Maximum interest rate for consumer loans to be adjusted to low interest rate level

The maximum interest rate for consumer loans prevents abuses in the credit system. In addition to state price monitoring and regulations against overcharging and usury, it protects consumers from becoming overindebted. It also reduces the risk of financial institutions granting more risky loans due to a high profit margin.

In 2003, the Federal Council set the maximum interest rate for consumer loans at 15% per year. The persistently low level of interest rates now requires an adjustment. According to the will of the legislator, the maximum interest rate should be dependent on the level of refinancing costs. The Federal Council is therefore proposing a calculation mechanism based on the costs that the financial institutions, for their part, have to pay for the borrowed money. The maximum interest rate is made up of the three-month Libor, which is determined in each case by the National Bank, and a surcharge of 10 percentage points, whereby the value calculated in this way is rounded up or down to the nearest whole number.

Currently this results in a maximum interest rate of 10 percent.

What negative impact could this change maximum interest rate on consumer loans have for the consumer?

On the occasion of the introduction of the maximum interest rate, various arguments were put forward against its introduction.

• People who did not have the best debtor qualities could no longer get loans in the future
• Less generous lending due to falling yields will be the result
• It could drive the consumer into illegality

A maximum interest rate of 12% would therefore be a reasonable solution. The credit banks would be able to continue to grant loans at the same rate, even if yields were to fall moderately. You as a consumer would thus benefit twice over. 

 

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