Law on the Program for the Consolidation of Debts of Honduran Workers

The purpose of this Law is to provide a real solution to the problem generated by the high indebtedness of the Honduran population, caused by financing or extra financing with credit card issuing institutions and other financing contracted with unregulated commercial companies that have a high financial cost.

For the purposes of this Law, the following concepts are defined: COMMISSION: National Commission of Banks and Insurance (CNBS). PUBLIC PENSION INSTITUTES OR INSTITUTES: the Institute for Teacher Pensions (INPREMA), the National Institute for Pensions and Retirements (INJUPEMP), the Military Pension Institute (IPM), and the National Pension Institute of the National Autonomous University of Honduras (INPREUNAIH). RAP: Private Contribution Regime, created under the Social Housing Fund Law (FOSOVI). REAL RATE OF RETURN: 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.

The Public Pension Institutes and the Private Contribution Regime (RAP) may invest, within the limits that the National Commission of Banks and Insurance (CNBS) authorizes for such purposes, in loan programs intended to consolidate the debts of their members or participants, arising 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 credit cooperatives, or other entities supervised by the Commission, to establish investment agreements or portfolio rediscount, for the financing of other plans or financial mechanisms that allow debt consolidation for natural persons, arising 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.

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

From the yield obtained by the loan portfolio and paid by the borrower in a timely manner, net of administrative and operational expenses associated with the operation, thirty percent (30%) thereof must be accumulated in an individual capitalization account in favor of the borrower, which must generate for the latter the corresponding technical interest rate approved by the Board of Directors of the respective Institutes or the Private Contribution Regime (RAP), as applicable. The balance accumulated in the individual account must be used by the respective borrower exclusively to improve their pension benefits and be subject to the same limitations on availability and use of the separation benefit of the Institutes, or individual contributions of the Private Contribution Regime (RAP), as applicable.

Natural persons who wish to obtain a loan under the conditions established in this Law must demonstrate adequate payment capacity for the resulting loan payment, already considering the new debt status and the payment for consolidation of existing debts. In this regard, the resulting payment cannot exceed sixty percent (60%) of the borrower's income, nor forty percent (40%) of the corresponding family group. To analyze the above situation, the Private Contribution Regime (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.

The Boards of Directors of the Private Contribution Regime (RAP) and of the Institutes, as responsible for the administration of their reserves, must establish the mechanisms necessary to ensure that there is, at the expense of borrowers, own or contracted coverage on loan balances, aimed at protecting such investments against the risks that could be generated by non-payment. In the event that the aforementioned coverage is contracted through private insurance, these services must be contracted directly and bid according to what is established by Law.

The loan contract for debt consolidation must consider payroll deductions from salaries, in the corresponding proportion, for loan amortization. In the event that a borrower member withdraws from the Private Contribution Regime (RAP) or one of the Institutes, and for this reason requests the corresponding separation benefit or their contributions, the outstanding balance of the loan plus interest at that date shall be deducted from the amount of values and assets offered as collateral, or required from their joint guarantor. The following may be established as guarantees, according to what is agreed and contractually required between the parties:

• 1)

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

• 2)

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

• 3)

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

• 4)

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

• 5)

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

• 6)

  The values resulting from guarantee funds constituted to back 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 Contribution Regime (RAP) or the lending Institute, with ownership charge, as well as mortgage guarantees.

Once the credit is approved and prior to the respective disbursement, the Private Contribution Regime (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, members who request a loan for debt consolidation must be reported to the Credit Information Center or Private Credit Bureau, so that their special situation status is known and to prevent the member from becoming re-indebted beyond their payment capacity once their debt consolidation has been effected. Financial institutions, cooperatives, commercial houses, or other non-banking lenders that are creditors of loans with respect to a participant, which the participant intends to consolidate in the context of this Law, are obligated to provide the documentation that is required of them regarding the balance of capital, interest, and others that legally correspond and that would be owed at the date on which the disbursement for the respective consolidation is projected to be made, according to the format that for such purposes is established and approved by the Commission.

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.

This Law shall enter into force from 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 seventh day of the month of March of two thousand thirteen. LENA KARYN GUTIÉRREZ ARÉVALO PRESIDENT RIGOBERTO CHANG CASTILLO SECRETARY GLADIS AURORA LÓPEZ CALDERÓN SECRETARY To the Executive Power. Therefore: Execute. Tegucigalpa, M.D.C., March 22, 2013. PORFIRIO LOBO SOSA PRESIDENT OF THE REPUBLIC THE SECRETARY OF STATE IN THE OFFICE OF FINANCE WILFREDO CERRATO RODRÍGUEZ