people's court.

If the legal representative or person in charge of an enterprise signs a private lending contract with the lender in their personal name, and the borrowed funds are used for the production and operation of the enterprise, the lender's request for the enterprise and the individual to bear joint responsibility shall be supported by the people's court.

　　Article 24 If the parties use the signing of a sales contract as a guarantee for a private loan contract, and the borrower cannot repay the loan after it is due, if the lender requests the performance of the sales contract, the people's court shall handle it according to the legal relationship of private lending and clarify the change of the litigation request to the parties. If the parties refuse to change, the people's court shall rule to dismiss the lawsuit.

After the judgment made according to the legal relationship of private lending takes effect, if the borrower does not perform the monetary debt determined by the effective judgment, the lender may apply for the auction of the subject matter of the sales contract to repay the debt. Regarding the difference between the auction proceeds and the principal and interest of the loan to be repaid, either the borrower or the lender has the right to claim a refund or compensation.

　　Article 25 If the parties to the loan do not agree on interest, and the lender claims payment of interest during the loan period, the people's court will not support it.

If the interest agreement between natural persons is unclear, and the lender claims payment of interest, the people's court will not support it. Except for loans between natural persons, if the interest agreement between the parties is unclear, and the lender claims interest, the people's court shall determine the interest based on the content of the private lending contract, as well as local or party transaction methods, trading habits, market interest rates, and other factors.

　　Article 26 If the interest rate agreed upon by the parties does not exceed an annual interest rate of 24%, the people's court shall support the lender's request for the borrower to pay interest at the agreed rate.

If the interest rate agreed upon by the parties exceeds an annual interest rate of 36%, the interest agreed upon for the excess part is invalid. If the borrower requests the lender to return the interest paid that exceeds the annual interest rate of 36%, the people's court shall support it.

　　Article 27 The loan amount stated in the loan receipt, receipt, IOU, and other debt certificates is generally recognized as the principal. If interest is deducted in advance from the principal, the people's court shall recognize the actual loan amount as the principal.

　　Article 28 If the parties to the loan include the interest in the principal of the subsequent loan after settling the principal and interest of the previous loan and reissue the debt certificate, if the previous interest rate did not exceed an annual interest rate of 24%, the amount stated in the reissued debt certificate can be recognized as the principal of the subsequent loan; the interest on the excess part cannot be included in the principal of the subsequent loan. If the agreed interest rate exceeds an annual interest rate of 24%, and the parties claim that the interest on the excess part cannot be included in the principal of the subsequent loan, the people's court shall support it.

According to the previous paragraph, the total amount of principal and interest that the borrower should pay after the loan period expires cannot exceed the sum of the initial loan principal and the interest calculated at an annual interest rate of 24% for the entire loan period based on the initial loan principal. If the lender requests the borrower to pay the excess part, the people's court will not support it.

　　Article 29 If the parties to the loan have agreed on overdue interest rates, they shall follow their agreement, but it shall not exceed an annual interest rate of 24%.

If there is no agreement on overdue interest rates or the agreement is unclear, the people's court may handle it differently based on different situations:

(1) If neither the interest rate during the loan period nor the overdue interest rate is agreed upon, and the lender claims that the borrower should pay interest at an annual interest rate of 6% from the date of overdue repayment, the people's court shall support it;

(2) If the interest rate during the loan period is agreed upon but the overdue interest rate is not, and the lender claims that the borrower should pay interest at the interest rate during the loan period from the date of overdue repayment, the people's court shall support it.

　　Article 30 If the lender and the borrower have agreed on both overdue interest rates and penalties or other fees, the lender may choose to claim overdue interest, penalties, or other fees, or may claim them together, but the total amount exceeding an annual interest rate of 24% will not be supported by the people's court.

　　Article 31 If there is no agreement on interest but the borrower voluntarily pays, or pays interest or penalties exceeding the agreed rate voluntarily, and does not harm the interests of the state, collective, or third parties, the people's court will not support the borrower's claim for the lender to return the payment, except for the borrower's request for the return of interest exceeding the annual interest rate of 36%.

　　Article 32 The borrower may repay the loan in advance, except as otherwise agreed by the parties.

If the borrower repays the loan in advance and claims interest calculated based on the actual loan period, the people's court shall support it.

　　Article 33 After the promulgation and implementation of these regulations, the "Several Opinions on People's Courts Handling Loan Cases" issued by the Supreme People's Court on August 13, 1991, shall be simultaneously abolished; any judicial interpretations issued by the Supreme People's Court that are inconsistent with these regulations shall no longer apply.