"Its provisions can be exploited by people who refuse to co-operate," bank association representative
The government's intention, according to the finance minister, is to regulate the fluctuation of interest rates from now on.
"The intention is to set the lending rate from now on. With the approval of the bill, banks will not be able to raise the rates unilaterally," he told the committee, meeting to discuss the foreclosure legislation.
However, the minister added, it was not illegal if a bank charges 3.0 per cent in late payment interest last year. If that rate was unreasonable though – 10 per cent – then borrowers have the right to go to court.
The bill puts a 2.0 per cent cap on late payment interest.
The bank association however, disagreed with the bill in its entirety because saying it would have negative effects on the banks while the benefits for borrowers were doubtful.
Plati said if the banks cannot raise the rate they would probably set one as high as possible from the onset in a bid to cover any future risks.
The late interest cap was also a sticking point as sometimes the cost for the bank could be over 2.0 per cent.
The attorney-general said it would not be easy to make the bill retroactive without first carrying out an impact study.
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