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As of 1 January 2026, Switzerland adjusted the statutory maximum interest rates for consumer credit. The Federal Department of Justice and Police (FDJP) set the annual percentage rate (APR) ceiling at 10% for cash loans and 12% for overdraft facilities, including credit card balances. This update follows the established formula under the Consumer Credit Act and reflects the continued low interest rate environment, aligning borrowing costs with broader market conditions while maintaining consumer protection standards.
Legal Framework and Amendment Mechanism
The legal basis for this amendment lies in the Federal Consumer Credit Act (Konsumkreditgesetz, KKG) and its implementing ordinance (Verordnung zum Konsumkreditgesetz, VKKG). Since 2016, the VKKG has applied a formula to calculate the maximum allowable annual percentage rate (APR) for consumer credit. This calculation is based on the three-month compounded Swiss Average Rate Overnight (SARON), which replaced the three-month LIBOR in 2021, plus a fixed margin of 10 percentage points for cash loans and 12 for overdrafts. The resulting figure is then rounded to the nearest whole number. Importantly, the ordinance also sets absolute minimum thresholds: 10% for cash loans and 12% for overdrafts.
Pursuant to its statutory mandate, the FDJP is required to conduct an annual review of the applicable maximum interest rates for consumer credit. Following a prior reduction that took effect on 1 January 2025, the three-month compounded SARON was recorded at 0.0054% in August 2025. This once again triggered the application of the statutory minimum thresholds. The FDJP formally announced the adjustment on 31 October 2025, with the revised maximum rates entering into force on 1 January 2026.
Pursuant to Article 14 of the KKG, any consumer credit agreement stipulating an interest rate above the statutory maximum is deemed null and void. If the interest is set above such maximum, the borrower is only required to repay the principal and no interest or ancillary charges.
Economic Context and Rationale
The amendment comes amid a broader macroeconomic environment characterized by subdued inflation and accommodative monetary policy. In June 2025, the Swiss National Bank (SNB) reduced its policy rate to 0%, citing declining inflationary pressures. By December 2025, the SNB maintained this rate, forecasting inflation at just 0.3% for 2026.
This low-interest environment directly influenced the SARON, which in turn triggered the downward adjustment of the consumer credit cap. The amendment ensures that borrowing costs remain aligned with market conditions, preventing lenders from charging disproportionately high rates in a low-rate economy.
Market Impact and Industry Response
The recent adjustment to the APR ceiling has had a clear impact on both borrowers and lenders. For consumers, it translates into more favourable borrowing conditions, with lower interest rates helping to reduce the overall cost of credit. Lenders, particularly those reliant on higher-margin consumer loans, may need to reassess their pricing models and risk strategies in response to the narrower interest rate margins.
Looking Ahead
While the current environment supports lowering the permissible interest rate levels, future adjustments remain possible, depending on the evolution of the SARON and broader economic indicators. The FDJP will continue its annual reviews, ensuring that the regulatory framework remains responsive to market dynamics while upholding consumer protection.
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