Senate approves the reform to the General Law of Negotiable Instruments and Credit Transactions to introduce the Payroll Credit. Pending approval by Deputies

On February 18, 2021, a report issued by the Senate’s Joint Commissions of Finance and Public Credit, and the Senate’s Legislative Studies Commission, was approved, the purpose of which is, among others, to amend certain provisions of the General Law of Negotiable Instruments and Credit Transactions.

In order to be considered as approved, these reforms must also be approved by the House of Deputies, where the project will be discussed in the next few days, and promulgated by the Federal Executive, prior publication in the Official Federal Gazette.

Among the main objectives of the reform is the regulation of the so-called “Payroll Credit with Delegated Collection”. This modification in the law seeks to promote financial inclusion and protect working people from incurring in over-indebtedness and suffering abuses by financial entities.

Thus, if the reform is approved by the House of Deputies and the Federal Executive in the terms endorsed by the Senate, the General Law of Negotiable Instruments and Credit Transactions will include a new section related to Payroll Credit with Delegated Collection, which would allow the execution of an agreement for opening straight facility or current account credit by employees with financial entities by virtue of which the employee will authorize the employer to pay, in his/her name and on his/her behalf, the amounts due under the credit agreements from his/her accrued salary, extraordinary payments, labor indemnities, pension or life annuity.

The relevant reform provides that the amount of partial and periodic payments to be made by employees with respect to payroll credits mentioned before, to be included in the General Law of Negotiable Instruments and Credit Transactions,  would be limited according to the payment capacity of the borrower and the credit agreements previously entered by such persons. The foregoing to guarantee compliance by the debtor to the creditor and to protect the solvency of the employees.

The aforementioned reform will also imply the reform of other legal provisions such as the General Law of Credit Organizations and Auxiliary Activities and the Law for the Protection and Defense of Financial Services Users.

If you would like to know more details about the reform or to know the status of its approval, please do not hesitate to contact us.

Yours sincerely,

Cannizzo, Ortiz y Asociados, S.C.