Lender of entrusted loan

From: The Tree of Law

20 15 The Supreme Court issued the Provisions on Several Issues Concerning the Trial of Private Lending Cases, which clarified the boundaries and standards of judicial protection of private lending contracts. The judicial interpretation (202 1 Revision) stipulates that if a lender who fails to obtain the loan qualification according to law provides loans to unspecified social objects for profit, the private lending contract is invalid. The Summary of the Ninth National People's Congress of the Supreme Court defines a quantitative standard and puts forward the concept of professional lender: if the same lender engages in paid private lending for many times within a certain period of time, it can generally be recognized as a professional lender, and the effectiveness of professional lenders should be denied according to law.

The above-mentioned provisions in the judicial interpretation and minutes of the Supreme Court focus on determining the effectiveness of private lending contracts by the number of times that the party providing funds lends funds. The loan contract may be deemed invalid because of many times, and the agreed interest rate cannot be protected by judicial decisions. Therefore, in the trial of private loan contract cases, the number of times the lender lends money and whether the lender is a professional lender are often the focus of the parties to prove that the loan contract is invalid. However, in some cases, the parties accumulate the entrusted loans of the lenders into private lending contracts, which is intended to prove that the lenders have lent funds many times. This method of proof is wrong.

Entrusted loan refers to the loan provided by the government departments, enterprises, institutions, individuals and other principals, and distributed, supervised and used by the lender (i.e. the trustee) according to the loan object, purpose, amount, term and interest rate determined by the principal. In the entrusted loan relationship, the lender (trustee) is a financial institution. Entrusted loans are financial loans, not private loans. According to the loan contract in the judicial interpretation and minutes of the Supreme Court, the lender is a civil subject without loan qualification, while the lender in the entrusted loan relationship is a financial institution with loan qualification. Entrusted loans are financial loans and should not be included in the number of private loans, and entrusted lenders should not be recognized as professional lenders.

In order to meet the demand of private hot money lending and curb usury, as early as 1996, the People's Bank of China issued the General Rules for Loans, which stipulated the entrusted loan business of banks, incorporated a large number of private hot money into the national financial system, and opened up channels for financial institutions to borrow and use private funds. According to Article 7 of the General Rules for Loans, loans of financial institutions are divided into three types: self-operated loans, entrusted loans and specific loans. Since then, the clear way of entrusted loans has enabled the interests of both providers and users of private funds to be recognized and protected by the national financial system, and at the same time, it has also avoided the risk that a large number of private hot money will impact the financial order. In the entrusted loan relationship, although the loans after financial supervision are still provided by civil subjects who are not qualified for loans, the self-operated funds of non-financial institutions, after the entrusted loan relationship is established, the financial institutions are the lenders as trustees, and the loan interest rate and the use of funds are supervised by financial institutions. The nature of capital lending behavior has undergone a qualitative change. Entrusted loans belong to the financial business of financial institutions and should not be included in the adjustment scope of judicial interpretation of private lending.