Consumer Law has introduced certain regulations to prevent sellers or providers, who hold a stronger position in contracts, from exploiting consumers. A consumer is a natural or legal person who acts without a commercial or professional purpose. A person who purchases a good or service and uses or consumes it in their daily life, without acting for commercial or professional purposes, is considered a consumer. One of the regulations introduced to protect the consumer, as the weaker party in the contract, from unlawful practices by the seller is the regulation of interest rates within the scope of consumer protection.
Articles 3 and 83/1 of Law No. 6502 on the Protection of the Consumer (TKHK) prevent contracts established between a merchant and a consumer from being considered commercial transactions from the consumer’s perspective. The primary law governing commercial transactions is the Turkish Commercial Code. However, since the TKHK is a special law compared to the Turkish Commercial Code, the provisions of the TKHK will apply to contracts where the parties are a consumer and a merchant. In cases where there are no provisions in the TKHK, the Turkish Code of Obligations will be applied.
If the annual interest rate to be applied to an interest payment debt is not specified in the contract, it is determined according to the legislation in force at the time the interest debt arises. The annual interest rate agreed upon in the contract cannot exceed fifty percent more than the annual interest rate determined according to the first paragraph. Furthermore, compound interest cannot be applied in consumer transactions, including cases of default.
How is the Interest Rate Applied to Consumers Determined?
Although our Turkish Commercial Code regulates that contracts which constitute commercial transactions for only one of the parties are considered commercial transactions, the provisions of the Law on the Protection of the Consumer constitute an exception to this situation. Since the Law on the Protection of the Consumer is a special law, the application of the special law takes precedence. The interest rates are not clearly regulated in the Law on the Protection of the Consumer. In this regard, the relevant articles of the Turkish Code of Obligations will be taken into consideration.
Principal Interest
According to Article 88/2 of the Turkish Code of Obligations, the annual interest rate to be agreed upon in the contract cannot exceed fifty percent more than the annual interest rate determined in the first paragraph. In this regard, the current legal interest rate of 9% will be taken as the basis. Based on the calculation over the legal interest rate, 9% + 4.5% = 13.5% is the upper limit for the principal interest rate. Any interest rate exceeding this limit will be considered invalid, even if agreed upon in the contract.
Default Interest
According to Article 120 of the Turkish Code of Obligations, the annual default interest rate agreed upon in the contract cannot exceed double the annual interest rate. In other words, the contractual default interest rate cannot exceed 9% + 9% = 18%. Even if an interest rate above this limit is agreed upon in the contract, the exceeding portion will be considered unlawful.
Interest Rate Applicable to Bills of Exchange
As a result of the transactions made by the consumer, promissory notes that qualify as negotiable instruments may be issued. However, in consumer transactions, for these transactions to be valid, separate promissory notes must be issued for each installment payment. Additionally, bills of exchange subject to consumer transactions can only be issued as registered (named) instruments. In our legal system, promissory notes issued contrary to these conditions are considered invalid from the consumer’s perspective. Compound interest cannot be applied in consumer transactions, including cases of default.
Furthermore, certain restrictions have been introduced in favor of consumers regarding the interest rate applied to bills of exchange. The principal interest applied to bills of exchange cannot exceed fifty percent of the legal interest rate. Therefore, any portion exceeding 13.5%, based on the legal interest rate of 9%, will be considered legally invalid.
In a consumer contract linked to bills of exchange, if the consumer defaults on the payment of the promissory note amounts, the default interest that can be claimed against the consumer cannot exceed double the legal interest rate. In this regard, default interest exceeding 18%, which is double the legal interest rate of 9%, will be considered invalid for the consumer even if agreed upon in the contract. It is also worth noting that compound interest cannot be applied under any circumstances in consumer transactions.
