House: statutory interest rate lowered
Legislation decreasing the statutory interest rate for the first time in more than 40 years was approved in the House of Assembly on Friday.
While the Statutory Interest Rate Reduction Act tabled by the Progressive Labour Party proposed halving the rate, members of the One Bermuda Alliance argued that the changes would have unintended consequences.
The passing of the Bill — along with legislation decriminalising small amounts of cannabis — was described by the PLP as evidence that the OBA had lost “control of the House”, prompting Opposition leader David Burt to table a vote of no confidence in the Government.
Detailing the legislation, Mr Burt said the statutory interest rate, which is used in judgment debts, has remained unchanged at 7 per cent since 1972.
While he said the Bermuda Monetary Authority have the ability to change the rate, but have failed to do so despite falling interest rates elsewhere.
By halving the rate to 3.5 per cent, he said it would help those struggling to pay debt — although it would not affect interest rates for bank loan, mortgages or any other contract in which another interest rate is specified.
“At the end of the day, people who are suffering are having their suffering compounded with a high rate of interest,” he said. “It's now time for this parliament to act.”
Bob Richards, the Minister of Finance, however, said that in judgments the rate is 2 per cent lower than the statutory rate, so reducing the statutory rate to 3.5 per cent would have undesired consequences.
While Mr Burt noted cases of poor people struggling with high rates, Mr Richards said the change would also benefit those who can pay but refuse to.
“There is a much broader spectrum than is being portrayed in this house. How in circumstances like that can you justify an interest in default of 1.5 per cent,” he said. “It's not fair. It's not equitable.”
He also said that even if the amendment passes, the BMA could change the rate back the next day, with the Minister's approval.
“This is not a voting matter,” he said. “What's the point of this, other than grandstanding?”
While Wayne Furbert and Zane DeSilva reiterated that the amendment would help those who are struggling, OBA MPs responded that landlords who are struggling to get rent and single parents trying to get child maintenance payments could be faced with greater challenges.
However, independent MP Shawn Crockwell said he could not see why reducing the rate would suddenly disadvantage the creditor.
“If that money was somewhere else, they won't be attracting 7 per cent, they won't be attracting 5 per cent, 4 per cent, 3 per cent.”
He said the rate should be proportionate, adding that 7 per cent is clearly too high.
“I think it should be commensurate to what the normal interest rate is — obviously it shouldn't be the same,” he said. “At the end of the day, the question should be asked is, ‘will this help some individuals?'
“Keeping it at 7 per cent is not going to make rogue debtors pay — they are not paying it now.
“What did make them pay was locking them up but this house did not like that either.”