On June 20th of this year, the new law number 7472 that regulates interest rates, “Promotion of competition and effective consumer defense”, also popularly known as the “usury law”, was published in the Official Gazette. This law establishes, among other aspects, the methodology that must be used to set the maximum interest rates, from which the crime of usury shall be considered to exist.

According to the Office of the Financial Consumer (OCF), there are ten basic elements to understand the implications of this new Law, which are:
1. Methodology to determine maximum interest rates: The law defines a calculation methodology so that, instead of fixed rates, every six months it is allowed to know the maximum rate for loans formalized as of that date, considering the weighted averages of existing credits. Accordingly, the maximum rates will vary over time.
2. Limits for credit interests: The law establishes three limits. The first is for all types of credit, including credit cards, which will have an initial cap of 39%. The second limit is for microcredits (loans that do not exceed c.675,000.00), which will have an initial cap of 55%. The last limit is for contracts, businesses or transactions agreed in other currencies, which will be set using the average of the last 12 months of the interest rates negotiated in the “Other Depository Companies” group, in dollars, which is calculated by the Central Bank.
3. The BCCR: The Central Bank of Costa Rica will be the entity in charge of calculating and establishing the maximum rates twice a year, and the update must be published in January and July, both in La Gaceta and on its website.
4. What is not part of interest rates: There are charges, such as administrative collection management, that will not be part of the interest rate; however, they may not exceed 5% of the portion of the principal payment that is in debt and may not exceed the amount of USD $12.00.
5. Moratorium interest rates: The recently published law also creates a regulation for this type of rates. In the case of banks and their financial groups, they will be set according to article 70 of the Organic Law of the National Banking System. In addition, they must comply with what is indicated in article 498 of the Commercial Code.
6. The Comparability Index: This is one of the most important tools that the consumer will have, since they will be able to find the entire offer of credit products, including data on interest rates and others. This index will be calculated by the BCCR and the MEIC, it will include individuals, legal entities, and electronic means of payment.
7. Criminal charges: The requirement of disproportionate interests against the limits established by the Law, will constitute the crime of usury, which has a prison sentence ranging from 6 months to 2 years, or from 20 to 80 days fine. This penalty may be doubled when committed to the detriment of consumers and users.
8. Obligations of the offeror: Before being able to provide a credit, the offeror must ask the debtor for authorization to have access to the SUGEF Credit Information Center. In addition, they must provide the user with prior information in writing, in a clear and updated way regarding the interest rate.
9. Rights of the financial consumer worker: Workers may request their employers to withhold quotas for the payment of their credits, as long as there is a prior agreement between the worker, employer and the financial entity.
10. No retroactivity: According to the new law, the new limits or caps on rates will not apply to credits that were formalized prior to the law’s entry into force.

The publication of this new law represents a financial relief for those users who are looking for new credits or who are considering applying for credit cards, since interest rates will be reviewed every six months so that they are not contrary to what the law indicates.

If you require advice on this matter, ERP Lawyers puts at your disposal a specialized team on the matter. Do not hesitate to contact us.