Thailand’s new Debt Collection Law

According to the law, the borrower is responsible for the costs of a contract, the cost of delivery of the property and the cost of returning the property. For a loan not exceeding 2,000 Baht, a witness may testify in the court that a loan was established and for a loan of exceeding 2,000 Baht, there must be some form of written loan contract signed by the borrower.  

As a general rule, the court will not allow any interest rate exceeding 15% a year. Any higher rate fixed by a contract will almost certainly be reduced to 15% unless there are specific laws which prescribe a higher rate be charged such as those relating to the loan of money by certain types of financial institutions. The law also generally prohibits compound interest except under the following circumstances: as follows:

  • Both parties agree that that the interest due for not less than one year be added to the capital and the whole amount shall bear interest. Any such agreement must be made in writing and signed by both parties.
  • The loan is one of “commercial usage” such as a bank current account or loans of a similar commercial nature.

Assuming a loan is made for a sum of money and the lender accepts goods or other properties for the repayment of that loan, the amount of the debt to be repaid will be considered by the court equal to the market value of such goods or property at the time. If a borrower accepts goods or property instead of a sum of money, the amount of the debt will be considered in precisely the same way. If it is agreed in the contract for a loan that the interest is payable, but no rate is specified in the contract, the court will order a rate of 7.5% per year as it is prescribed by law.  

In Thailand debt collection has long been associated with deceptive practices and it is common to hear stories of collectors tricking debtors into paying by giving false information or even resorting to abusive language, violence and blackmail to even murder the debtors. In an effort to stamp out these practices, the National Legislative Assembly has passed the Debt Collection Act 2558. 

The new law, which took effect on Sept 2, 2015 agreed to establish fair and standardized collection rules. It applies to all debt collectors, from institutional lenders such as banks, finances to individual creditors. Under this law, the way creditors collect debts will be more tightly regulated and debtors will also have increased protection rights and the law defines “debt collector” as a creditor who makes a loan to a debtor whether the debt can be legal or illegal. In other words, even loan sharks are subject to this Act. Further, a creditor’s representative and attorney, a debt collection agency and its representative are all categorized as “debt collectors” where a “debt collection business” means any business hired to collect a debt, directly or indirectly but lawyers who collect debts for clients are not considered a “debt collection business”.      A “debtor” in this law means any natural person obligated to pay a debt including an individual debt guarantor. Under this law, debt collectors can only communicate with the debtor or another person authorized by the debtor. A collector can only contact third parties to acquire information and details or learn the debtor’s location. The collector is also limited to identifying himself and inquiring about the debtor’s whereabouts to a third party. The collector cannot tell the third party that the debtor owes a debt unless the third party is a spouse, parent or child of the debtor so the rules are very strict.                  

The collector is also required to communicate confidentially with the third party. He cannot use any language, symbol, mark or business name of the debt collector on any correspondence that may indicate the communication is related to debt collection. The collector can contact the debtor only between 8.00 and 20.00 week days (Monday to Friday) and between 8.00 and 18.00 on holidays. The collector can also only contact the debtor at a place indicated by the debtor.  Lawyers of for debt collectors must state their names, agency, creditors’ names and the debt amount. If the collector seeks to collect the debt in person or demands performance, he must show his power of attorney to the debtor. If the debtor pays the debt, the collector must give the debtor evidence of payment such as a receipt. The collectors who try to collect a debt, they can’t do the following’s:     

  • Threaten to use violence against the debtor or any action that injures the body, property or reputation of the debtor.
  • Notify and disclose any debt of the debtor to third parties who are not related to the collection
  • Use profane or other language that insults the hearer or reader.
  • Use false information to deceive a debtor, for example by falsely claiming to have a court order or be a state official or lawyer or by falsely threatening to seize the debtor’s assets or salary. In addition, and much like when contacting third parties, collectors can’t disclose that the nature of their communication is to collect a debt. They can’t contact debtors by postcard, open letter, fax or any other non-discreet method that shows the communication is related to any debt collection. Anyways, if the communication is discreet, the collector can only indicate the collector’s business name as long as it does not indicate the business is any debt collecting business. The collector can’t collect any fees nor expenses over an official limit appointed under the Act.

Anyways, if the communication is discreet, the collector can only indicate the collector’s business name as long as it does not indicate the business is any debt collecting business. The collector can’t collect any fees nor expenses over an official limit appointed under the Act.   

 Individual Directors, Managers and representatives of corporate debt collectors can also be criminally liable if they are involved. If a juristic person violates the law, and the offence falls within the scope of duty of the managing director, manager or any representative, these individuals can be punished for the same offence as it was committed by that juristic person.        

Please consider that a loan of money contract in Thailand is known as a “loan of consumption”, a contract whereby the lender transfers to the borrower the ownership of a certain quantity of property which is “consumed” by the borrower. The borrower, in return, agrees to return property “of the same kind, quality and quantity.” Note, such a contract only becomes complete upon delivery of the property. The best way for debtors to minimize the risk of dealing with collectors is to borrow from reputable lenders and this Debt Collection Act would provide measures of protection for those who do not have these options.             

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