He Central Bank of Uruguay (BCU) communicated an extension of almost a month for the reception of comments on the project to modify the regulations on insurance coverage of debit balance, an initiative that insurers and financial institutions intend to extend as long as possible.
The Superintendency of Financial Services presented the communication of extension of deadlines to receive comments on the project of debit balance until the 30 of this month. This idea, presented in 2019 to start a debate, had several twists and turns due to pressure from the sectors that would be affected by the changes in this project. In 2021, it went from being classified as highly important to medium, allowing times to stretch more and more.
What are the modifications planned by the BCU about?
One of them is related to the intentions of making the fee collection mechanism transparent. death balance insurance that users usually pay when accessing a loan or using a credit card.
Actually in Uruguay Card issuing entities and those that grant loans require their clients to contract and pay for insurance that is added to the costs that they pay monthly for the financial product to which they accessed.
This insurance is not contracted directly by the user, but the financial entities themselves have incorporated it into their services after direct agreements with the insurers.
On these two central points, which are part of the so-called implicit interest rate, is that the Central Bank wishes to advance in its modifications.
The BCU project establishes that the sums reimbursed by the insurance companies to the beneficiary lending institutions of debit balance life insurance cannot be excluded from the calculation of implicit rate. Currently there are retrocessions for commission and administrative expenses, among others.
In addition, the monetary entity plans to reduce from the current 6,000 Indexed Units on the outstanding balance to 2,000 the maximum amount of the monthly premium that can be excluded from the calculation of the implicit rate.
According to studies carried out by the BCU, it was found that the amount covers the net items collected by most insurance companies. That is to say that, as of today, there is almost a 67% extra cost in the premium.
The other significant change proposed by the BCU has to do with breaking the opacity of the agreement between insurers and lending entities, since the latter They will be obliged to inform clients of all the insurance conditions debit balance that requires you to pay.
When applying for a loan or a credit card, the financial user must know:
- Name of the insurance company contracted to provide insurance coverage.
- The premium paid broken down into its componentsdistinguishing what the insurance company actually receives from what is reimbursed to the institution that grants the credit.
- Scope of insurance coverage. In particular, it should be clarified if it covers the entire debt on the date of death of the debtor, including the credits to expire.
- Detail of how the amount of insurance to be paid will be calculated. When the premium is paid on a monthly basis, it must be detailed whether the agreed premium percentage will be applied to the entire amount owed, including credits to expire.
Source: Ambito
