Actualidad Chile

Prohibiting the charging of compound interest

Bill for the amendment of Act 18.010

Act 18.010/1981, on rules for credit operations and other monetary obligations, sets out that: “Payment of interest on interest payments may be stipulated, and may be capitalized at each maturity or renewal date. Under no circumstances may such interest be capitalized for periods of less than thirty days”.

There are currently two Bills aimed at eliminating these abusive practices. Both are parliamentary initiatives not sponsored by the Executive. One aims to eliminate compounding of interest absolutely and the other aims to eliminate compounding and the clause for shortening terms in financing and refinancing transactions. Both proposals are part of the ongoing efforts seen in recent years in relation to consumer rights protection, particularly in the financial sector.