1.8 million Israelis who owe money to some person or institution can start to breathe a sigh of relief starting tomorrow, thanks to a reform passed by the Knesset Constitution Committee which reduces interest paid on debts to "proportional" levels, according to Calcalist.
Until now, according to the Justice Ministry, people with creditors were forced by law to pay "disproportionate" interest rates on their debt, leading to repossession and confiscation of their property since they were unable to pay.
The purpose of the current reform is to ensure that creditors are paid sufficient amounts to compensate for the lateness in payment, while also not becoming so exorbitant as to make debtors despair of paying it, causing them financial collapse and forcing creditors to wait far more for their money.
The reform splits what used to be a combined bill - interest and late fees. Originally, the two were combined into one by law and calculated by the Finance Ministry, in a way which was easier to calculate but also crushing financially.
Now, interest and late fees will be separate instead of compounding on one another, and late fees will now be charged quarterly rather than on a daily basis - with the hope of incentivizing debtors to pay within the next three months.
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