Sunday 5 February 2023

Costa Rica’s Central Bank publishes new ceilings for ‘usury interest’

The Central Bank published, on January 7, the new ceiling rates for loans in colones and dollars as established by the so-called ‘usury interest law’

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4 February 2023 - At The Banks - BCCR

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QCOSTARICA – The maximum annual interest rates on loans for financial, commercial and microcredit operations, in colones or US dollars, fell for the first half of this year, according to the publication made, this January 7, the Banco Central de Costa Rica (BCCR) – Central Bank – on its website and in the official newspaper La Gaceta.

“Gente Verde” safeguard the entrance to the Banco Central in downtown San Jose

The calculation of the maximum annual interest rates and their publication must be carried out by the Central Bank in the first week of January and July of each year, in accordance with the provisions of article 36 bis of Law No. 7472 on the Promotion of Competition and Effective Defense of the Consumer, added by Law number 9859, of June 11, 2020, popularly known as the “usury interest law”.

See here the official statement from the Central Bank.

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“The maximum rate includes all formalization or administration commissions. It is not an effective rate, in the financial sense, but it is effective in that it not only takes the rate of credit and other charges. What is allowed, and is outside that effective rate, is the collection of charges for the evident performance of an administrative collection management,” explained Danilo Montero, director of the Office of the Financial Consumer.

According to a statement released this morning, to calculate the new interest rates, the Central Bank used the simple average of the monthly negotiated active interest rates for the previous 12 months (in this case, for the period between January 2021 and December 2021).

The interest rate for each month is the weighted average (the amount borrowed is taken into account) of the active interest rates (for loans) for all credit operations carried out during the respective month. The weighting is based on the amount of the corresponding transaction.

For loans in colones, except microcredits, the maximum rate for the first semester of this year is 33.44%; 0.22 percentage points less than the one in force for the second half of 2021, and 27.98% for loans in dollars, that is, 0.71 percentage points less compared to the last fixation.

In the case of microcredits, the rate in colones fell 0.31 percentage points to 47.27%, and that of dollars, 0.99 percentage points to 39.69%. In other currencies, it fell 0.47 percentage points to 5.86%.

According to the Law, a microcredit is understood to be any credit that does not exceed a maximum amount of 1.5 times the base salary of the clerk of the Judicial Power.

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Credit cards are excluded from microcredits.

The Law indicates that it will be the responsibility of the General Superintendency of Financial Entities (Sugef) to ensure, on a monthly basis, that no credit that exceeds the amount corresponding to a microcredit is charged a rate higher than the maximum annual interest rate for all types of credit.

In the event of a non-compliance, the Superintendency must report this fact to the Prosector’s Office to determine if it will file charges of usury.

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