Debt Relief Law for Workers

The purpose of this Law is to facilitate workers who present conditions of high indebtedness with regulated or unregulated financial entities and commercial houses, professional associations, to access a mechanism of financial inclusion, access to credit and financial relief through consolidation of their debts, by means of the supervised financial and cooperative system and social security institutions through payroll deduction, provided that financing conditions are applied that improve the economic availability of the worker in relation to their income.

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, in order to facilitate a single payment that is less than the sum of all current periodic obligations, through the improvement in financing conditions;

• 2)

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

• 3)

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

This Law is of public order and is applicable to all workers who earn a salary, regardless of their mode of employment contract, credit history, and who are paid through the National Financial System, or any other mode. TITLE II ACCESS TO CREDIT AND DEBT CONSOLIDATION

Financial system institutions that are regulated, cooperatives and provisional institutions may, within the limits established in this Law and other applicable legislation, consolidate debts of 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 under the payroll deduction payment system established in this Law. In the case that debt consolidation includes credit card obligations, the provisions of the Credit Cards Law and its Amendments shall apply regarding the restrictions applicable to refinancing loans.

Workers who avail themselves of the benefits of this Law must:

• 1)

  Certify to financial entities, through the mechanisms established by them, the creditors with whom they maintain a credit obligation;

• 2)

  Present all the information that financial entities establish for granting their financial products;

• 3)

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

• 4)

  Notify each employer of their preexisting obligations with Financial System institutions in accordance with what is prescribed in this Law, within a period not exceeding fifteen (15) days, counted from the execution of the credit obligation; Financial obligations 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 the framework of 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)

  Other obligations established in this Law and credit contract approved by the National Banking and Insurance Commission (CNBS).

Employers who have workers benefiting from this Law must:

• 1)

  Issue work certificates with all deductions to the worker;

• 2)

  Deduct from payroll the installments 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 from the worker; The employer is obligated to retain the value of the loan installment(s) and remit them to financial institutions within the first ten (10) days after making the deductions referred to in this Law;

• 3)

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

• 4)

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

• 5)

  Other obligations established in this Law.

• 1)

  Financial entities that grant financing under the framework of this Law are obligated to pay the outstanding balances in accordance with the detail presented by the workers referred to in numeral 1) of Article 5, directly to the creditors;

• 2)

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

• 3)

  Pay for Financial Education campaigns in accordance with the terms and conditions established in the Regulations of this Law;

• 4)

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

• 5)

  Other obligations established by the National Banking and Insurance Commission (CNBS); and,

• 6)

  Grant the settlement statement once the debt balance has been paid.

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

The following may constitute guarantees of compliance with obligations contracted under the framework of this Law with financial institutions:

• 1)

  Deduction from ordinary salary, pensions, overtime, commissions and bonifications accrued monthly by the lender;

• 2)

  Proportional deductions from labor rights and vacation bonifications;

• 3)

  Individual capitalization labor reserve, when applied as severance pay under the Private Contribution System (RAP); The proportional constitution of guarantees must be supervised by the National Banking and Insurance Commission (CNBS); and,

• 4)

  Other guarantees authorized by the worker.

For purposes of the foregoing Article, employers must deduct from payroll the amounts corresponding to the installments of the credits accessed by workers and make payment to the financial institution within the first five (5) days after making the corresponding deduction. It is understood that beneficiaries of this Law must sign an authorization for the execution of guarantees in accordance with the foregoing Article or any other that the worker authorizes. Workers may access any of the financial institutions that grant them the greatest benefit, without a current debt contracted with another financial institution conditioning this benefit.

