top of page
  • Writer's picturePham Ba Thien

The 8.5 million VND credit card debt turns into a bad debt of 8.8 billion VND at Eximbank after 11 years, the statute of limitations has expired for the interest debt claim


In March of this year, a legal situation that attracted significant public attention was a bad credit-card debt case at the Vietnam Export Import Commercial Joint Stock Bank (Eximbank). Specifically, a customer in Quang Ninh Province, Vietnam, opened a Master Card credit card at the Eximbank Quang Ninh Branch in March 2013 with a credit limit of VND 10 million. In April and July 2013, this customer's credit card incurred a principal debt of VND 8,554,625. However, according to Eximbank, this debt was not paid on time. According to a document sent by the Single-Member Limited Liability Company for Debt Management and Asset Exploitation - Vietnam Export Import Commercial Joint Stock Bank (Eximbank AMC) to this customer on 8 November 2023, to notify about the obligation to pay, in collaboration with the bank to handle the aforementioned debt, the credit card debt had become bad debt and, as of 31 October 2023, had incurred an interest debt of VND 8,830,314,924. Thus, the total principal and interest debt amounted to VND 8,838,869,549 (hereinafter referred to as "The Bad Debt Case at Eximbank").[1]


As of the time of publishing this article, the entire case file has been transferred to Eximbank's headquarters in Ho Chi Minh City for compilation and reporting to the State Bank of Vietnam – Quang Ninh Branch. Therefore, it is still unclear how this case between Eximbank and the aforementioned customer will be resolved. However, assuming Eximbank would file a lawsuit in a competent Court to claim the entire principal and the incurred interest, totaling nearly VND 9 billion, the author of this article is of the opinion that the following two scenarios are possible due to the statute of limitations for filing a lawsuit in this case have expired:


(i) The Court decides to suspend the case resolution, meaning it does not accept Eximbank's lawsuit to reclaim both the principal and incurred interest of VND 8,838,869,549; or

(ii) Eximbank can only reclaim the principal debt of VND 8,554,625, and the Court does not accept the claim to recover the incurred interest of VND 8,830,314,924.


This article thus comments on the "statute of limitations for initiating lawsuits" according to current civil law regulations and assesses the importance of determining the statute of limitations for lawsuits related to disputes in bank lending transactions, while also relating to the practical situation with The Bad Debt Case at Eximbank.


1. STATUTE OF LIMITATIONS FOR FILING LAWSUITS ACCORDING TO THE CIVIL CODE AND GUIDANCE FROM THE JUDICIAL BODIES

First, it is necessary to determine that the lending relationship between the bank and an individual or organization is a transaction established based on a credit contract. According to the provisions of Article 154(1) and Article 429 of the Civil Code, the statute of limitations for filing a lawsuit to request the Court to resolve a contract dispute is 03 years, counting from the day the person entitled to request became aware or should have been aware that their legitimate rights and interests were infringed. Accordingly, if the statute of limitations for filing a lawsuit has expired, the Court will decide to suspend the civil case resolution when the litigant requests the application of the statute of limitations before the Court of First Instance issues a verdict or decision to resolve the case, according to the provisions of Article 217.1(e) of the Civil Procedure Code. However, regarding disputes over lending and borrowing transactions, the statute of limitations for initiating lawsuits does not apply in cases of requests for property ownership protection, as stipulated in Article 155.2 of the Civil Code.


Furthermore, the Supreme People's Court has provided specific guidance and clarifications on the direction for adjudicating disputes related to bank lending transactions, specifically as follows:


(i) According to the clarification in Paragraph 2, Part III, Official Dispatch No. 02/TANDTC-PC dated 02 August 2021, regarding clarifications on some issues in adjudication (hereinafter referred to as "Official Dispatch 02"), if the borrower violates the debt repayment obligation and thereafter the bank files a lawsuit after the 3-year period has expired from the date the payment obligation was breached, then the Court's adjudication direction is as follows:[2]

  • Determine that the statute of limitations for filing a lawsuit to request the court to resolve the credit contract dispute has expired. However, the bank has the right to sue according to Article 155.2 of the Civil Code as analyzed above, i.e., requesting the court to protect property ownership.

  • Accordingly, the court determines that the bank has the right to sue the borrower to reclaim the principal debt of the loan as its property. In this scenario, the court processes and resolves the case without depending on whether the litigant requests the application of the statute of limitations before the Court of First Instance issues a verdict or decision to resolve the case or not.


(ii) Article 23 of Resolution No. 03/2012/NQ-HĐTP dated 03 December 2012, by the Judges' Council of the Supreme People's Court, guiding the implementation of some provisions in the first part "general provisions" of the Civil Procedure Code, which has been amended and supplemented by the law amending and supplementing some articles of the Civil Procedure Code (hereinafter referred to as "Resolution 03"), also specifically instructs the court in evaluating the statute of limitations for filing lawsuits when resolving disputes related to bank lending transactions. It should be noted that Resolution 03 has ceased to be effective since 01 July 2016; however, the content instructed in Article 23 hereof is still adopted to draft the clarification in Official Dispatch 02 as analyzed. Article 23.3(b) of Resolution 03 instructs as follows:


“(b) For disputes over property ownership rights, claims for property return, and claims for land use rights managed or possessed by others through civil transactions, the statute of limitations for initiating lawsuits does not apply.

