Published and draft legislation - Colombia

Interest rates chargeable on commercial transactions

Draft decree, interest rates and types of credit

The Colombian government presented this bill to include limits on the interest rates that can be charged on commercial transactions not carried out by financial institutions.

Thus, it aims to include various types of credit within the list of lending categories already established by Colombian legislation within Decree 1074/ 2015 “Decreto Único Reglamentario del Sector Comercio, Industria y Turismo”. These are:

  • Microcredit: This is the financing of a specific business unit and is allowed to charge a higher return than is authorised for ordinary retail lending.
  • Ordinary retail lending: This is the default type of credit, with no specific purpose, subject to the general ceiling on interest rates determined by Colombian law (1.5 times the Current Bank Interest certified by the Colombian financial supervisor, Superintendencia Financiera de Colombia).
  • Low-volume consumer lending: This is a recently created kind of lending, for no specific purpose and with limits regarding the amount that can be lent. A higher interest rate can be charged than on ordinary retail lending.

Pros and contras

This bill gives greater control to the Industry & Commerce supervisor over retail lenders that may be granting credit with interest rates above those permitted by law. It is intended to increase protection for consumers. However, it may be problematic to apply, since the dynamics of these types of credit are more suited to the financial sector than to the trade and services sector. Moreover, financial institutions are already bound by the additional regulation to which the trade and services sector are not subject, such as provisions against their loanbook, credit risk administration, etc.

The higher rates may be attractive for the non-banking sector, leading merchants to take higher credit risk with their customers without having lending experience or expertise, diverting their focus from their principal economic activity.