The reasons why Cabildo Abierto promotes the debt restructuring project
In the document submitted to the Vice President of the Republic, Beatriz Argimonit is held that “In recent years, financial companies that offer loans with easy access have proliferated in Uruguay.“, where “the average financial cost of this financing scheme is generally excessive for the individuals who receive it”, and “generating high levels of indebtedness in thousands of people with little wealth“.
“The current legislation that regulates the bankruptcy situation in Uruguay does not contemplate natural persons, only those who carry out a business activity, leaving an important group of Uruguayans who are over-indebted“, the document states.
In turn, he adds that these citizens live “in the permanent anguish of collection strategies that border on the threat through credit recovery companies that literally harass them“leaving these people in”a kind of civilian death“due to its registration in the clearing, and in the register of debtors categorized by the Central Bank of Uruguay (BCU).
What does the bill say?
In Article 1, the creation of “a judicial procedure to restructure the liabilities of natural persons” is proposed, which “must be preceded by a conciliation process in the administrative field“.
According to Article 2, “those debtors with private individuals or legal entities, or with state entities” who do not have a real estate asset, or have only one intended for housing and that does not exceed the cadastral value of 1.6 million Indexed Units (UI).
Nor may they be owners of vehicles that cost more than 150,000 IU according to the value awarded by the Single Vehicle Income Collection System (dirty), or who receive nominal annual income less than or equal to the sum of 240,000 IU.
Article 3 explains that the debtor must initiate the administrative process before the Consumer Defense Unit of the Ministry of Economy and Finance (MEF). After the beginning of this stage, “the executions of patrimonial content will be suspended until the sentence that contains the forced judicial agreement”.
Article 4 specifies that when the debtor begins the mandatory administrative stage You must identify your creditors reporting amounts and conditions of the contractalong with your income and the assets you own in your estate.
After this, the Consumer Defense Unit will convene a hearing within the term of 45 days, where the debtor and creditors denounced will be summoned. With a notice of 10 daysthe creditor must provide all information regarding the debt.
In this hearing, according to Article 5, an attempt will be made to reconcile the parties regarding the debts, proposing reductions or waits. Said agreements they must leave a margin of 70% of their monthly income to the debtor for their own subsistence, when they do not exceed the equivalent of 4 monthly minimum wages. In case of exceeding this amount, the reserve will be 60%.
Failure to submit documentation by the creditor will result in a fine of between 50 and 100 Resettable Units (UR), which will be sent to the Consumer Defense Unit.
Article 6 explains that if the administrative process is initiated by the creditor, or several creditors, the debtor must be notified for a period of 15 days so that he denounces his creditors.
For the approval of the payment plan, an affirmative vote of the absolute majority of the creditors will be required, representing two thirds of the denounced liability, says Article 7.
In the event that no agreement is reached, a legal proceeding may be filed before the First Instance Courts with competence in civil matters, or Justices of the Peace, according to the amount calculated, and according to the concept of just debt (established in Article 15 of the project).
The deadline to initiate the restructuring action “it will be 6 months counting from the date of the minutes that the Consumer Defense Unit will draw up at the end of the hearing due to lack of agreement”.
When the creditor invokes the nullity of the restructuring agreement, or summarily demonstrates having a liquid and demandable credit, “the term to initiate the judicial agreement will be 60 days from the registration of the Extrajudicial Restructuring Agreement” (provided for in Article 22).
In Article 9, it is added that the debtor requesting the restructuring must present a payment plan, respecting the requirements of Article 4, and taking into account the concept of fair debt (Article 15).
Article 10, the approval of the payment plan “the majority provided for in Article 7 of this law will be required.”
In Article 11 it is mentioned that if the procedure is initiated by one or several creditors, “the debtor will be summoned to appear within a period of 15 days” to formulate a payment proposal.
If the approval of the hearing is not obtained, the judge will analyze the positions and try to bring the positions closer together (Article 12).
If conciliation fails at the hearing, the judge will analyze the economic and financial situation of the debtorand will make a projection of the income of the debtor and his assets, and present within a period of 10 daysfor the consideration of the creditors, a payment proposal (Article 13).
According to Article 14, it will be presumed that creditors acted illegally when:
- When granting a loan, they do not inform the debtor of the total amount of the credit to be paid.
- Advertise without it containing information about the interest rate.
- Carry out abusive practices for the collection of creditssuch as violations of the privacy of individuals, or the use of erroneous information.
Said behaviors would be sanctioned with a fine equivalent to 20% of the unpaid balance of the original creditconverted to UI on the date of the last amortization, and updated to the present at the Effective Annual Rate (TORCH) of the 2%.
Article 15: For the restructuring of the payment, the fair debt will be considered, which is defined as the amount initially agreed in any currency (converted to UI), to which is added a 2% APR for interest, fines, or any other type of surcharge, and the payments made by the debtor are subtracted, for all concepts and converted to UI, up to the date of the restructuring request.
This fair debt will serve as the basis for the restructuring proposal, which cannot exceed its amount, which can only be removed. “In case of proposed cancellation in installments, these may not exceed 30% or 40% of monthly income of the debtor in accordance with the provisions of Article 5 of this law”, says Article 16.
If there is no agreement between the parties, the judge can sentence a “Forced Judicial Restructuring“Such restructuring will contain what, at the discretion of the judge, is feasible for the debtor to comply with, the amount of which may not exceed what is defined in Article 15”, is written in Article 17.
Article 18: “In the event of non-compliance by the debtor with the payment plan established in the forced restructuring, the creditors will have the right to execute the same prior notice of payment with a term of 10 days“.
Article 19: “The restructuring imposed by the court may be reviewed and improved while compliance is pending,” and the debtor’s income so allows. The review may be requested by creditors who submit, at least, 25% of the verified liability amount.
Article 20 states that the control of compliance with the agreement is the responsibility of the parties.
Article 21: “The debtor may not initiate a new procedure until two years have elapsed from the extinction of the debts that were the subject of a previous restructuring.”
Article 22: Creation of a “Record of Restructuring of Liabilities of Indebted Individuals” in the Consumer Defense Unit of the MEF.
The maximum interest, according to Article 23, may not exceed the equivalent of 4 times the value of the rates at which the State borrows.
The maximum interest that can be charged for operations in dollars “shall not exceed three times the value of the weighted averageby amount issued, of the coupons to be paid by the General Treasury of the Nation in the three most recent issuances of Global Bonds denominated in dollars at a fixed rate.
For both currencies, the maximum default rate will be set at a level twenty% greater than the corresponding maximum rate.
Article 24: Registrations in the database will have no connection with information from public services.
Article 25: In all that is foreseen, the provisions of the General Process Code.
Article 26: “This law shall not apply to food and labor obligations.”
Article 27: “This law shall govern the 30 days from its promulgation”.
And Article 28 ends by saying that “this law is of public order”, in the document signed by the lobbying senators Guido Manini Ríos, Guillermo Domenechand Irene Moreira.