The Finance Commission of the Chamber of Deputies tomorrow will discuss the articles of the project that seeks to modify Law 18,212 that regulates interest ratesof usury and credit operations in Uruguay.
The project was presented in 2020 by the deputy of the People’s Party, Daniel Pena, with the aim of regulating the high usury rates that are charged in the country, an action that constitutes a crime but that happens too often.
The initiative was already approved last week at the general level in committee by 9 votes out of 10 — the only negative was by the representative of Town meeting-; while the greatest difficulties could be faced tomorrow, when the articles and the most controversial points from the point of view of the country’s banks are discussed.
What is the project looking for?
As Peña explained in dialogue with Radio Carve, “what needs to be regulated is the interest rate that Uruguayans are charged, in a country where we have investor grade —that is, that money is obtained cheaply in the international area—, and that for years we have had a inflation less than double digits”Peña indicated. “So charging and letting Uruguayans charge interest rates of 170%, 180%, 200% or 230% is directly theft; and that is usury and that is a crime that we are allowing to operate within the law.”
For the deputy, “the only way to solve this problem is modifying the usury law”. “What we have to do is quickly approve this bill that already has two reports from the Central bank, who enjoyed great support at the time and also had commitment within the government coalition,” said Peña.
Regarding the current situation of high usury rates, the People’s Party legislator pointed out that the problem is that “the Finance system in Uruguay was left in very few hands, they are five banks They basically control the 95% of the financial market and this caused the average bank rate to skyrocket, which is why the interest rate allowed to banks and their finance companies was multiplied by five.”
This, in turn, happens because the current law allows banks to report their entire operation, as well as that of financial companies and banking houses, in the same report; so the average bank rate “which was around 30% went to around 100%”.
In this sense, one of the most important articles of the project—and on which there is already strong pressure from the banks—seeks that this report contains only the average rate of the banks, without incorporating the other entities. “That makes drop between 50 and 60 points what people are being charged,” Peña noted.