(QCOSTARICA) The entry into force of the reform that established a cap interest rate on loans and credits generated changes in the fast loans sector, including quick lenders such as “Beto” and “Instacredit”.
The decision by these major lenders and others in the Costa Rican financial market is to comply with the reform of Ley 7472 (Promoción de la competencia y defensa efectiva del consumidor), which establishes, among others, that the Banco Central (Central Bank) will set a cap on lending rates in the country.
Last Friday, July 3, the Central Bank capped loans at 37.69%, in colones, and 30.36%, in dollars, and 7.44% for loans in other currencies (ie Euros), 7.44%.
For example, with the maximum interest rate set at 37.69%, Beto suspended loans to new customers.
Beto – formerly known as “Beto lo presta” (Beto will lend you) offering fast personal loans, with little paperwork to low and middle-income populations, has been in the Costa Rica market for the last 10 years and more than 550,000 loans during that time.
The company, part of the Grupo Gente, also has operations in El Salvador, Guatemala and Nicaragua, under brands such as Multimoney and Kuiki.
Before the new cap went into effect, Beto promoted loans of up to ¢8 million colones or US$15,000 up to 60 months, without any type of guarantee or guarantor, approved in less than 24 hours, at a monthly interest rate of 3.25% in colones (equivalent to 39% per year), in addition to a formalization fee of 10%. Beto also offered no-interest credit for up to 24 months at some 300 “affiliated” merchants.
Beto has adjusted its rates to meet the guidelines of the usury law, 3.14% monthly in Colones, and 2.53% monthly for dollar loans, no mention of the 10% processing costs. However, the company is not lending at this time.
A feature of Beto was the “re-presto”, allowing customers to easily take out new loans as they developed a payment history.
“This law obliges us to review the segmentation of future clients and there will undoubtedly be segments that unfortunately we will have to stop attending to due to their risk and associated costs, and that cannot be covered with the rate cap imposed by the law.
“For new clients, we are making the necessary changes both in systems and contractual to adjust and abide by the law, in this way we will restart very soon,” said Alberto Dobles, Beto’s general manager in Costa Rica.
For its part, Instacredit, a company that offers approved loans in 20 minutes and 0 % formalization fees, says it has made adjustments to its structure.
“It (the new law) forces financial institutions to reinvent themselves and seek new product alternatives and solutions that adapt to the new regulatory framework,” said the company in a statement. “In the last 12 months, Instacredit has been making a series of adjustments to its structure, aimed at adjusting the business model to the new reality in Costa Rica, in order to guarantee the business’ survival.”
Instacredit has some 20 years in the Costa Rica personal loans market, with some 1,000 employees and 46 offices, and international operations in countries such as Mexico, Nicaragua, and Panama, part of the Financiero Contigo.