Illegal entrepreneurial activity and so-called "loansharking" are strictly regulated in Georgia by both the Criminal and Civil Codes. Often, private lenders who issue loans at high interest rates without appropriate licensing or registration become targets of law enforcement agencies. The charge is mainly based on Article 192 of the Criminal Code (Illegal entrepreneurial activity) if the person received a large amount of income from an activity that required a special permit or registration with the National Bank. In addition, charges of coercion (Article 151) or arbitrariness (Article 360) are common if threats or illegal seizure of property occurred during the debt recovery process. Recently tightened regulations regarding the upper limit of interest rates (50% annual effective rate) have created even more legal risks for private lenders. The task of the defense is to prove that the act did not contain signs of a crime or was a one-time civil transaction.
What does Loansharking Defense service cover?
Lawyers specializing in financial crimes offer the following services:
- Audit of loan agreements: Examining existing agreements for compliance with the Civil Code and National Bank regulations.
- Requalification of the act: Arguing that the act was a civil-legal relationship and not a criminal offense (illegal entrepreneurship).
- Defense against coercion charges: Collecting evidence that the debt demand was made through legal means and no threats took place.
- Financial expertise: Accurate calculation of the amount of income received to determine whether it exceeds the threshold for criminal liability.
- Plea agreement: Negotiating with the Prosecutor's Office regarding a fine or suspended sentence.
Common Situations and Scenarios
Legal problems often arise in the following situations:
- Lending without registration: When an individual systematically issues loans for profit but is not registered as a loan issuing entity.
- Exceeding interest rates: Charging interest higher than the statutory maximum limit (50% per year) through hidden fees.
- "Re-registration" of apartments: Signing a real estate purchase agreement with a buyback right instead of a mortgage, which can be assessed in court as a sham transaction.
- Threats against the debtor: Using aggressive methods when demanding debt repayment, which qualifies as coercion.
Georgian Legislation and Legal Framework
The main article is Article 192 of the Criminal Code (Illegal entrepreneurial activity). Also important is Article 625 of the Civil Code, which limits loan interest and penalties. Orders of the National Bank define the rules for registration of loan issuing entities. Criminal liability arises if the illegal activity resulted in a large amount of damage or income. The lawyer's strategy is often based on refuting the sign of "systematicity" — that is, proving that issuing the loan was not a regular business activity.
Service Delivery Process
The lawyer primarily studies the client's financial activity and concluded agreements. If the case concerns illegal entrepreneurship, it is checked whether there was an obligation to register. If the charge concerns coercion, the history of communication (messages, recordings) is checked. The lawyer tries to transfer the case to a civil dispute context, which excludes criminal liability and imprisonment.
Why choose a specialist on Legal.ge?
Cases of loansharking and illegal lending require a lawyer who is well-versed in civil (contract) and criminal law. Specialists represented on Legal.ge will help you draw the line between legal lending and crime. Incorrect defense can lead to confiscation of property and imprisonment. Trust experienced lawyers on Legal.ge.
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