Discussion Of Legal Issues About Private Loan

Since ancient time of China, as an important way to satisfy people's demand for capital, private lending has been frequent in social life. In the Western Zhou Dynasty,"FuBie", a contractual form which was applied to lending relation had been established. In the Tang and Song Dynasty, financing relationship developed further. People called lending which did not calculate the interest"ChuJu", and lending which calculated the interest was called"Fuzhai."The government established laws and regulations to strengthen thecontrol andprohibit usury. In the Yuan, Ming, Qing Dynasty, the control of lending was also strict, monthly interest rate was limited to 30%. In the times of Nanjing Nationalist Government, the relevant regulation was the annual interest rate must belimited to 20%.After the founding of PRC, especially since the reform and the opening-up policy was adopted, along with the development of market economy, people's demand for capital rises rapidly.However, the procedure of getting the loan from financial institution is too complex tomeet the demand of most common people and small and medium-sized enterprises. Thus, private lending is becoming increasingly popular among people. However, the characteristics of private lending, such as private ownership, ubiquitousness, simpleness and rapidness in procedure leads to lots of problems which brings to our attention. For example,violent collective action, usury, illegal financing, even crime.These all bring adverse influence to people's life and even disrupt the country's financial regulatory system. The main contributing reasons to these are lacking of systematic laws and regulations and clear definition of private lending. For the former, our legislative has formulated a series of laws to regulate the healthy development ofprivate lending. In the paper, the writer tries to make a more accurate definition about private lending, and analyze relevant problems from the perspective of both theory and practicehave a better understanding about it.The goal is to ]explore the advantage of private lending'sand reduce the amount disputes.The paper includes following contents:Firstly, the subjects of private lending. It not only exists among two natural persons, natural person and enterprise, but also among enterprises. Though the mainstream view is to deny the legitimacy of private lending, it doesn't comply with the development of the social economy, and we can see a growing trend of acceptance in judicial practice. In essence, private lending between enterprises is not materially different from private lending between other forms and they all should be within the category of private lending.Secondly, through the analysis of Contract Law, it is a mistake to understand the private lending contract as a contract become effective upon performance. In addition, there is no strong theoretical supporto categorize the lending contract from financial institutions and private persons as effective upon oral agreement and performance, respectively. Not to mention that it is not theoretically meaningful.Although through the discussion of origin of private lending, the writer cannot deny the existence of contract upon performance. However, along with decreasing tendency of free-of-charge and good faith of private lending, we have a stronger need to characterize private lendingcontract ascontract which effective upon agreement.We can also refer to the relevant clause about gift in Contract Law to give the lender right of free cancellationThirdly, along with the improvement of social economic life, private lending with charge is expanding, resulting in more and more interest rate problems.. Becauseprivate lending is so popular and feasible thatthere is not much restrictions about it by law. The law only requires that the interest can not exceed four times of the same bank loan interest rate. However, for the frequently occurred usury in our real life, except that the relevant judicial interpretation regulates that the exceeded interest is not protected,we can also find the criminal responsibility of illegal business activity from Criminal Law, which alreadyhas a case to follow in judicial practice.In the last place, the form of private lending contract can be agreed by the parties freely. The oral contractexists broadly, especially in rural region. However, the shortage of oral contract is also obvious and it causes many disputes. The writer suggest that, to avoid these risks, no matter theprivate lending relationship exists between what kind of subjects, they should be in writing. It is not only helpful for parties to performthe contract, but also easier for investigation conducted by judicial institutions.