Personal IOUs are protected by law as long as they meet legal conditions. But the interest on IOUs is not unconditionally protected. The maximum interest rate protected by law is four times the market quoted interest rate of one-year loan when the contract is established, and the excess part is not protected by law.
The private loan receipt with the following requirements shall be protected by law: each party has the corresponding civil capacity; The intention of borrowing money is true; The contents of the IOU are legal; And the IOU does not violate the public order and good customs of our country.
[Legal Basis]
Article 26 of the Provisions on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases states that if the lender requests the borrower to pay interest at the interest rate agreed in the contract, the people's court shall support it, except that the interest rate agreed by both parties exceeds four times the interest rate quoted in the one-year loan market when the contract is established.
The term "one-year loan market quoted interest rate" as mentioned in the preceding paragraph refers to the one-year loan market quoted interest rate issued monthly by the National Interbank Funding Center authorized by the People's Bank of China as of August 20, 2019.
