Financial Fraud in Guatemala: New Decree Sets to Regulate Credit Card Activity

A Major Step Forward in Regulating Financial Activity

Guatemala City, February 2024 - The Congress of the Republic of Guatemala has passed Decree 2-2024, also known as the Credit Card Law, aimed at regulating credit card operations, establishing control mechanisms, and introducing a sanctioning regime with the creation of new crimes. This significant move is expected to crack down on financial fraud and protect consumers.

Key Changes Introduced by the Decree

Prohibition on Capitalizing Interest Rates: Interest can only be charged on the initial debt amount and not on accumulated interest or administrative charges from previous months.
Creation of Financial Services Protection Unit: The unit will ensure compliance with consumer rights in financial services, working closely with the Directorate of Consumer and User Assistance (DIACO) to protect consumers from fraudulent activities.

New Rules for Banks

Publication of Interest Rates: The Superintendency of Banks must publish a report every six months on the weighted average interest rates related to credit card operations, making it easier for Guatemalans to understand their financial obligations.
Interest Rate Modification Notice: Banks must provide 45-day notice to customers before modifying the interest rate, giving them time to accept or reject the changes.

New Opportunities for Consumers

Cooperatives as Issuers and Co-Issuers: First- and second-degree savings and credit cooperatives will now be able to act as issuers and co-issuers of credit cards, providing more options for consumers.
Protection from Unauthorized Account Transfers: Banks are prohibited from taking money from customers’ accounts without their authorization to pay credit card debts.

Crackdown on Abusive Debt Collection Practices

Respect for Consumers’ Privacy: Issuers must respect consumers’ privacy and not make more than two calls per day for debt collection purposes.
Criminalization of Fraudulent Activities: The decree introduces new crimes related to fraudulent activities, such as cloning credit or debit cards, using illegal cards, and distributing and marketing counterfeit cards.

Promoting Financial Literacy

Financial Education Provisions: The law includes provisions aimed at promoting financial literacy among Guatemalans to prevent irresponsible use of financial services. Experts warn that the effectiveness of the decree will depend on consumers taking responsibility for their financial education.

Effective Date

The decree is set to come into effect six months after its publication in the Diario de Centroamérica.