Interest Rate Cap in Thailand: What Thai Law Permits

Interest also matters when a creditor enforces registered security over business assets, which the Business Collateral Act in Thailand governs.

What is the interest rate cap in Thailand?

The interest rate cap in Thailand is 15% a year on money lent between private parties. Section 654 of the CCC prohibits agreed interest above that rate, and the Act of B.E. 2560 makes charging it an offence punishable by up to two years’ imprisonment, a fine of up to THB 200,000, or both.

How does CCC section 654 set the interest rate cap in Thailand?

Section 654 of the CCC prohibits agreed interest above 15% a year. According to the Thai-language text consulted, a rate written into the contract above that figure is reduced to 15%. The cap sits in the chapter on loans for consumption, sections 650 to 656, which also fixes the form and compounding rules for a money loan.

Section 653 adds an evidence rule. A loan of THB 2,000 or more cannot be enforced in court unless written evidence signed by the borrower exists. Once a written loan exists, proof of repayment needs a receipt signed by the lender, the return of the loan document, or the cancellation of that document. One Thai legal publisher also states that an electronic signature meeting sections 8 and 9 of the Electronic Transactions Act can satisfy the writing requirement.

Section 655 restricts compounding. A lender may not charge interest on overdue interest. However, if overdue interest has run for at least one year, the parties may agree in writing to add it to the principal. Trade custom of compounding interest in a current account falls outside that first paragraph.

What does the Excessive Interest Act B.E. 2560 prohibit?

The Act, published in the Royal Gazette on 15 January 2017 (Volume 134, Part 5 Ka), makes three kinds of conduct an offence when a person lends money or disguises a loan. Section 4 sets the penalty at imprisonment of up to two years, a fine of up to THB 200,000, or both.

1. Charging interest above the rate the law allows.
2. Writing false amounts or other false details in loan documents or negotiable instruments, in order to hide excess interest.
3. Demanding or taking a benefit other than interest, in money, goods or any other form, that is clearly excessive given the terms of the loan.

The same penalties reach a person who acquires a claim, knowing that it arose from a section 4 offence, and then enforces it or seeks a benefit from it (section 5). The Act repealed the Act of B.E. 2475 (1932) under section 3, and the Minister of Justice enforces it under section 7. Under section 2, it took effect on the day after publication.

Which lenders sit outside the interest rate cap in Thailand?

Financial institutions fall under separate legislation. The Act on Interest on Loans of Financial Institutions B.E. 2523 (1980) and Ministry of Finance notifications fix which institutions it covers and the rates they may charge, as the Bank of Thailand’s legal page lists.

Other lenders and credit products also have their own statutes. A news explainer names pawnshops under the Pawnshop Act B.E. 2505, approved non-bank micro-lenders, and hire-purchase contracts under the Hire-Purchase Contract Control Act B.E. 2565 in this group. That explainer is marked as an advertorial and cites no section of the 2017 Act for these exemptions. Each category therefore needs confirmation against the statute that governs it.

What happens to interest above the cap?

Sources describe the civil result of charging above the cap in different ways. Section 654 itself reduces an agreed rate above 15% to 15%, according to the Thai-language text consulted, while commentary describes the interest term as void. Because the descriptions below differ, the outcome for a particular loan needs confirmation.

Which interest applies when the contract names no rate?

Section 7 of the CCC applies 3% a year where interest is owed and no rate is fixed by a juristic act or a clear statutory provision. Section 224 sets default interest on money debts at the section 7 rate plus 2 percentage points a year, which equals 5% at the 3% rate.

An amendment of B.E. 2564 (2021) replaced both rates, which stood at 7.5%, with effect from 11 April 2021, according to Supreme Court judgments summarised by a Thai legal publisher. The change does not affect interest accrued before that date. Sources describe the amending instrument differently, as a Royal Decree, an emergency decree or an act, so this article cites the date and not the title.

Section 7 allows the rate to change by Royal Decree to match economic conditions. The Ministry of Finance normally reviews it every three years, aiming at the average of commercial banks’ deposit and lending rates. A reader should therefore confirm the rate currently prescribed. Section 224 also bars interest on interest during default, limits default interest on an instalment debt to the principal of the missed instalment, and voids any agreement that conflicts with its first paragraph. For an unpaid money debt, see our guide to commercial debt recovery in Thailand.

Frequently asked questions

Conclusion

The interest rate cap in Thailand is 15% a year on agreed loan interest under CCC section 654, backed by the criminal offence in section 4 of the Act B.E. 2560. Section 653 governs enforceability, section 655 governs compounding, and sections 7 and 224 govern the rates that apply without agreement. Because sources differ on the civil result of excess interest, each loan needs reading against the current statute texts and decisions. Loan terms also belong in the wider contract review described on our contract lawyer in Thailand page.