Civil Code leads to change in loan dispute

Shanghai Financial Court has changed the original sentence in a loan contract dispute according to the Civil Code for the first time on Monday.

The borrowers, surnamed Tian and Zhou, got back 840,000 yuan (US$130,031) from state-controlled financial institution Zhongyuan Trust. 

The Civil Code of the People's Republic of China, which is called "an encyclopedia of social life" and has 1,260 articles covering all aspects of life, took effect on Friday.

Tian and Zhou borrowed 6 million yuan from the institution in 2017. They could return the money in eight years with an annual rate of 11.88 percent according to the contract. They also signed on a plan about how much money they should return each month.

A year later, they wanted to pay their debt ahead of schedule but were asked to return 7.4 million yuan, with the annual rate reaching 20.94 percent.

Although they returned the money, they thought this unreasonable so sued the company to refund 880,000 yuan.

A district court rejected this and the pair lodged an appeal to the financial court.

According to the new law, lenders should inform borrowers of the actual interest rate in a clear and accessible way. 

There was no actual interest rate in the plan so people without professional financial knowledge could not calculate the rate in a short time, which was different from the figure written in the contract, the financial court said.

The plaintiffs’ appeal was supported and the company told to return 840,000 yuan.