Banks permitted to raise loan interest without informing borrowers

(Photo: Freepik)
AMMAN — Banks in Jordan have the right to raise interest rates without consulting borrowers, according to Director-General of the Jordan Banks Association (JBA) Maher Al-Mahrouq, Hala News reported.اضافة اعلان

The Consumer Protection Department at the Central Bank of Jordan (CBJ) has been receiving complaints about banks raising interest rates without informing borrowers, according to the department director, Raja Al-Khawaldeh.

In a statement issued on Thursday, Mahrouq explained that, as stipulated in the contract signed between the two parties (a bank and a borrower), the bank has the right to raise interest rates in accordance with the decisions of the CBJ, which also supervises all loan contracts.

 “The contract is the law,” Khawaldeh said. “Borrowers allow banks to raise interest rates within their contracts,” which include a clause to that effect.
“The contract is the law,” Khawaldeh said. “Borrowers allow banks to raise interest rates within their contracts.”
An increase in a loan’s interest rate is generally linked to a rise in national interest rates, according to Mahrouq. However, banks may not raise interest rates on loans at the full rate of national hikes, as this would place “a huge burden on borrowers”. Instead, the rate of increase is determined by market competition and other financial determinants, he explained.

In 2022, the CBJ raised interest rates in the Kingdom seven times, with a combined hike of 4 percent, however this increase has not been fully reflected in loan interest rates, he said.

Mahrouq pointed out that borrowers have the right to submit objections with the central bank’s Consumer Protection Department, which, according to Khawaldeh, deals with and resolves all complaints.

Read more Business
Jordan News