Wuhan Courts See Small Loan & Credit Guarantee Cases Surge 10-Fold

Wuhan has seen a ten-fold increase in credit guarantee cases involving small amounts. These firms make small loans and charge anywhere from 20% to 40% in monthly interest. The lenders typically lack access to capital as well and they live off the interest in order to fund the businesses. In one case involving a 2.5 million yuan loan to a shipbuilder, the court ruled that 4 times the benchmark interest rate is the legally acceptable ceiling.

In another case a tech firm borrowed 3 million at 15.12% annual interest. It repaid only 115,000 yuan. The small lender sued and also went after the credit guarantee firm, but the credit guarantee firm claimed the seal on the documents was fake. Upon examination, the court found the seal was indeed fake and would not allow the suit against the guarantor to proceed.

The Supreme Court recently ruled that interest of 24% and below on private loans is enforceable, while anything above 36% is unenforceable. Many small finance companies skirt the law and regulations when doing business, which results in many disputes when things go awry, as they are presently.

CN Hubei: 高息放贷虚假担保 武汉小额贷款案一年激增十倍