In Brief
On April 10, 2021, New Emergency Decree which amended the Civil and Commercial Code on the reduction of default interest rates has been published in the Government Gazette and it shall be effective on April 11, 2021.
The purpose of the Emergency Decree is aiming to 1) prevent loopholes caused by ambiguity in the previous provision that allowed creditors to charge unfair interest rates which had been enforced since A.D. 1925 (B.E. 2468) that is not practically aligned with the current economic situation; and 2) relief the effect of Covid-19 pandemic that caused widespread damage to businesses, SMEs, and entrepreneurs to handle the obligations and debts’ payment during the economic crisis and to reduce economic inequality and unfairness.
Key Takeaways
The essential changes of the amendment are 1) to repeal the previous Section 7, 224 and replaced with new statements; and 2) to add remark provision on Section 224/1 of the Civil and Commercial Code, as summarized by the table below:
A. Section 7 : Standard Interest Rate that is neither predetermined nor required by law

Previously	After 11 April 2021	Remark
7.5 per cent per annum	Decrease to 3 per cent per annum	To be reviewed every 3-years by the Ministry of Finance, and compared to close with deposit interest rate and loan interest rate of commercial banks

B. Section 224 : Default Interest Rate

Previously	After 11 April 2021	Remark
7.5 per cent per annum	3 percent perannum, as prescribed in Section 7; Add-on 2 percent per annum	The creditor is able to demand higher interest on any other legitimate grounds; Interest for default shall not be paid upon interest.

C. Section 224/1 : Installment Payment of Default Interest Rate

Additional provisions	Result
1. A Debtor who fails to make installment payment at any dues.	The creditor is able to calculate the default interest only from the principal of the installment in which the debtor has defaulted. The creditor will no longer be able to collect default interest on the total principal amount of the debts that have not been paid.
2. Any clause of agreements is contrary to the above provision.	Such an agreement will be void.

Conclusions
In the past period, many creditors have forced debtors who failed to make a payment, to pay interest on top of the principal amount owed, as the repealed provision of law did not set a default rate. Thus, this new decree entitled to decrease the interest rate to be applied with the current world situation and economic trends.
However, the new interest rate under this decree shall only be applicable for the Interest and Default Interest calculation of the debt or the installment payment of which is due from the effective date of the decree.

Should you have any further inquiries or require any assistance, please let us know.
Yours sincerely,

Somphob Rodboon
Managing Partner
Somphob.R@ilawasia.com
ILAWASIA Co., Ltd.

Nannapas Phatcharakeatkanok
Associate
Nannapas.P@ilawasia.com
ILAWASIA Co., Ltd.

Chananya Yongmunkongkul
Associate
Chananya.Y@ilawasia.com
ILAWASIA Co., Ltd.