Financial institutions that grant credit to workers, protected under this Law, may consider granting the benefits established, regardless of the worker's credit history or current debt, provided that compliance with the financial obligation contracted is ensured. For such purposes, credits granted under this Law must be considered Category I - good credits, at the time of their granting and covered by the provisions of the National Banking and Insurance Commission (CNBS). The allowance for uncollectible accounts for uncollectible credits established as of the effective date of this Law cannot be reduced as a result of restructurings that are granted. Workers, once their debts are consolidated, may apply for other loans derived from this Law, provided they certify their payment capacity; however, in no case can the net availability of the worker be less than forty percent (40%) of the monthly nominal salary. Any indebtedness granted by a legal or natural person that contravenes what is established in the foregoing paragraph cannot be deducted from the monthly salary. For the purposes described above, financial entities may establish requirements for contracting unemployment insurance or other applicable coverages as additional guarantees with the due consent of the worker in accordance with the provisions of the Regulations of this Law.

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

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

It is the processing and settlement system for payment of 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 accordance with the provisions contained in the Law on Payment Systems and Settlement of Securities in a manner that facilitates the employer in carrying out unified payments. The Central Bank of Honduras (BCH) in coordination with the National Banking and Insurance Commission (CNBS) will verify compliance with this provision.

Financial System institutions that grant credit facilities under this Law must report both to the Credit Information Center and to private credit bureaus these operations under a special code for which both the National Banking and Insurance Commission (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 TRANSITORY PROVISIONS

TEMPORARY SYSTEM FOR LOAN PAYMENT: While the payment system referred to in Article 14 of this Law is being implemented, the processing of transfers originated for the payment of loans derived from this Law shall be carried out through the electronic transactions system, without generating any cost for the loan beneficiary or employer. TITLE V FINAL PROVISIONS

LIABILITY: It is understood that all obligations contracted within the framework of this Law are the exclusive responsibility of the worker, provided that there is no negligence on the part of the employer; in case of negligence by the employer in the payment of loans covered under this Law, the employer shall be responsible for all charges, interest and/or principal resulting from unpaid installments.

CHANGE OF EMPLOYER: In case the worker changes employers, he/she is obliged to immediately notify his/her new employer and the financial institution of the obligations contracted within the framework of this Law; it is understood that the worker is responsible for payments corresponding to obligations contracted with financial institutions. Once such notification is made, the obligation persists on the part of the new employer with respect to the payroll deduction of the balances owed as applicable, without executing the guarantees. For purposes of this article, an employee cannot be prevented from being hired due to being indebted within the framework of this Law.

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

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

SUPREMACY: The provisions of this Law have superior rank to the General Provisions of the Budget of Income and Expenditures of the Republic that are approved annually, in relation to the limits of resources to be invested for the purposes of this Law by the Public Social Security Institutes.

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

REPEAL AND AMENDMENT: To repeal the seventh paragraph and amend 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 pay the severance benefit annually. The aforementioned sub-account cannot be substituted or modified in terms other than those established in this Article, except for the purposes described in the Law for the Relief of Workers' Debt".

REGULATIONS: It is the responsibility of the National Commission of Banks and Insurance (CNBS) to regulate this Law within a period of thirty (30) days counted from the date of publication of this Law in the Official Gazette "La Gaceta".

GARNISHMENT OF MINIMUM WAGE AND LABOR BENEFITS: In the event of execution of the guarantees of the loans referred to in Article 9 of this Law, the provisions contained in 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 garnishments of the legal minimum wage nor of labor benefits.

CREDIT HISTORY: Any person who consolidates their debt under this Law shall have their credit history cleared and shall not be charged for advance payments.

EFFECTIVE DATE: This Law shall enter into force as of the date of its publication in the Official Gazette "La Gaceta". Given in the city of Tegucigalpa, municipality of the Central District, in the Session Hall of the National Congress, on the fourth day of the month of November of the year two thousand nineteen. ANTONIO CÉSAR RIVERA CALLEJAS PRESIDENT JOSÉ TOMÁS ZAMBRANO MOLINA SECRETARY SALVADOR VALERIANO PINEDA SECRETARY To the Executive Branch Therefore: Execute. Tegucigalpa, M.D.C., November 7, 2019. JUAN ORLANDO HERNÁNDEZ ALVARADO PRESIDENT OF THE REPUBLIC THE SECRETARY OF STATE IN THE OFFICE OF LABOR AND SOCIAL SECURITY CARLOS MADERO