Anti-usury policies and regulations

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The Italian anti-usury law (Law 108/1996) introduced a ceiling on interest rates on financing transactions above which they are considered usurious, i.e. the 'threshold rate'. The threshold rate is identified through a specific administrative procedure, to be carried out by the Italian Ministry of Economy and Finance (Ministero dell'Economia e delle Finanze - MEF) and Banca d'Italia. Only the judicial authorities can decide whether the interest rates applied to individual contracts are usurious and assess any criminal and civil charges arising from them.

Law 108/1996 set up two publicly financed funds to facilitate lawful access to credit for those at greater risk of usury (Prevention Fund) and to support its victims (Solidarity Fund).

Banca d'Italia provides technical support to the public authorities responsible by law for preventing and countering usury, including through its staff in local branches, and carries out the following tasks:

  • as delegated by the MEF, it records quarterly the average overall effective rates applied by banks and financial institutions authorized to provide credit, which are the basis for determining the threshold rates according to the mechanism provided for by Law 108/96 (see below 'Further information - The procedure for recording the average overall effective rates', Tassi effettivi globali medi - TEGMs);
  • it is a permanent member of the Italian Anti-Usury Observatory chaired by the Special Government Anti-Usury Commissioner, who took office in 2022 pursuant to the Framework Agreement to Prevent and Combat Usury signed by the Italian Minister of the Interior and the President of the Italian Banking Association on 16 November 2021. Banca d'Italia staff working in local branches take part in the Local Observatories promoted by the prefects;
  • its local branch staff participate in the 'assessment units' set up by the prefectures to examine applications for access to the Solidarity Fund for Victims of Usury, specifically by ascertaining the damage sustained by applicants (Article 14 of Law 108/96).

The smooth functioning of the regulated credit cycle is an important safeguard against usury. Protecting customers and educating them on how to use money responsibly helps to bring vulnerable people into the legal financial system and raises awareness of the dangers of borrowing from illegal sources.

Further information

References

The Solidarity Fund provides free loans (i.e. without interest payments) for an amount equal to the usury damage suffered, repayable within a maximum of ten years, to victims of usury (i.e., economic operators and professionals that have been identified as the offended party in criminal proceedings). It has a twofold purpose: to reintegrate them into the legal economic system and to encourage them to report usury to the judicial authorities. The loans are approved by the Solidarity Committee within the office of the Special Government anti-usury Commissioner, based on an assessment carried out by the local prefect.

  • Usury Prevention Fund (only in Italian) - Italian Ministry of Economy and Finance (Article 15 of Law 108/96)

The Prevention Fund is based on a partnership between the public sector, the banking system and the non-profit sector. The funds allocated by the MEF to the managing entities (loan guarantee schemes and anti-usury associations and foundations) are used to provide collateral to banks and financial institutions and ultimately facilitate the provision of loans to creditworthy but vulnerable households and small businesses that might otherwise turn to unauthorized lenders. Banca d'Italia has no statutory powers over the Prevention Fund. The disbursement of loans guaranteed by the Fund is the sole responsibility of the banks and is carried out under the terms and conditions set out in the agreements between the managing entities and the individual banks or financial institutions.

The procedure for recording the average overall effective rates - TEGMs (Article 2 of Law 108/96)

The average overall effective rate (Tasso Effettivo Globale Medio, TEGM) is the benchmark for setting the threshold rate above which interest on a loan is deemed usurious, regardless of who is charging it. It provides the average value of the interest rates applied by banks and regulated financial institutions to lending operations (including commissions and remuneration of any kind and expenses, excluding taxes). As of 14 May 2011, the thresholds are established by increasing the published TEGMs by one quarter, plus a margin of a further 4 percentage points; the difference between the threshold and the average rate may not exceed 8 percentage points. Before that date, threshold rates were obtained by increasing the TEGMs by 50 per cent.

As delegated by the Ministry of Economy and Finance (MEF), Banca d'Italia collects data on TEGMs among supervised financial institutions on a quarterly basis, broken down by homogeneous categories of loans as identified by the MEF in annual decrees (e.g. overdraft facilities, personal loans, mortgages, etc.). The data collected, adjusted for any changes in the official rates after the reference quarter, and the threshold rates are published in the Official Journal of the Italian Republic (Gazzetta Ufficiale) by the MEF, which also makes them available on its website (only in Italian). Banks and financial institutions are required to display the decree identifying lending operations and that governing TEGMs and threshold rates in premises open to the public.

The data collection and reporting criteria are described in the relevant ministerial decrees, which take into account the Instructions for the reporting of the average overall effective rates (TEGMs) under the anti-usury law issued by Banca d'Italia to reporting entities. These Instructions are now updated by Banca d'Italia's Financial Intermediaries Conduct Supervision Directorate, which also handles queries from the reporting entities in accordance with the criteria published on Banca d'Italia's website (only in Italian).

Banca d'Italia makes available to the general public in a user-friendly format the time series of the TEGMs published by the MEF and the threshold rates. For information purposes only, the Bank also issues quarterly press releases containing the TEGM tables (available only in Italian) that are sent to the MEF.