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Possible changes in the financial sector in El Salvador

Luis Ernesto Vega

In El Salvador, the existence of possible changes in financial sector regulations is being glimpsed. The Legislative Assembly, the body responsible for creating the laws of the Republic, has issued or intends to issue, enact a series of bills which involve important changes in this sector.

The first law issued is the Regulation of Information Services about Credit History of People, which seeks to guarantee and limit the actions of credit information bureaus and protect personal privacy rights. This law was approved and published on July 26 2011 and entered into force as law of the Republic 90 days after its publication.

The aforesaid law provides authority to the Consumer Defense organism to act in the case of an erroneous report by an institution, and also allows the Superintendence of the Financial System to regulate the information that can be shared, attending not only to financial entities, but to all financial agents that share information, given that previously the figure doctrinally known as habeas data was not regulated in any legal text (although there are a few rulings of the Supreme Court that address this figure).

After the enactment of this law, an amendment was made to the Credit Card System Law, which intends to regulate interest rates that can be charged to cardholders. It established that card issuers and co issuers would no longer be able to establish effective interest rates eight-times higher than the interest rate that banks pay to the public for a fixed deposit of one year.

This amendment was observed by the President of the Republic, who alleged it was inconvenient for most of the population, and returned it to Congress. Efforts are now being made in the Legislative Assembly to overcome these presidential observations. At the time of writing (the second week of November 2011) there are not enough votes to turn the situation around.

The Legislative Assembly is also considering issuing a bill against usury, in order to identify and punish predatory practices and protect the property and possession rights of individuals, and control the legal and economic consequences resulting from this practice.

This bill will apply to loans of cash, operations for the acquisitions of all goods and services and other transactions with different payments methods provided by individuals, corporations, institutions of the financial system, commercial establishments, traders of goods and services and in general any entity providing money, including so-called pawn shops.

In both bills, the Consumer Defense organism and the Superintendence of the Financial System are provided with the authority to investigate and punish these practices.

Luis Ernesto Vega

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