Proposal to cut credit card interest rates by 30% in the Dominican Republic and set a 45% cap

Santo Domingo — Deputy Alcibíades Tavárez, of Fuerza del Pueblo for the province of San Pedro de Macorís, introduced a bill seeking to amend Monetary and Financial Law 183-02 to cut by 30% the interest rates charged by financial institutions on credit card financing in the Dominican Republic.

The bill, filed Tuesday in the Chamber of Deputies, proposes an initial 30% reduction of current rates, applying to both existing financed balances and new transactions. It also creates a Maximum Credit Card Rate (TMTC), calculated with reference to the Weighted Average Active Rate for consumer credit in national currency plus a regulatory margin to be set by the Monetary Board, with an absolute cap of 45% per year.

The bill provides that if the 30% reduction places a rate below the maximum limit, financial institutions must keep the rate most favorable to the consumer, without using the legal cap as an argument to raise a previously lower interest rate.

It also expressly prohibits charging interest on amounts that have already been paid: payments toward principal would immediately reduce the outstanding balance on which surcharges are calculated. If an institution makes charges contrary to those provisions, it would be required to return the funds or credit them to the consumer.

On transparency, monthly statements would have to detail the debt principal, interest, commissions, charges, minimum payment and annual rate, and include an estimate of how long it would take the cardholder to pay off the debt if only the required minimum payment is made.

In presenting his proposal, Tavárez called it "unconscionable" that while the average active rate for bank loans ranges between 14% and 15% per year, credit cards are charged a rate close to 60% per year, nearly four times the cost of average commercial or personal financing, according to De Último Minuto.

Photo: Expreso Digital

Source: Expreso Digital