1. Financial institutions are obligated to establish contracts that are easy to read and understand, detailing important aspects such as credit limits, interest rates, fees, and other charges that must be clearly outlined in the contract. Procedures in case of theft, fraud, or loss of credit cards must be established, along with cardholder obligations, contract duration, and the ability for cardholders to terminate the contract by notifying the issuer, in which case the contract will be immediately terminated, with any outstanding balance to be paid as agreed.
2. There is a requirement to disclose the annualized interest rate to enhance transparency and promote market competition. Any changes in the interest rate must also be communicated and specified in the contract.
3. Prohibition of interest capitalization without cardholder authorization; prohibition of capitalization of financing and overdue interest. Furthermore, interest will only be applied to the outstanding balance, deducting any payments made by the cardholder.
4. The interest rate may be fixed or variable, calculated on the financed capital balance and for the days used up to the cutoff date. Fees and charges may be freely agreed upon, alongside the interest rate, with transparency mandated due to numerous complaints from cardholders regarding interest application and service charges.
5. Additional services or charges cannot be imposed unless expressly regulated in the contract signed by both parties. Moreover, commissions or fees for services not rendered are strictly prohibited.
6. Issuers of credit cards are prohibited from accessing cardholder monetary funds or savings for payment unless expressly authorized by the cardholder or by court order.
7. Issuers must regularly inform cardholders of the effective interest rate, calculated according to a financial formula determined by the Banking Superintendence.
8. Late payment interest rate: In defense of the cardholder, interest on late payments will be calculated on the capital amount of the overdue installment(s), based on the number of days, not exceeding the agreed financing rate. Capitalization of interest is prohibited to prevent excessive financial charges.
9. Debt restructuring: Cardholders have the option to request debt restructuring if unable to meet scheduled payments or in default. The issuer must respond to such requests within thirty days.
10. Evaluation of cardholder’s ability to pay: Issuers are obligated to conduct an economic and financial analysis to determine whether the cardholder can generate sufficient cash flow to repay expenditures. Issuers must also monitor the cardholder’s payment capacity throughout the financing period.
11. Transparency of information ensures that participants in the credit card system are aware of the rights and obligations associated with managing credit cards.
12. Credit card usage culture: Issuers are required to develop educational programs to educate users on responsible financial management for purchasing goods and services, aiming to prevent losses due to irresponsible card use.
13. Classification of crimes and administrative fines for the use of stolen credit cards, cloning and use of cloned cards, illegal distribution and commercialization of credit cards, fraudulent use of credit or debit cards, punishable by six to ten years’ imprisonment and fines ranging from twenty-five thousand to five hundred thousand quetzales.
14. The new credit card law under Decree 2-2024 was published in the Official Gazette on March 1, 2024, and will come into effect on September 1, 2024.
Associate
Guatemala