Interest in Turkish Law
The application of interest in our legal system is a measure aimed at protecting the creditor. In a debt relationship, a debtor who fails to pay their debt on the specified due date is considered to be in default. In the event of default, the debtor is required to pay a certain amount of interest to prevent the creditor from suffering a loss of rights. This interest may be determined in the contract, or if not specified, it accrues based on the rate set by law
Statutory interest rate
In cases where the interest rate is not determined by contract, the statutory interest rate set by law will apply. In our legal system, this rate is currently set at 9%.
Interest Rates in Commercial Transactions
TCC ARTICLE 8-
(1) The interest rate in commercial transactions is freely determined.
(2) The condition of adding interest to the principal and applying interest again, provided that it is not less than three months, is valid only in current accounts and loan agreements that qualify as commercial transactions for both parties. However, this paragraph does not apply to parties who are not merchants.
Pursuant to Article 9 of the Turkish Commercial Code (TCC), statutory interest, principal interest, and default interest apply to commercial transactions.
According to Article 1 of Law No. 3095, if the interest rate is not specified in the contract, the statutory interest rate will be calculated as 9%. In commercial transactions, the interest rate applicable to advance transactions was set at 16.75% annually by the Communiqué on the Determination of Discount Interest Rates to be Applied in Rediscount Transactions, published in the Official Gazette on 02.01.2022. This rate constitutes the aforementioned default interest.
Interest Rate in Advance Interest
In debts related to a commercial enterprise, if the debtor is also a merchant, it is possible to demand advance interest. The creditor is not required to have merchant status. The creditor may request advance interest from a merchant debtor for claims arising from any cause, including wrongful acts. The advance interest rate has been set at 16.75% annually.
Interest Rates on Consumer Claims
In the event that the consumer defaults on their loan payment, the default interest that the lending institution may demand is regulated in Article 18 of the Consumer Credit Contracts Regulation.
Article 18/2 of the TKSY (Consumer Credit Contracts Regulation) stipulates that, in case of default or late payment, a delay interest rate higher than thirty percent of the contractual interest rate specified in the contract cannot be collected from the consumer. Otherwise, the lender is obligated to pay the consumer interest calculated at thirty percent above the contractual interest rate for the period between the date the excess amount was collected and the date it was actually refunded to the consumer.
In consumer transactions, the statutory interest rate of 9% applies.
Example Court of Cassation Decisions
(Formerly closed) 6th Civil Chamber 2013/16606 E., 2013/17177 K.
1- The decision issued by the execution court, with the date and number mentioned above, has been appealed by the defendant within the prescribed period. After reviewing all the documents in the case file and considering the necessary deliberations, the case was examined.
The creditor (plaintiff) initiated an enforcement proceeding against the debtor (defendant) for unpaid rent. Upon the debtor’s objection, the creditor requested the execution court to remove the objection and claim enforcement indemnity. The court decided to remove the objection to the interest rate and impose enforcement indemnity on the principal debt at a rate of 20%, with a principal of 18,040 TL and accrued interest of 8,326.27 TL. The decision was appealed by the defendant.
2- Article 120 of the Turkish Code of Obligations No. 6098, which came into effect on 1.7.2012, regulates default interest. According to this article, “If the annual default interest rate to be applied has not been agreed upon in the contract, it will be determined according to the legal provisions in force at the date the debt arises. The annual default interest rate agreed upon in the contract cannot exceed 100% of the rate determined under the first paragraph. If the contractual interest rate has been determined but the contract does not specify a default interest rate, and if the annual contractual interest rate is higher than the rate specified in the first paragraph, the contractual interest rate will apply as the default interest rate.”
Additionally, in Article 88 of the same law, it is stated, “If the annual interest rate to be applied to the obligation to pay interest has not been agreed upon in the contract, it will be determined according to the legal provisions in force at the date the debt arises. The annual interest rate agreed upon in the contract cannot exceed 50% more than the rate determined under the first paragraph.”
3- RESULT: For the reasons explained in paragraph 2 above, the defendant’s appeal objections are accepted, and the decision is to be REVERSED in accordance with Article 428 of the former Civil Procedure Code (HUMK) and Article 366 of the Enforcement and Bankruptcy Law (İİK), taking into account the temporary Article 3 added by Law No. 6217 to the Civil Procedure Code No. 6100.
- Civil Chamber 2018/12187 E. , 2018/12592 K.
The debtor’s attorney, in their application to the execution court, claimed that although the enforcement order included a request for the principal debt, attorney’s fees, and litigation costs, interest was requested without specifying the annual interest rate and without indicating which receivable would accrue interest and at what rate from which date. They argued that the interest amount was excessive and that only 9% annual interest could be claimed for attorney’s fees and litigation costs. They requested that the enforcement order be canceled. The court, finding that the enforcement request and the enforcement order did not specify the starting date and rate of interest for each receivable and that interest had been requested on interest, decided to correct the enforcement order. The correction was to apply re-discount interest on the principal debt (2,000.00 TL) from the date of the enforcement proceeding, with varying rates, and to apply 9% legal interest (and varying rates) on the receivables for attorney’s fees and litigation costs, as stated in the decision upon which the enforcement was based.
The decision was appealed only by the creditor’s attorney. After the appeal review, it was concluded by the 8th Civil Chamber of the Court of Cassation that since the type of interest for the principal debt was not specified in the judgment upon which the enforcement was based, it should be accepted that legal interest would apply to the receivables. The amount of interest requested in the enforcement order should be examined and decided according to the outcome. As a result, the court decision was overturned.
In the decision of the Commercial Court of First Instance, Case No. 2013/24, Decision No. 2013/66, dated 11/04/2013, it is stated: “…The sum of 1,000.00 TL for material compensation shall be collected from the defendant for the plaintiff’s benefit, with re-discount interest from the date of the lawsuit. The excessive claim is REJECTED. The sum of 1,000.00 TL for moral compensation shall be collected from the defendant for the plaintiff’s benefit, with re-discount interest from the date of the lawsuit. The excessive claim is REJECTED.” This shows that the type of interest for the principal debt is specified in the judgment upon which the enforcement is based.
Therefore, since the judgment upon which the enforcement is based specifies the type of interest for the principal debt, the court decision is correct. Considering that the creditor is the appellant, the court decision should be upheld. However, the 8th Civil Chamber of the Court of Cassation erroneously overturned the decision, and the request for a decision correction should be accepted.
CONCLUSION: With the acceptance of the creditor’s request for decision correction, the 8th Civil Chamber of the Court of Cassation’s decision dated 05/12/2017, 2015/15250 E. – 2017/16192 K., is annulled, and the decision of the 17th Execution Civil Court dated 24/02/2015, Case No. 2014/854 E. – 2015/208 K., is upheld in accordance with Articles 366 of the Enforcement and Bankruptcy Law (İİK) and 438 of the Civil Procedure Law (HUMK) for the reasons explained above. The decision was made unanimously on 03/12/2018.
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