A Comparative Study of the Supreme Court's Judgment in Cases of Property Recovery from Payment of Interest that Exceeds the Law

Abstract

This article is a qualitative research that study documents for concepts and theories of laws relating to property recovery, loans and soliciting of over-rate interest, and the verdict of the Supreme Court in disputes of this matter. The objective is to study the Supreme Court’s verdict in situations where the borrower pays over-rate interest to the lender and what they should do when that interest is void. The Supreme Court's judgment is divided into 2 lines. On one hand, the Supreme Court sees this as arbitrary repayment where debts are repaid with the knowing that they are not obligated to pay. Thus, the borrower has no right to receive the payment back. On the other hand, the Supreme Court does not consider this as arbitrary payment. When the interest is void, the lender has no right to charge interest before default. So, the money already paid by the borrower could not be deducted from the unentitled interest. The money already paid by the borrower should be paid for all the principal.

Research results show that the Supreme Court rules the cases where the borrower pays over-rate interest by basing their judgement on the borrower's perception of interest charges. This depends whether or not, before or during contract-making, the borrower knows that the interest rate exceeds the legal limit. If the borrower knows, it is an arbitrary payment in which the borrower cannot retrieve the property. If the borrower does not know the facts, it will not be regarded as arbitrary repayment. The lender must pay the money already paid by the borrower back to the borrower according to the undue enrichment principle.