Law Would Limit Amount of Consumer Credit Interest

YERUSHALAYIM -
credit card, bank card, China

The Knesset Law and Constitution Committee has authorized for its second and third reading a law that will set limits for the amount of interest a bank or credit card company can charge individuals – and penalties for those who violate the laws.

The law distinguishes between two levels of maximum interest, with different penalties assigned to violations of those levels. Maximum interest rates that can be charged individuals will be set at the Bank of Israel prime interest rate, currently 1.5 percent, plus 15 percent. Charging interest above this amount will subject offenders to fines of several million shekels. If interest beyond the prime rate plus 30 percent is charged, the offender could face three years in prison.

The main targets of the law are lenders in the “gray market,” who provide loans mainly to individuals who are unable to get loans from banks, or who cannot meet the collateral or other requirements of banks. There are dozens of such firms, and while most of them are considered legitimate, there are a number suspected of organized crime connections that charge excess amounts of interest.

Currently, all credit card companies maximum interest rates are under 16.5 percent.