Decree No. 118-2019, Debt Relief Law for Workers

OBJECT: The purpose of this Law is to facilitate workers who present conditions of indebtedness with regulated or unregulated financial entities and commercial establishments, professional associations, to opt for a mechanism of financial inclusion, access to credit and financial relief through debt consolidation, by means of the financial and cooperative system supervised by regulatory institutions and by means of payroll deduction, always and when financing conditions are applied that improve the economic availability of the worker in relation to their income.

DEFINITIONS: For the purposes of this Law, the following concepts are defined:

• 1)

  Debt Consolidation: It is the process by which a natural person obtains a loan, with the specific purpose of unifying credit obligations with one or more creditors with the purpose of promoting a single payment that is less than the sum of all existing periodic obligations, through the improvement of financing conditions;

• 2)

  Access to Credit: It is the opportunity for workers or retirees to access the diverse financial products and services of quality offered by regulated and unregulated institutions; and,

• 3)

  Financial Inclusion: Access to diverse financial products and services of quality.

SCOPE OF APPLICATION: This Law is of public order and applies to all workers who earn a salary, regardless of their employment arrangement method, credit history and who are paid through the National Financial System, or any other method. TITLE II ACCESS TO CREDIT AND DEBT CONSOLIDATION

FINANCIAL PRODUCTS: The institutions of the regulated financial system, cooperatives and prevision institutions may, within the limits established in this Law and other applicable legislation, consolidate debts to workers through financial products and ensure their repayment via payroll deduction. New credits for housing, health and education, which are granted in accordance with the payment capacity of workers may also be covered by the payroll deduction payment system established in this Law. In the case that debt consolidation includes credit card obligations, the provisions of the Credit Card Law and its Reforms regarding restrictions applicable to refinancing loans shall apply.

OBLIGATIONS OF WORKERS: Workers who avail themselves of the benefits of this Law must:

• 1)

  Accredit to the financial entities, by means of the mechanisms established by the same, the creditors with which a credit obligation is maintained;

• 2)

  Present all information that financial entities establish to grant their financial products;

• 3)

  Notify the employer of any obligation derived from this Law, starting from the subscription of the credit contract;

• 4)

  Notify each employer of their pre-existing obligations with institutions of the Financial System acquired under the framework of this Law; likewise must inform the financial institution of the change of employer;

• 5)

  Comply with timely payment of obligations acquired under this Law, even in cases where in the future they do not work with an employer that pays them through the National Financial System or during the period of duration of legal conflict; and,

• 6)

  Others established in this Law and the credit contract approved by the National Commission of Banks and Insurance (CNBS).

OBLIGATIONS OF EMPLOYERS: Employers who have workers covered by the benefits of this Law must:

• 1)

  Issue work certificates with all deductions to the worker;

• 2)

  Deduct from payroll the payment amounts in accordance with the amortization plan established between the worker and any of the Financial System Institutions in accordance with the benefits of this Law, prior written notification and authorization of the worker; The employer is obliged to retain the value of the credit payment(s) and remit them to the financial institutions within the first ten (10) days after having made the deductions referred to in this Law;

• 3)

  Make the deductions for the application of guarantees for compliance with the financial obligations of workers;

• 4)

  Notify financial institutions of the termination of the employment relationship with the worker; and,

• 5)

  Others established in this Law.

OBLIGATIONS OF FINANCIAL INSTITUTIONS:

• 1)

  Financial entities that grant financing within the framework of this Law are obliged to pay the outstanding balances in accordance with the detail presented by the workers referred to in subsection (1) of Article 5 directly to the creditors;

• 2)

  Report to employers the amortization plans executed with workers who access the financial products in accordance with the provisions of this Law, within a period not exceeding fifteen (15) days, counted from the subscription of the credit obligation;

• 3)

  Pay for Financial Education campaigns according to the terms and conditions established in the Regulation of this Law;

• 4)

  Provide all required information to the Secretariat of State in the Offices of Labor and Social Security for verification of compliance with the provisions of this Law through the National Commission of Banks and Insurance (CNBS);

• 5)

  Others established by the National Commission of Banks and Insurance (CNBS); and,

• 6)

  Grant the corresponding release of debt once the debt balance is paid.

