BAC Credomatic, Costa Rica’s largest private bank, announced this week that it is closing eleven of its outlets, canceling 187,000 customer credit cards, and laying off 373 of its employees. Many of BAC’s loyal clients have been contacted and told their credit cards will be cancelled within 60 days. Several other changes will be implemented in the coming months, apparently all due to the new law, Ley 7472, Promocion de la Competencia y Defensa Efectiva del Consumidor – the law against credit usury.
Given the track record of BAC in Costa Rica as well as in six other Central American countries, this dramatic transition caught many people off guard. In 2018, BAC Costa Rica had grown its net income to $115 million from $77.2 million in 2017, cementing its position as the largest private bank in the country. BAC Costa Rica generated 25% of BAC’s earnings in all of Central America. The bank’s assets had climbed to $6.3 billion by the end of 2018, up from $5.9 billion a year earlier. (Figures from Latin American Finance News).

BAC made these decisions in advance of the July implementation of Law 7472, and after a thorough viability analysis which indicated the new regulations against usury rates would mean credit card rates would have a ceiling of 37.69% for credit cards, and 53.18% for microcredit. Higher interest rates would now be considered usury, and therefore illegal. Keep in mind that credit card interest rates in the United States usually average 18.8 %, for comparison.

BAC says that as of September 3, 2020, all monies owed on BAC credit cards will be entered into a collection system which will allow clients up to five years to pay them off. Frederico Odio, manager of BAC Credomatic commented, “We are evaluating new products in credit and microcredit which will allow us to continue serving these clients within the new laws and regulations.” The new regulations will not be retroactive for previous monies owed.
Odio went on to say, “We regret these decisions, although we deem them necessary and responsible. We pledge to continue servicing our clients and helping them with their finances, both personal and business.” He went on to describe the difficulty of doing business during the COVID-19 pandemic, and the many challenges faced by BAC during these difficult times.

Studies by Costa Rica’s Ministry of Economics, Industry and Commerce (MEIC), reveal that 70% of all credit cards circulating in Costa Rica are charging more than 40% interest rates, with the majority issued by private banks.
Frederico Odio of BAC summarizes his bank’s decision to cease charging the high rates which have made the bank so successful. “We find ourselves obligated to take these decisions due to our respect for the new law. Unfortunately, many people will be adversely affected due to our inability to serve them using our previous business model.

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