THE NEW CREDIT CARD LAW IN GUATEMALA
DECREE 2-2024 OF THE CONGRESS OF THE REPUBLIC
EMPHASIZES PROTECTION AND TRANSPARENCY FOR CARDHOLDERS
Introduction
Recently, the Congress of the Republic of Guatemala has taken a significant step towards protecting cardholders and promoting transparency in the financial sector with the publication of Decree 2-2024, which introduces the new Credit Card Law. Published in the Diario de Centro América on March 1st of this year, the law will come into effect on September 1st, 2024. Its aim is to regulate and oversee credit card operations in Guatemala, ensuring that cardholders are well-informed and protected. It also fosters healthy competition among financial institutions, including first and second-degree Savings and Credit Cooperatives as credit card issuers.
Increased Transparency
A key feature of the new law is its focus on transparency in credit card operations. Financial institutions are now required to provide contracts that are easy to read and understand. These contracts will establish equal conditions in contractual relationships and regulate important aspects such as credit limits, interest rates, fees, and other charges. The law also addresses issues like theft, fraud, and loss of credit cards, outlining cardholder obligations and mandating the issuance of copies to ensure transparency. By providing clear and precise information on interest rates, late fees, credit limits, and other associated charges, the law enables cardholders to make informed decisions, promoting responsible credit card use.
Consumer Protection
The Credit Card Law aims to protect Guatemalan cardholders by obligating financial institutions to assess the cardholder’s repayment capacity and that of their guarantor before granting a credit line or additional financing. It also requires prior evaluation before modifying an existing credit limit to ensure timely payment without incurring late fees. Furthermore, the law sets clear limits on debt collection practices and complaint procedures to prevent abusive actions by issuing entities and collection agencies. It establishes mechanisms for consumers to lodge complaints and resolve disputes fairly and efficiently. Cardholders can also negotiate payment agreements or terminate their contractual relationship at any time with simple communication to the card issuer, provided the outstanding balance is settled or a payment agreement has been signed.
Interest Rates
The law allows financial institutions to freely negotiate interest rates with cardholders for the credit lines they provide. Rates can be fixed, meaning they cannot be changed during the contract period, or variable, allowing adjustment based on periodic reviews. Notification of any rate changes must be given forty-five days in advance, both directly to the cardholder and on their statement. If a cardholder does not accept the new rate, they can request that their accumulated balance up to that point be settled through a payment agreement. This provision aims to prevent cardholders from falling into unsustainable debt cycles, promoting a more equitable and secure financial environment.
Promotion of Competition
In addition to consumer protection, the new Credit Card Law promotes healthy competition among financial institutions. It requires clear rules on advertising and promotions, aiming to prevent misleading or fraudulent practices. It encourages institutions to offer innovative products and services with attractive conditions for credit card users.
Conclusion
The new Credit Card Law in Guatemala represents a significant milestone in protecting cardholders and promoting transparency in the financial sector. With stricter regulations on information disclosure, consumer rights protection, and transparent interest rate setting, cardholders can enjoy a safer and fairer financial environment.
Carlos Franco
Associate
Guatemala
