El Salvador: Credit Card Law Needs Improvement

©image: Andres Rueda

Armando Arias, head of the Association, argues the law needs to better define how to calculate effective rates.

Laprensagrafica.com reported: "The deadline for credit card issuers to modernize their information systems is another point in need of clarification, argued Arias. 'We had agreed on 60 days, but some passages of the law still refer to 8 days', he explained".

Source: laprensagrafica.com

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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."