Central Bank Rejects Setting Maximum Interest Rates

In El Salvador, opponents of the law are proposing a maximum credit card interest rate controlled by the Central Bank.

Thursday, September 17, 2009

Authorities from the Central Bank (BCR), the Superintendence of the Financial System and the Consumer Defense Directorate, presented a new law proposal to the Legislative Assembly.

"... there are several drawbacks in the project being discussed in Congress. Among them is Article 19, which would set a maximum interest rate of 10% over the average rate calculated by the Central Bank", reported Elsalvador.com.

More on this topic

Bill to Regulate Plastic Money Rejected

July 2011

The Costa Rican National Assembly has archived the draft bill on Regulating the Credit and Debit Card market.

The project presented under the previous administration sought to establish new parameters for the development of contracts between issuers and cardholders and to set limits on the interest charged.

El Salvador: Credit Card Law in September

August 2009

The new law will oversee issuance, operation, administration and closure of credit and debit cards.

Some of the aspects included in the new legislation will be commissions, fees for late payments and interest rates.

Representative Blanca Coto commented in newspaper ElSalvador.com: "We intend to protect the user from abuses, … and obviously to lower interest rates".

Salvadoran Banks Oppose Fixing Interest Rates

July 2009

A credit card law proposal being studied by the Legislative Assembly would set a maximum interest rate of 22%.

Both the Banking Association of El Salvador (ABANSA), and the National Private Enterprise Association (ANEP), support the creation of a credit card law, that would provide greater transparency to the market, but disagree in regulating interest rates.

El Salvador: Credit Card Law in its Final Stretch

July 2009

It will regulate the relationship between cardholders and issuers, by defining rules regarding contracts and interest rates.

With the new law, interest rates shall not be more than 10 points above the effective weighted average rate calculated by the Central Bank.

Guadalupe Hernández writes in Elsalvador.com: "For example, the average interest rate for a one year loan is 9.2%, so credit card rates could not be above 19.2% with the new law. However, in reality issuers charge interest rates that fluctuate from 29% to 38.9% for a $1.000 loan."

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