Disputes Over Bank Credit Contracts

Such disputes directly affect the lawful rights and interests of debtors, while at the same time causing negative consequences for the reputation, image, stability, and safety of creditors and the credit institutions they represent. Against this backdrop, conducting a comprehensive analysis of the main causes leading to disputes, and proposing appropriate, feasible, and effective solutions, has become an urgent requirement. This is not only the basis for the parties involved to proactively protect their legitimate rights within the framework of the law, but also a contribution to building a transparent, safe, and sustainable credit environment.
 

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.

4. Legal Framework Governing Credit Contract Disputes

The regulations relating to disputes over credit contracts can be found in the following legal instruments:

• Civil Code 2015: Governs civil relations concerning credit contracts, clearly stipulating the rights and obligations of the parties, the validity of contracts, and liability for breach.

• Law on Credit Institutions 2024: Provides regulations on loan agreements and credit contracts.

• Circular No. 39/2016/TT-NHNN (as amended by Circular No. 12/2024/TT-NHNN): Regulates lending activities of credit institutions.

5. Methods of Resolving Credit Contract Disputes

• Negotiation and Mediation

 This is the preferred method applied first in most credit contract disputes. Through negotiation, the parties can directly exchange views, clarify positions, and seek solutions that balance their interests in a spirit of goodwill and cooperation. If necessary, a neutral third party (mediator, lawyer, or intermediary organization) may assist in the process. The key advantages of this method are saving time and costs, while maintaining long-term cooperative relationships between banks and customers.

• Commercial Arbitration

 Where the credit contract contains an arbitration clause, the parties may choose to submit the dispute to a Commercial Arbitration Center. Arbitration proceedings are generally more flexible and expeditious than court litigation, while ensuring confidentiality for the parties. Arbitral awards are final and binding, meaning they cannot be appealed or protested and are enforceable in the same manner as court judgments. However, this method is limited to contracts containing arbitration clauses, and arbitration costs are often higher than court fees.

• Litigation before the Court

 When negotiation, mediation, or arbitration fails, litigation before the Court becomes the final measure to protect the lawful rights and interests of the parties. Under the Civil Procedure Code, the plaintiff may file a lawsuit with the competent Court where the defendant resides or has its head office. The advantage of this method is that court judgments and decisions carry mandatory legal force. However, court proceedings are often lengthy, time consuming, and costly, and may negatively affect the reputation and image of the parties involved.

6. Preventive Measures Against Credit Contract Disputes

To minimize potential disputes, the parties should take note of the following:

• Ensure transparency during the negotiation, drafting, and performance of credit contracts.

• Strictly comply with legal provisions on credit activities and consumer protection, and fulfill contractual obligations.

• Establish internal monitoring mechanisms to ensure proper performance of credit contracts and improve the quality of loan appraisal.

• Maintain proper records and documentation relating to the loan.

• Prioritize dispute resolution through negotiation and mediation before resorting to arbitration or litigation.

• Review adjudicated cases to draw lessons and avoid legal risks.

7. The Role of Lawyers in Credit Contract Disputes

Resolving credit contract disputes often involves complex legal provisions, requiring in-depth knowledge of banking, finance, and litigation. Therefore, the participation of lawyers is a crucial factor in helping parties effectively protect their lawful rights and interests. Specifically:

• Specialized legal advice: Lawyers analyze the entire content of the credit contract, identify the strengths and weaknesses of each party, and provide strategic guidance to resolve disputes optimally while minimizing legal risks.

• Representation in negotiation and mediation: With negotiation skills and legal expertise, lawyers can represent clients in discussions with banks or other parties to reach fair agreements, reduce losses, and avoid escalation to adjudicatory bodies.

• Drafting and preparing legal documents: Lawyers assist clients in preparing all necessary documents, evidence, statements of claim, or petitions for dispute resolution in compliance with legal requirements, ensuring accuracy and validity.

• Litigation and arbitration advocacy: Where disputes must be brought before courts or arbitral tribunals, lawyers directly defend their clients’ interests by presenting arguments, submitting persuasive evidence, and countering opposing views, thereby increasing the likelihood of a favorable outcome.

Conclusion

Disputes over credit contracts are a complex legal phenomenon, intertwined with economic, financial, and legal factors. However, with thorough preparation, a clear understanding of rights and obligations, and the adoption of appropriate approaches, parties can effectively limit and resolve arising conflicts.

In particular, prioritizing flexible measures such as negotiation and mediation helps save time and costs while preserving cooperative relationships between banks and customers. Moreover, timely support from experienced legal professionals plays a decisive role in formulating legal strategies, safeguarding the parties’ legitimate rights and interests, and minimizing unnecessary losses.