The realm of banking and finance is often fraught with complexities, particularly when it comes to credit contracts. Disputes over bank credit contracts have become increasingly common in recent years, affecting not only financial institutions but also consumers and businesses that rely on credit for growth and stability. These disputes may arise from ambiguities in contract terms, differing interpretations of obligations, or failures in communication between parties. Understanding the root causes of these conflicts is essential for developing effective strategies to mitigate risks and enhance the clarity of credit agreements.
1. Credit Contracts and the Current Situation of Disputes
A credit contract is understood as a written agreement between a credit institution (the bank – as the creditor) and a customer (the debtor). Under this agreement, the bank undertakes to disburse a specific sum of money to the customer, while the customer is obliged to fully repay both principal and interest within the period and under the conditions mutually agreed upon. This type of contract is highly specific in the field of finance and banking, often involving large amounts, long implementation periods, and being closely associated with various security measures such as mortgage, pledge, or guarantee. Therefore, a credit contract is not only a legal instrument governing the lending–repayment relationship between the bank and the customer, but also an essential foundation ensuring the safety and stability of credit activities across the entire system.
However, due to its complexity and the strict binding of rights and obligations between the parties, a credit contract is also a type of contract that is highly prone to disputes. In practice, common disputes may arise from various causes, the most typical of which include:
- Debtors’ delay in repaying principal, interest, or penalty fees as committed in the contract.
- Disagreements over the calculation of interest rates and late-payment penalties, especially when there are changes in interest rate policies or in the application of contractual terms.
- Disputes concerning the handling of collateral, including rights, obligations, and procedures when the bank proceeds to seize or liquidate the secured assets.
- The bank’s responsibility in the process of disbursement or debt recovery, such as disbursing not in accordance with the agreed schedule or purpose, or applying recovery measures that cause damage to the debtor.
Judicial practice at the Courts in recent years shows that the number of cases related to credit contracts has been steadily increasing, accounting for a significant proportion of all economic cases. This trend not only generates litigation costs and prolongs the time required for dispute resolution for both banks and customers, but also undermines market confidence, negatively affects the reputation of credit institutions, and poses potential risks to the safety and stability of the national credit system.
2. Common Types of Credit Contract Disputes
- Breach of disbursement conditions
One of the most common disputes arises when the debtor fails to fully meet the conditions required for disbursement, such as not providing sufficient documentation to prove the purpose of loan use or failing to complete the legal procedures related to collateral. Conversely, there are also cases where the bank deliberately changes or adds disbursement conditions outside the contract, leading to delays in disbursement. As a result, the debtor may lose business opportunities and suffer profit losses, while the bank faces the risk of complaints or lawsuits for failing to comply with the agreed terms.
- Unjustified refusal of disbursement
This type of dispute occurs when the bank has already signed a credit contract but subsequently refuses to disburse funds even though the debtor has fully satisfied all conditions. The reasons often cited include changes in internal policies, tightening of credit limits, or other subjective factors. Such refusal without a legitimate legal basis causes direct damage to the debtor and simultaneously gives rise to the bank’s legal liability.
- Unilateral termination of the credit contract
Another form of dispute arises when one party unilaterally terminates the credit contract and demands early repayment without the debtor’s consent or without a clear legal basis. This creates significant difficulties for customers, especially businesses relying on loan capital to maintain production and business activities. In some cases, unilateral termination may even be considered a breach of contractual obligations.
- Disputes over banking service fees
In addition to lending interest rates, banks often impose various fees such as appraisal fees, loan management fees, or early repayment fees. However, in many cases, these fees are not clearly stipulated in the contract, or the bank applies higher fees than those published in its official fee schedule. The unilateral imposition of unreasonable fees makes customers feel that their rights have been infringed, thereby giving rise to disputes.
3. Causes of Credit Contract Disputes
- Lack of transparency in drafting credit contracts
One common cause is that credit contracts are often drafted based on standard templates prepared by banks, in which many important terms are not clearly stipulated. For example, instead of specifying the exact interest rate, the contract may only state in general terms “interest rate in accordance with the bank’s regulations” or “fees according to the prevailing fee schedule.” Such vague wording creates legal loopholes, leading to different interpretations by the debtor and the creditor, and consequently giving rise to disagreements and disputes when applied in practice.
- Limited legal awareness of debtors
Many customers, when signing a credit contract, tend to focus only on the loan amount and the interest rate, while neglecting to carefully examine other provisions such as the rights and obligations of the parties, disbursement conditions, methods of handling collateral, or additional fees. This lack of understanding or subjective negligence at the signing stage often places debtors in a disadvantaged position, as they have little legal basis to protect their rights when disputes arise.
- Creditors imposing unfavorable terms on debtors
With their superior position as lenders, many banks tend to draft contracts in a way that favors themselves. In some cases, banks unilaterally change interest rates or impose additional fees such as loan management fees or early repayment fees without clear agreement with the debtor. This results in debtors being bound by unfavorable terms, with limited ability to negotiate or object, thereby leading to disputes.
- Debtors’ declining repayment capacity
Apart from factors attributable to banks, disputes may also stem from the borrowers themselves. During the performance of the contract, debtors may encounter objective difficulties such as financial market instability, epidemics, natural disasters, or price fluctuations, all of which negatively affect their business operations and cash flow for repayment. In addition, subjective factors such as poor capital management, investment in high-risk sectors, or misuse of loan funds may also occur. These factors can cause debtors to lose the ability to make timely payments, thereby triggering disputes with the bank.
In conclusion, disputes over bank credit contracts represent a significant challenge in the financial sector. The intricacies involved highlight the necessity for clearer communication, standardized practices, and comprehensive understanding among all parties involved. By addressing the underlying issues that lead to these disputes, stakeholders can foster better relationships and create a more transparent lending environment. Ultimately, resolving these conflicts not only benefits individual parties but also contributes to the overall stability and integrity of the financial system.
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1. Lawyer Vu Thi Phuong Thanh, Chairman of the Members’ Council, Ha Noi Bar Association
Email: vtpthanh@tlalaw.vn
2. Lawyer Tran My Le, Manager of TLA Law LLC, Ha Noi Bar Association
Email: tmle@tlalaw.vn.
Dinh Phuong Thao