FINANCING CONDITIONS: For the purposes provided in this Law, financial institutions shall define the terms and the annual interest rate to be applied based on their policies, credit products and market conditions.

LOAN GUARANTEES: The following may constitute guarantees of compliance for obligations contracted within the framework of this Law with financial institutions:

• 1)

  Deduction from ordinary salary, retirements, overtime, commissions and bonuses accrued monthly by the borrower;

• 2)

  Proportional portions of their labor rights and vacation bonuses;

• 3)

  Individual capitalization labor reserve, when applied as a bonus for seniority under the Private Contribution Scheme (RAP); The proportional constitution of guarantees must be supervised by the National Commission of Banks and Insurance (CNBS); and,

• 4)

  Others authorized by the worker.

PAYROLL DEDUCTION: For purposes of the provisions in the preceding Article, employers must deduct from payroll the amounts corresponding to the credit payments accessed by workers and make payment to the financial institution within the first five (5) days after having made the corresponding deduction. It is understood that the beneficiaries of this Law must sign an authorization for the execution of the guarantees in accordance with the preceding Article or any other that the worker authorizes. Workers may access any of the financial institutions that offers greater benefit to them, without an existing debt contracted with another financial institution conditioning this benefit.

ACCESS TO CREDIT: Financial institutions that grant credits to workers, covered by this Law, may consider granting the benefits established independently of the worker's credit history or existing debt, as long as compliance with the financial obligation contracted by the same is ensured. For such purpose, credits granted under this Law must be considered category I – good credits, at the time of their granting and in accordance with the provisions of the National Commission of Banks and Insurance (CNBS). The estimation for uncollectible accounts for uncollectible credits constituted on the date of entry into force of this Law cannot be reduced by the effect of restructurings that are granted. Workers, once their debts are consolidated, may apply for other loans derived from this Law, as long as they prove their payment capacity; however, in no case may the worker's net availability be less than forty percent (40%) of monthly nominal salary. Any indebtedness granted by a legal or natural person in violation of what is established in the preceding paragraph cannot be deducted from monthly salary. For the purposes described above, financial entities may establish requirements for employment insurance or other applicable coverage as additional guarantee with the proper consent of the worker in accordance with the provisions of the Regulation of this Law.

HOME PURCHASE: Mortgage loans may be consolidated with debt consolidation loans into a single product and may combine the guarantees established in this Law together with the corresponding mortgage guarantees. For such purpose, the credits mentioned in this article shall be considered housing loans.

FINANCIAL EDUCATION: The institutions of the national financial system must promote a culture of sound management of the finances of workers who wish to access financial products through educational campaigns designed for such purpose, with the National Commission of Banks and Insurance (CNBS) and the Honduran Association of Banking Institutions (AHIBA) being responsible for coordination; likewise promote the banking of payroll payment to workers for the purpose of accessing this Law. TITLE III PAYMENT SYSTEM

LOAN PAYMENT SYSTEM FOR THE WORKER DEBT RELIEF LAW: It is the processing and payment settlement system for loans derived from this Law, which will operate through the platforms established for the national payment system at no cost to the loan beneficiary. Said system will operate in conformity with the provisions contained in the Law on Payment Systems and Settlement of Securities in such a manner as to facilitate the employer's unified realization of payments. The Central Bank of Honduras (BCH), in coordination with the National Commission of Banks and Insurance (CNBS), shall verify compliance with this provision.

CODIFICATION: The Financial System institutions that grant credit facilities under this Law must report to the Credit Information Center and to private credit bureaus these operations under a special code, for which purpose both the National Commission of Banks and Insurance (CNBS) and the Private Credit Bureaus must create and make available the corresponding codes within a period not exceeding thirty (30) days counted from the publication of this Law. TITLE IV TRANSITIONAL PROVISIONS

TEMPORARY SYSTEM FOR LOAN PAYMENT. While the system referenced in Article [number] of the present Law is implemented, the processing of transfers originated for the payment of loans derived from this Law shall be carried out through an electronic transaction system, without generating any cost to the loan beneficiary or employer. TITLE V FINAL PROVISIONS

RESPONSIBILITY. It is understood that all obligations incurred within the framework of the present Law are the exclusive responsibility of the worker, provided that there is no negligence on the part of the employer; in the event that negligence exists on the part of the employer in the payment of loans covered under this Law, the employer shall be responsible for all charges, interests and/or principal resulting from unpaid installments.

