Iceland's parliament passed on Tuesday a law to aid the repayment of loans taken out in foreign currency by modifying their interest rates, the ministry of economic affairs said in a statement. The once-popular loans in foreign currency have spelled financial difficulty for thousands of Icelanders since the country's economy collapsed in 2008.
The Icelandic government had already said in September that it would pass legislation on foreign currency loans following a Supreme Court decision. The Supreme Court ruled that "interest should be calculated on unlawfully foreign-denominated automobile loans in accordance with the interest rates published by the Central Bank of Iceland."
The government said at the time legislation that would "apply to those classes of loans which are considered to be based on unlawful exchange-rate linking." The ministry of economic affairs said Tuesday the enactment of the law meant "financial institutions now have 90 days to convert foreign-denominated automobile loans in accordance with the interest rates published by the Central Bank of Iceland."
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