THAILAND Law and Practice Contributed by: Jessada Sawatdipong, Sarunporn Chaianant, Supawich Nimmansomboon and Supawin Pongthananikorn, Chandler Mori Hamada
policy objective is to enhance financial inclusion and increase competition in the Thai banking sector by leveraging technology-driven, branchless business models. Leasing Regulation A Royal Decree on hire-purchase and leasing busi- nesses, effective June 2025, placed the automotive hire-purchase and leasing industry under the direct supervision of the Ministry of Finance and the BoT. The new framework requires licensing and imposes business conduct standards on operators, including clear disclosure of effective interest rates, fees and borrower obligations. It also strengthens borrower protections by regulating repossession practices and setting standards for contract fairness, with the aim of ensuring greater transparency and more responsible practices in the auto finance sector. 3.10 Usury Laws The interest rate charged on a loan shall not exceed 15% per year in general. According to the BoT’s noti- fication on practices regarding interest, discounts, service charges and penalties for commercial banks, each commercial bank is entitled to announce its own maximum interest rate to be charged to its customers for Thai baht commercial loans above a cap of 15% per annum. The charging of interest on a foreign loan provided by banks or financial institutions registered and located in foreign countries is limited to 20% per annum. Fees, penalties and other payments under a loan agreement that are in the nature of interest may be regarded as additional interest. If interest is charged at a rate in excess of the applicable ceiling, the entire interest charged may be held to be void and unen- forceable. Default Interest The default interest rate can be agreed at a rate higher than the loan interest rate. However, the Thai courts can classify exorbitant default interest rates as pen- alties. The courts can use their discretion to reduce the default interest rate if they take the view that such default interest rate is disproportionately high.
In addition, the newly amended Thai Civil and Com- mercial Code prescribes that where debts are due in instalments, the default interest rate shall be cal- culated on the due but unpaid principal amount of such default instalment. Thus, default interest can be charged only on the principal amount of each instal- ment. Under the Thai Civil and Commercial Code, interest on interest can be charged after it is overdue for more than one year, provided that the lender and the bor- rower have agreed in writing in advance, and that the entire debt shall be charged interest at a specified rate. In respect of financial institutions and non-banks under the supervision of the BoT, in 2022, the BoT issued a notification regarding practices for the cal- culation of interest for entities under its supervision meaning that, except for certain transactions, they may not accumulate the interest, service charges, penalties and expenses to a loan’s outstanding bal- ance to recalculate the interest and penalties. Under the Securities and Exchange Commission Act B.E. 2535 (1992) and relevant SEC regulations, listed companies may enter into certain transactions with a related party upon approval by the board of directors or the shareholders, as the case may be. Disclosure of such a transaction must be made to the Stock Exchange of Thailand. A financial contract that may fall within the scope of an RPT may include, among others, a guarantee agreement where a listed company agrees to guarantee the indebtedness of its affiliates or vice versa. In any case, disclosure is only required when the transaction value reaches the appli- cable threshold when compared to the net tangible assets of the relevant listed company, as specified in relevant SEC regulations. Where a disclosure has to be made, the details that follow in relation to the agreement must be provided to the Stock Exchange of Thailand: 3.11 Disclosure Requirements Related-Party Transaction (RPTs) • date and relevant parties to the agreement; • general explanation regarding the nature of the offer or receipt of financial assistance relating to the decision to enter into the transaction; and
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