Hebrew daily “Yediot Ahronot” reports that the Bank of Israel has forbidden the banks and credit card companies from changing the interest added to the basic rate. The Banking Supervision Department sent a draft circular on the subject to the banks and credit card companies several days go.
The Banking Supervision Department stated, "The banks and credit card companies sometimes grant loans in which the added interest rate basis varies over the loan's lifespan, according to decisions taken by the bank or, ostensibly, in accordance to negotiations between the bank and customer." The Bank of Israel added that it was referring to installment loans and installment payments, among other things.
The Bank of Israel stated that in view of the court ruling on the subject and banking regulations, the interest added to the basic rate may not be increased during the loan period, unless this is stipulated in advance and the dates are specified in the loan agreement.
The order will also apply to existing loans and credit transactions (payments by credit cards). The Bank of Israel stated that changing the interest added to the basic rate during the loan period was tantamount to changing the terms set by the bank, while the customer was a captive audience with no bargaining power.
Published by Globes [online] - www.globes.co.il - on September 7, 2003