CHANGE OF EMPLOYER. In the event that the worker changes employers, he is obligated to immediately notify his new employer and the financial institution of the obligations contracted within the framework of the present Law; it is understood that the worker is responsible for payments corresponding to the obligations contracted with the financial institutions. Once such notification has been made, the obligation persists on the part of the new employer regarding the deduction by payroll of the balances owed as the case may be, without the guarantees being executed. For the purposes of this article, an employee cannot be denied employment for being indebted within the framework of this Law.

ACCESS TO INFORMATION. The National Commission of Banks and Insurance (CNBS) shall develop the necessary consultation means so that the Financial System Institutions that participate in the debt relief and consolidation program may identify the workplace of workers who opt for the benefits established in the present Law. Said consultation system shall be available within ninety (90) business days following the entry into force of the present Law. The Honduran Institute of Social Security (IHSS) and the Private Contribution System (RAP) shall provide to the National Commission of Banks and Insurance (CNBS) the data that it demands from them regarding the persons who request or enjoy the benefits contemplated in the present Law.

TRUST. Authorize institutions that are not institutions of the financial system or financial institutions not included within those enumerated in Article 3 of the Financial System Law and that are governed by their own law, such as: Social Welfare Institutes, the Private Contribution System (RAP), the Pension and Severance Funds Administrators and Insurance Institutions, so that, within the framework of what the present law establishes, the laws that regulate them and the regulatory provisions in force or to be issued, they may participate as investors in an investment trust in order to place resources for the purposes of the present Law.

PRECEDENCE. The provisions of the present Law have a higher rank than the General Provisions of the Budget of Income and Expenses of the Republic that are approved annually, in relation to the resource limits to be invested for the purposes of the present Law by the Public Social Welfare Institutes.

SUPPLEMENTARY APPLICATION. In all matters not provided for in the present Law, the provisions established in the Financial System Law and other applicable legislation shall apply in a supplementary manner, provided that its provisions prove compatible and do not oppose the nature and purpose of the present Law.

REPEAL AND REFORM. Repeal the seventh paragraph and reform the sixth paragraph of Article 30 of the Framework Law of the Social Protection System, which shall be read as follows: "All workers must have an individual capitalization sub-account, except those who by agreement of the parties have the annual severance aid paid to them. The sub-account in question cannot be substituted or modified in terms other than what this Article establishes, except for the purposes described in the Law for Worker Debt Relief."

REGULATION. It falls to the National Commission of Banks and Insurance (CNBS) to regulate the present Law within a period of thirty (30) days counted from the date of publication of the present Law in the Official Gazette "La Gaceta."

GARNISHMENT OF MINIMUM SALARY AND LABOR BENEFITS. In the event of execution of the guarantees of the loans referred to in Article [number] of the present Law, the content of the Constitution of the Republic and other applicable legislation shall be respected, so that the courts and tribunals of the Republic shall in no case decree garnishment over the legal minimum salary nor of labor benefits.

CREDIT HISTORY. Any person who consolidates their debt under the present Law shall have their credit history cleared and shall have no charges for early payments.

ENTRY INTO FORCE. The present Law shall enter into force as of the date of its publication in the Official Gazette "La Gaceta." Done in the city of Tegucigalpa, municipality of the Central District, in the Chamber of Sessions of the National Congress, on the fourth day of the month of November in the year two thousand nineteen. ANTONIO CÉSAR RIVERA CALLEJAS PRESIDENT JOSÉ TOMÁS ZAMBRANO MOLINA SECRETARY SALVADOR VALERIANO PINEDA SECRETARY To the Executive Power In Witness Thereof: Let it be executed. Tegucigalpa, M.D.C., November 7, 2019. JUAN ORLANDO HERNÁNDEZ ALVARADO PRESIDENT OF THE REPUBLIC THE SECRETARY OF STATE IN THE DEPARTMENTS OF LABOR AND SOCIAL SECURITY CARLOS MADERO