Excess interest is not reduced, it is void
The wording of section 654 reads as though it were safe for a lender: charge too much and the rate simply comes down to fifteen per cent. What happens in court is not that, and the point on which the authorities still differ is where the money the borrower has already paid ends up.
Phenhnung Thabthimthong
Partner · YACT Association
Published 7 August 2026 · Updated 14 August 2026
The Code's wording, and the statute that changes the result
Section 654 of the Civil and Commercial Code forbids interest above fifteen per cent a year and says a contract fixing more is reduced to fifteen. But section 4(1) of the Prohibition of Excessive Interest Act B.E. 2560 (2017) makes charging above the statutory rate a criminal offence carrying up to two years' imprisonment or a fine of 200,000 baht, or both. The term therefore has an object expressly forbidden by law and is void under section 150, and judgment 1452/2511 puts it plainly: the interest is void in its entirety, not merely as to the excess.
Only the interest is void; the loan itself is not
Judgment 261/2516 draws the line. The note recorded 27,000 baht, which separated into 12,000 baht of real principal and 15,000 baht of advance interest charged above the cap. The Court held the interest debt void while the debt for the principal remained good, so the agreement was not void in its entirety and the valid part still evidenced the loan. A borrower who assumes an illegal rate takes the whole debt with it has misread the position.
Where the money already paid goes: the authorities differ
One line, of which judgment 11645/2554 is an example, treats a borrower who pays interest above the cap as having performed voluntarily knowing there was no obligation, within section 407: the money cannot be reclaimed and cannot be set against the principal. Judgment 2131/2560 goes the other way. The borrower could not be said to have paid in wilful breach of a prohibition or of their own accord, so section 407 did not bar them; the interest being void, the loan stood as though none had been agreed; and the lender, having no right to interest before default, could not set the payments against interest it was not entitled to charge, so everything paid went to the principal. The two produce entirely different arithmetic.
The court may raise it of its own motion, unlike limitation
Judgment 11645/2554 also holds that charging above the cap, in breach of the statute read with section 654, is a matter of public order, so the court may apply it to the case of its own motion under section 142(5) of the Civil Procedure Code; and that oral evidence to show the debt stated in the document is not genuine is not barred by section 94. That is the opposite of the position on limitation, which the court may not raise as a ground of dismissal unless it is pleaded.
What the lender is left with
What is lost is the contractual interest for the period before default. Interest during default is a different thing, arising from the law rather than the void term: section 224 sets it at the section 7 rate plus two per cent a year and forbids compounding during default. The section 7 rate is at present three per cent and may be adjusted by royal decree, so the rate in force at the time should be checked. Meanwhile the criminal liability under section 4 does not disappear because the term is void.
AUTHORITY
The judgments this rests on
Supreme Court judgment 1452/2511
Where advance interest above the statutory rate was rolled into the principal figure in the note, the interest was void in its entirety, not merely as to the excess.
Supreme Court judgment 261/2516
Where the figure in a note separates into real principal and advance interest above the cap, the interest debt is void and the principal good; the agreement is not void as a whole.
Supreme Court judgment 2131/2560
Interest at 15.6 per cent a year was above the cap and void; the borrower had not paid voluntarily within section 407, so the lender had no interest before default and everything paid went to the principal.
Supreme Court judgment 11645/2554
The agreement was void and, being a matter of public order, could be applied by the court of its own motion under section 142(5); but the borrower's acquiescence in paying was voluntary performance within section 407 and could not be credited to the principal.
QUESTIONS
Questions this raises
Years of interest have been paid. Can it be credited against the principal?
The authorities have not settled this. Judgment 2131/2560 applied everything paid to the principal, holding that section 407 did not bar the borrower; judgment 11645/2554 treated the payments as voluntary and refused to credit them. What separates them is the circumstances of the payments and how the issues were framed, so the payment records are the place to start rather than a general rule.
The contract says exactly fifteen per cent, but a deduction was taken when the money was handed over.
The figure on the document is not conclusive. Judgment 261/2516 separated the sum in the note into real principal and advance interest above the cap, and judgment 11645/2554 confirms that oral evidence to show the recorded debt is not genuine is not barred. Section 4(3) of the same Act also reaches benefits taken beyond interest that are plainly excessive.
LAW
The legislation
- Civil and Commercial Code, section 654
- Civil and Commercial Code, section 150
- Prohibition of Excessive Interest Act B.E. 2560 (2017), section 4
- Civil and Commercial Code, section 224
ENQUIRIES
