Law on Optional Debt Consolidation Program Honduras 2013

PURPOSE.- The purpose of this Law is to provide a real solution to the problems generated by high debt levels among the Honduran population, caused by financing or extra-financing with credit card issuing institutions and other financing contracted with commercial companies not regulated that have a high financial cost.

DEFINITIONS.- For purposes of this Law, the following concepts are defined: COMMISSION: National Commission of Banks and Insurance (CNBS). PUBLIC PROVISIONAL INSTITUTES OR INSTITUTES: the Teacher's Provident Institute (INPREMA), the National Institute of Retirements and Pensions for Employees and Officials of the Executive Branch (INJUPEMP), the Military Provident Institute (IPM), and the National Provident Institute of the Autonomous National University of Honduras (INPREUNAH). RAP: Private Contributions Scheme, created under the Housing Social Fund Law (FOSOVI). REAL YIELD RATE: The interest rate obtained from investments made, net of inflationary effects produced by the percentage variation of the consumer price index, for the corresponding period.

SCOPE.- Public Provisional Institutes and the Private Contributions Scheme (RAP) may invest, within the limits that the National Commission of Banks and Insurance (CNBS) authorizes for such purposes, in loan programs intended for the consolidation of debts of their affiliates or participants, originating from credit card contracts and other commercial credits of a fiduciary or pledge nature. Likewise, the aforementioned entities may establish agreements among themselves or with financial institutions, savings and loan cooperatives, or other entities supervised by the Commission, to establish investment agreements or portfolio rediscounting, for the financing of other plans or financial mechanisms that allow the consolidation of debts to natural persons, originating from credit card contracts and other commercial credits of a fiduciary or pledge nature, provided that they guarantee adequate conditions of profitability, security, and liquidity, as established in Articles 4 and 8 of this Law.

FINANCING CONDITIONS.- For the purposes provided in the preceding Article, the Board of Directors of the Private Contributions Scheme (RAP) and of each Institute, as applicable, must establish the interest rates to be charged on loans granted for consolidation of debts of their affiliates, which must be defined as variable rates in the respective contracts. In no case shall the interest rate generated for the Private Contributions Scheme (RAP) and the Institutes be less than eight percent (8%) in legal currency, real, above inflation, net of administrative and operative expenses. The maximum term for the granting of a credit for consolidation of debt of active affiliates, under this Law, must be eighty-four (84) months.

RETURN OF INTEREST FOR CREDIT LOYALTY.- From the yield obtained by the loan portfolio and paid by the borrower in a timely and proper manner, net of administrative and operative expenses associated with the operation, thirty percent (30%) of the same must be accumulated in an individual capitalization account in favor of the borrower, which must generate for such person, the corresponding technical interest rate approved by the Board of Directors of the respective Institutes or the Private Contributions Scheme (RAP), as applicable. The balance accumulated in the individual account must be used by the respective borrower exclusively to improve their provisional benefits and be subject to the same limitations on disposition and use of the separation benefit of the Institutes, or individual contributions of the Private Contributions Scheme (RAP), as applicable.

PAYMENT CAPACITY.- Natural persons who wish to obtain a loan under the conditions established in this Law must demonstrate adequate payment capacity for the loan installment resulting, already considering the new state of indebtedness and the installment for consolidation of existing debts. In such sense, the resulting installment cannot exceed sixty percent (60%) of the borrower's income, nor forty percent (40%) of the corresponding family group. To analyze the foregoing situation, the Private Contributions Scheme (RAP) and the Institutes, prior to granting debt consolidation credits, must analyze the payment capacity of the credit applicant, making use of the Credit Information Center or other Private Credit Bureau.

COVERAGE OF LOAN INVESTMENTS.- The Boards of Directors of the Private Contributions Scheme (RAP) and of the Institutes, as responsible for the administration of their reserves, must establish the mechanisms necessary to ensure that there is, charged to the borrowers, own or contracted coverage, on the loan balances, tending to protect said investments against the risks that could be generated by non-payment. In case the aforementioned coverage is contracted through private insurance, these services must be contracted directly and bid according to what the Law establishes.

COLLECTION MECHANISM AND LOAN GUARANTEES.- The loan contract for debt consolidation must consider deductions from payroll of salaries, in the proportion that corresponds, for the amortization of the loans. In the event that a borrower member withdraws from the Private Contributions Scheme (RAP) or from one of the Institutes, and for that reason requests the corresponding separation benefit or their contributions, the outstanding balance of the loan plus the interest as of the date shall be deducted from the amount of values and assets offered as guarantee, or required from their joint guarantor. The following may be established as guarantees, as agreed and contractually required between the parties:

• 1)

  The borrower's monthly net salary, when the borrower is an active affiliate;

• 2)

  The borrower's monthly pension, when the borrower is a pensioned affiliate;

• 3)

  The separation benefit or individual contributions, in the Private Contributions Scheme (RAP) or the Institutes, respectively;

• 4)

  The insured amount, up to the debt balance, of the corresponding life insurance policy;

• 5)

  The accumulated values, up to the debt balance, in concept of other benefits or labor benefits;

• 6)

  The values resulting from guarantee funds constituted to support the credit, when necessary; and,

• 7)

  The guarantee of one (1) or two (2) joint guarantors, when necessary; who must be active members of the Private Contributions Scheme (RAP) or of the lending Institute, with charge in property, as well as mortgage guarantees.

SPECIFIC USE OF DISBURSEMENT AND TRANSPARENCY.- Once the credit is approved, prior to the respective disbursement, the Private Contributions Scheme (RAP) or the Institutes, as applicable, must establish the necessary controls to ensure that financial consolidation is carried out, according to the purposes provided in this Law. Likewise, affiliates requesting a loan for the consolidation of their debts must be reported to the Credit Information Center or Private Credit Bureau, so that the state of their special situation is known and to avoid re-indebtedness of the affiliate beyond their payment capacity once their debt consolidation has been effected. Financial institutions, cooperatives, commercial houses, and other non-banking lenders that are creditors of loans with respect to a participant, which the latter intends to consolidate in the context of this Law, are obligated to provide the documentation that may be required regarding the capital balance, interest, and others that legally proceed and that would be owed as of the date in which the disbursement for the respective consolidation is projected to be made, according to the format established and approved by the Commission for such purposes.

REGULATIONS.- By virtue of the powers contained in its Law, the National Commission of Banks and Insurance (CNBS) must issue the Regulations of this Law, within a period of thirty (30) business days, counted from the effective date of this Law.

EFFECTIVE DATE.- This Law shall take effect as of its publication in the Official Gazette La Gaceta. Done in the city of Tegucigalpa, municipality of the Central District, in the Session Hall of the National Congress, on the seventh day of the month of March of two thousand thirteen.