19.03.2024

Author:Nazlıgül Akdemir

In Turkish legal system, regulations regarding interest are included in the legislation disjointly, and the main provisions are included in the Turkish Code of Obligations, the Turkish Commercial Code, and Law No. 3095 on Legal Interest and Default Interest. Interest, an accessory debt in its legal nature, can be defined as the price paid to the creditor due to the deprived money receivable.

Although interest can be classified according to various criteria, it is divided into two in terms of its nature: principal interest and default interest. However, it is possible to distinguish between legal interest and contractual interest in terms of the source of both types of interest. The term legal interest is used when the interest rate is determined by law, and contractual interest is used when the parties determine it.

Whether a transaction is considered an ordinary or a commercial transaction brings with it some differences in terms of interest. The purpose of this legal brief is to provide summary information about the types of interest applied in commercial transactions and in specific situations.

Principal Interest (Capital Interest):

Principal interest is the interest paid up to the due date of the debt because of the deprivation of this money for a certain period of time. In other words, principal interest is the interest accrued up to the due date of any monetary claim, as agreed by the parties or as required by law.

In commercial transactions, the rate of principal interest can be determined freely (Turkish Commercial Code art. 8/1). The limits of this freedom are drawn by the rules of ethics and the provisions of the Turkish Code of Obligations on lesion . If the agreed interest is excessively high and threatens the economic existence of the debtor, it may be reduced by the judge. On the other hand, since it is not possible for the debtors, who are a merchant, to have no experience in commercial transactions, it may be possible for them to declare that they are not bound by the contract due to the existence of a difficult situation.

On the other hand, whether the provision of the Turkish Code of Obligations article 88/2 “The annual interest rate to be determined by the contract cannot exceed fifty percent more than the annual interest rate determined by the first paragraph.”  is valid or not in commercial transactions is controversial in the doctrine and the Supreme Court decisions.

If there is no agreement between the parties regarding the interest rate, the principal interest rate is applied as 9% per year (Article 1 of the Interest Law No. 3095).

Default Interest (Interest for Delay):

Default interest is the interest that must be paid to the creditor for the period of delay in the payment of the debt due to not fulfilling the money debt on time. If the debt is not paid on the due date and the default conditions occured, the debtor is obliged to pay default interest upon the request of the creditor, even if there is no fault of the debtor and it is not agreed in the contract that default interest shall be paid.

For default interest arising from commercial transactions, the parties may freely determine the default interest rate (Turkish Commercial Code art. 8/1, Interest Law no. 3095 art. 2/1).

There is no consensus on whether the provision is valid brought by Article 120/2 of the Turkish Commercial Code "The default interest rate to be determined by the contract cannot exceed one hundred percent more than the annual interest rate determined by the first paragraph" in commercial affairs just like in principal interests.

If there is no agreement between the parties regarding the default interest rate, the default interest is applied based on the capital interest rate of 9% per year. (Interest Law No. 3095, article 2/1)

An exceptional situation is foreseen in the legal default interest with interest Law no. 3095 art. 2/2. Accordingly, If the interest rate applied by the Central Bank for short-term advances on December 31 of the previous year is more than the amount determined by Article 1 (more than 9%), default interest may be claimed at this rate in commercial transactions, even if there is no contract.

Another point that should be taken into consideration is that if the default interest is paid late, no default interest can be claimed. (Turkish Code of Obligations art. 121/2)

Regarding other types of interest, rediscount and advance interest are regulated in Article 45 of the Central Bank Law No. 1211.

Rediscount Interest:

The term of rediscount refers to the rediscounting of discounted values, that is, values that change hands for a price, to change hands again. Commercial bills and certificates issued by banks can be accepted to meet the liquidity needs of commercial life.

The Central Bank sets all the conditions and rules for rediscount transactions, and the interest applied by the Central Bank for these transactions is called the "rediscount interest rate". The rediscount interest rate is determined by taking into account the money supply and credit expansion in the economy, and the last rate updated on 23.12.2023 is 43.25%.

Advance Interest:

The Central Bank may also grant advances in return for bills that it can accept for rediscount. (Central Bank of Republic of Türkiye Law art. 45/2)

The interest rate applied in advance transactions is regulated by the Central Bank in line with the monetary policy principles and the annual rate determined on 23.12.2023 is 44.25%.

Article 2/2 of the Interest Law No. 3098, attributes to the advance interest rate in terms of the interest rate applied in commercial transactions.

As a result;

Interest is regulated by many general and special laws in our legal system. It can be classified in various ways according to its source and nature. However, the main purpose of interest is to compensate for the deprivation of a certain amount of money under the law or contract. The fact that a transaction is considered a commercial transaction is a characteristic for the application of interest. The most important example of this is that interest can be charged on some types of interest even if it is not contractually or otherwise agreed, and that interest can be charged at a higher rate than in normal business.