Example 1: On 01 January 2008, A lends B VND 500 million with a one-year term. By 01 January 2009, B fails to repay the principal and interest. On 03 April 2011, A files a lawsuit demanding B repay the principal and interest. Regarding the request for interest payment, the Court shall not resolve due to the expiration of the statute of limitations. Regarding the request for principal payment, the statute of limitations does not apply, and the Court shall process and resolve according to common procedures.”


From the abovementioned, both Official Dispatch 02 and Resolution 03 provide a direction for dispute resolution over bank lending transactions that arise after the 3-year period from the day the borrower violated the repayment obligation as follows:

  • Do not accept the request for interest payment due to the expiration of the statute of limitations.

  • Consider accepting the request to reclaim the principal debt as it is considered a request for property ownership protection, thus not applying the statute of limitations.


2. REGARDING THE BAD DEBT CASE AT EXIMBANK

Based on the analysis in Part 1 of this article, assuming that Eximbank sues the customer in The Bad Debt Case at Eximbank to recover both the principal and incurred interest (nearly VND 9 billion) in a competent Court, if the defendant requests the Court to apply the statute of limitations for initiating lawsuits, then Eximbank's chances of recovering the VND 9 billion are very low. Since there is no information related to the customer requesting an extension of the repayment period or converting the credit card debt into installment payments, the customer's initial violation of the credit card repayment obligation falls around August 2013, meaning the statute of limitations for Eximbank to sue to recover both principal and interest would be from August 2013 to August 2016. In other words, as of the drafting of this article, the statute of limitations to recover the principal and interest has expired for more than 6 years.


As stated at the beginning, the author is of the opinion that the following two scenarios could occur if The Bad Debt Case at Eximbank is brought to Court:


(i) The Court decides to suspend the case resolution, meaning it does not accept Eximbank's lawsuit to reclaim both the principal and incurred interest of VND 8,838,869,549.

This scenario can occur when the Court, processing the case, views this dispute as a credit contract dispute and not as a dispute requesting the Court to protect property rights.


debtor) may have to file a petition requesting the application of the statute of limitations before the Court of First Instance issues a verdict or decision to resolve the case, according to civil procedure law.


When this scenario occurs, Eximbank may have to sue in a different civil case if it wants to reclaim the principal debt of VND 8,554,625.


(ii) Eximbank can only reclaim the principal debt of VND 8,554,625, and the Court does not accept the claim to recover the incurred interest of VND 8,830,314,924.

This scenario can occur when the Court, processing the case, redefines the dispute relation from a "credit contract dispute" to a "property claim" dispute that belongs to Eximbank. In this case, the Court will not suspend case resolution based on the litigant requesting the application of the statute of limitations before the Court of First Instance issues a verdict or decision to resolve the case and the statute of limitations has expired, but will continue to resolve the case already processed.


In summary, regardless of which scenario occurs in reality in the case of The Bad Debt Case at Eximbank being resolved in Court under civil procedural law, Eximbank will be at a disadvantage considering the statute of limitations for filing a lawsuit to request the Court to resolve a contract dispute.


If the defendant, namely the credit card debtor, is aware and understands the legal regulations related to the statute of limitations for contract lawsuits, the most favorable outcome that the bank could achieve when suing the customer in a competent Court is to recover the original principal debt.


[2] Excerpt from Paragraph 2, Part III, Official Dispatch 02 in Appendix below


APPENDIX

Excerpt from Paragraph 2, Part III, of Official Dispatch No. 02/TANDTC-PC dated 02 August 2021, by the Supreme People's Court

2. Mr. A borrows VND 1 billion from the Bank, with a loan term of 1 month starting from 02 January 2017, at an interest rate of 2% per month. After the 1-month term, Mr. A fails to repay the principal and interest. During the 3-year period from 03 February 2017, to 03 February 2020, the Bank does not initiate a lawsuit to demand Mr. A repay the debt. Now, if the Bank initiates a lawsuit demanding Mr. A to repay the debt, does Mr. A have the right to request the application of the statute of limitations before the Court of First Instance issues a verdict or decision to resolve the case?

According to Article 429 of the 2015 Civil Code, "The statute of limitations for filing a lawsuit to request the Court to resolve a contract dispute is 3 years, counting from the day the person entitled to request became aware or should have been aware that their legitimate rights and interests were infringed."

Based on the aforementioned provision, the statute of limitations for filing a lawsuit to request the Court to resolve the credit contract dispute has expired. However, according to Article 155.2 of the 2015 Civil Code, the statute of limitations for initiating lawsuits does not apply in cases of "requests for the protection of ownership rights, except where otherwise provided by this Code or other relevant laws." Therefore, the Bank may sue Mr. A to reclaim the asset (the principal debt), and the Court processes and resolves the case without depending on whether the litigant requests the application of the statute of limitations before the Court of First Instance issues a verdict or decision to resolve the case or not.

Download this article for more detailed information: Vietnamese | English


Disclaimer:

This article

  • reflects the author's subjective viewpoint on the main topic mentioned in this article, providing the best reference value at the time of publishing;

  • is not considered the viewpoint or opinion of any state agency in any case; and

  • does not constitute legal advice from Minh Thien Law and should not be applied to resolve any specific legal situation.

 

For more detailed information, please contact: info@minhthienlaw.com

16 views0 comments

Comments


bottom of page