Private banking sector representatives noted that the changes were approved without having performed prior technical analysis and this threatens their legal certainty.
"They also criticized the fact that their views, raised previously, about the inconvenience of setting this limit on fees were not taken into account when the issue was first discussed in the Assembly in late 2009," reported Laprensagrafica.com.
The decree, which has not yet received approval from the President, "requires issuers and co-issuers to limit the interest rate to up to eight times the rate that banks pay on savings to the public with one a year term times (currently 2.29%). This entails a ceiling rate of 18.30%. Currently in the market, the interest rate on credit cards is somewhere between 7% and 49.99% per annum. "
This measure will mean for the sector a significant reduction in the supply of credit which currently is being filled via credit cards.
Source: laprensagrafica.com
More on this topic
September 2009
In El Salvador, opponents of the law are proposing a maximum credit card interest rate controlled by the Central Bank.
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.
July 2009
According to ABANSA, the proposed maximum 22% rate would affect credit cards with a $1.000 limit or less, 59% of the market.
The Salvadoran Banking Association, known as ABANSA, warned of fewer supply of credit cards with less than $1.000 limit, if the credit card law proposal being studied is approved.
November 2009
Among the new regulations, fees for late payments cannot be higher than $25.
This law has been discussed by the Legislative Assembly for 7 years. It forces issuers to send statements to their customers with 15 days of anticipation, but refrains from set maximum interest rates.
September 2011
The new law places limits on the maximum interest rates that issuers can charge.
With the aim of establishing an appropriate legal framework, representatives have approved a reduction in the maximum interest rate as part of the Law on Credit Cards.
The lack of knowledge about how to use this method of financing in the country is one of the reasons why the reform was proposed, as several representatives believe it is essential to regulate the activity and better educate consumers on the use credit card loans.
español
1601
