February 12, 2010
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News: Mexico Lawmakers Approve Interest Caps
Some U.S. lawmakers want to see the country take the same steps as Mexican lawmakers in fighting the war against the credit card industry's excessive interest rates. The Central Bank of Mexico has been awarded the authority to control excessive interest rates and fees charged by banks and credit card companies. Mexican lawmakers approved the law on Friday which calls for the central bank to establish rules that will establish an appropriate range and reasonable caps on credit card and consumer loan interest rates.
The Mexico Antitrust Commission supports the new law that states that the Banco de Mexico is to be diligent in assuring that banks will provide credit card and loan customers “accessible and reasonable” borrowing terms. Furthermore, the Banco is given the authority to take the necessary steps to correct the situation, including placing a cap on interest rates. Mexico's Lower House of Congress approved the law after being previously approved by the Senate. No date was given as to when the new legislation would be signed into law by President Felipe Calderon. As in the U.S., credit card companies and banks have cautioned lawmakers that implementing more regulation will limit credit availability and force consumers to borrow from loan sharks.
If foreign banks including those of the U.S. expect to continue doing business in Mexico, they will need to abide by the new law. Mexico authorities have said that the majority of the problems have come from foreign companies that have charged excessive credit card and loan interest rates and unrealistic fees for cash advances and other services. Card interest rates have only recently fallen to an average of 32 percent after reaching over 40 percent. Banks have done so to encourage consumers to get a rein on debt and pay down balances. However, the banks say the Mexico market demands a higher interest rate because of higher risks from excessive defaults and lax laws.