The new credit card law and the introduction of DIACO in the financial system

José Andrés Dougherty Briz shares his perspective on the new regulatory update in the financial system in Guatemala.

Recently, in Guatemala, a regulatory change in the financial sphere has generated a lot of attention at the national level. This is Decree 2-2024 (hereafter "Decree"), also known as the Credit Card Law, which was approved by the Congress of the Republic of Guatemala on 15 February 2024.

According to articles 1 and 2 of the Decree, the law is specifically aimed at regulating the relationship between issuers, cardholders and affiliates, within the credit card operation.

For the purposes of the law, a credit card should be understood as an instrument that allows a person to use a line of credit or as a means of payment for the acquisition of goods and services. Within the transaction, the issuer is the person who grants credit lines and administers credit cards. The cardholder is the person who enters into a contract with the issuer in order to be authorised to use the credit line granted by the credit card. Finally, the affiliate is the person who provides goods or services by accepting the credit card as a payment instrument.

The Decree limits its scope of application bluntly. It is only addressed to individuals or legal entities that are directly related to the credit card transaction. That is, the issuer (financial institutions regulated by the Superintendencia de Bancos and now the Cooperativas de Ahorro y Crédito), the user (persons who have a credit card) and the person who accepts them as a means of payment (persons, companies or firms affiliated to the service). At no time does it include other actors involved in the granting of credit by means other than credit cards.

In terms of content, the Decree focuses mainly on regulating interest rates, the prohibition to capitalise interest, minimum payments, commissions, conditions for the change of terms within the contract, rights and obligations of the issuer and the cardholder, and the establishment of a sanctioning regime for non-compliance with these regulations. However, there is one aspect of the law that attracts particular attention.

Through the Decree, the Directorate for Consumer Attention and Assistance (DIACO) is allowed to interfere in the financial system. Article 34 of the Decree stipulates that DIACO shall request from the SIB information on compliance by credit card issuers with international security standards. Likewise, Article 35 of the same regulatory body creates the "Financial Services Protection Unit" in the DIACO’s Verification and Oversight Department. According to the regulation, this entity will be in charge of "(...) ensuring respect for and compliance with the rights of consumers or users of credit cards, debit cards and other financial services, as well as ensuring compliance with the obligations of financial service providers".

In addition, DIACO was empowered to request financial information from issuers, cardholders and other financial service providers. Finally, the Decree indicates that claims between the cardholder and the issuer or affiliate should be heard by DIACO, which should always favour the cardholder in the interpretation of the Law.

The Superintendency of Banks (hereinafter "SIB") plays an essential role in the Guatemalan financial system, especially in protecting public savings. This objective is achieved through various functions exercised by the SIB, such as the supervision of financial institutions to ensure that they maintain adequate liquidity and solvency to enable them to meet their obligations in a timely and complete manner, and adequately assess and manage the coverage, distribution and level of risk of their investments and contingent operations. In other words, the SIB is responsible for ensuring that banks and other financial institutions are able to meet their potential obligations and mitigate, to a large extent, the possibility of these institutions making risky decisions that endanger the savings of the people who have placed their trust in them. It is therefore a highly specialised institution with a wealth of experience in dealing with the financial sector.

It is for this reason that the introduction of DIACO into credit card regulation attracts special attention. The financial system is a technical and specialised field. It is for this very reason that, at a certain point, the Superintendency of Banks was created in order to have an institution specialised in the supervision of the financial system and its actors. DIACO has the function of hearing general disputes between consumers and suppliers. It is not an institution characterised by having the technical-legal knowledge to settle conflicts in the financial sphere. In any case, it would have made more sense to create a Consumer Protection Unit within the SIB. This would not only allow for greater technical expertise in dispute resolution, but would also create a more efficient mechanism for better safeguarding financial information.

As can be seen from the above, what is currently in the law requires constant exchange of information between DIACO and the SIB for compliance with the purposes of the Act. If the Unit had been created within the SIB, access to that information would have been quicker and more efficient. It would also have prevented DIACO from being able to hold or request financial information that could later be used for other purposes.

José Andrés focuses his practice mainly on Civil and Commercial Litigation, with additional experience in Corporate Law. He currently works at the firm Alegalis-Legic, where he efficiently handles the management of proceedings, drafting of claims and provides advice on various legal issues.

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