Excessive interest rates in Costa Rica may soon be a thing of the past, with an ambitious plan by the Ministry of the Economy preventing banks and retailers from abusing consumer rights by charging excessive interest.

Consumer credit interest in Costa Rica, particularly credit card and retail store credit, can range from 40%  to 62% per year.

On Monday, the government sent a bill to the Legislature to limit interest rates of banks and stores, on credit both in colones and dollars.

The bill, is approved by legislators, would forbid credit when the interest rate charged is more than double the average rate over the past three months in the regulated national financial system.

For example, the average interest rate over the past three months for credit in colones was 17.39%, meaning the maximum rate allowed if the bill were already approved would currently be 34.77%, the Economy Ministry said in a statement. The average rate for loans in dollars over the past three months was 10.90%, and would be capped at 21.80% if the bill were in effect now.

The Central Bank (Banco Central de Costa Rica)  would publish the interest rate limit for credit every three months.

Costa Rica scrapped limits on dollar loans in July as economic turbulence abroad and weaker harvests pushed the Central Bank to cut the country’s growth outlook sharply.

Last January, caps on lending were announced in a bid to curb a credit boom driven partly by the gap between local and U.S. interest rates, along with capital controls on foreign investment, which are still before the Legislative Assembly.

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