The finances of Salvadoran households have greater protection with the approval of reforms that the Nuevas Ideas bench, with a majority in Congress, promoted from the financial commission and approved in the legislative plenary session as part of the work of the previous year, in line with the vision of President Nayib Bukele’s Government to protect the pockets of Salvadorans, mainly those most in need, and avoid abuses and the application of excessive charges for services.
Dania González, president of the financial commission and deputy for Nuevas Ideas, explained that when they took office, in May 2021, they found major deficiencies in the financial system that harmed the majority of users.
“The level of exclusion was quite high, it was more than 70% of the population that was excluded from the financial system. This sector’s rights were violated because the financial system did not adapt to the real conditions of the majority of the population, and it seemed that only very few or the privileged could access it,” González considered.
They also discovered that the most used payment method in El Salvador is electronic transactions, so it was essential for the population to have at least one savings account.
The work of the financial commission with the 2021-2024 legislature highlighted the previous year with the approval of four opinions on reforms to laws in favor of the population. These were called “acts of financial justice.”
The first is related to the modifications to the Law on the Regulation of Information Services on People’s Credit History to remove the barriers created for a sector that was already in the credit system, but was excluded due to poor communication between credit bureaus, economic agents, trading houses and citizens.
With a list of nearly 20 reforms, the protection of the databases of the users of the financial system was strengthened, free access to these databases was facilitated for clients and the management of the credit bureaus was simplified.
The second is linked to the reforms in the Credit Card Law with the objective of eliminating the membership payment for use and possession, since it was identified that 90% of cardholders have credit limits of less than $2,000.
“Membership could range from $25 to $250 a year; This practice was fully regulated. The population is saving, today, all that amount of money that they can invest and use for other needs,” said Deputy González.
Some practices of financial institutions were also eliminated, such as pre-approving credit cards and sending them without the population requesting them, overdraft charges were eliminated when they are not the result of a purchase, and office hours were established so that financial institutions communicate with customers.
The third “act of justice” is related to the reforms of the Law against Usury so that no financial entity charges interests above those legally established.
This is due to a gap in the regulations, which does not establish the way in which the credit segments are defined, which are left to the discretion of the entity, and the percentage of interest that each client would pay depended on it.
These interests are regulated by the Law against Usury with a multiplier of 1.6; It will vary depending on demand and supply. They are not fixed, but are also supervised and regulated by the Central Reserve Bank (BCR). It will depend on the context. Every six months it is published by the Central Reserve Bank,” explained the president of the financial commission. This table published by the BCR is also applied by the Ministry of Housing, which grants credits.
“If we look at it objectively, even 1% of the interest rate that is regulated already has an impact on the family’s economy,” said Representative González.
The fourth achievement is related to the reform of article 20 of the Financial Inclusion Facilitation Law to include more people in the system, which allows people from the age of 16 to open a savings account with the minority card or the birth certificate, either at an agency or online. In addition, the minimum amount to open a savings account was eliminated.
“Under this measure we also include the diaspora with their DUI, their passport or their residence card, who can open a savings account from anywhere in the world in the bank of their choice, and begin a business relationship with any bank. Let us remember, our diaspora is willing to return. “Six out of every 10 Salvadorans have that intention, and measures such as the financial inclusion facilitation law open the doors to them in the financial system,” he noted.
As a result of these modifications, the State has protected collective financial rights in two specific cases: one through the Attorney General’s Office, with the seizure of a $300,000 account from a telephone company for sharing the user database with third parties.
The second was led by the Consumer Ombudsman’s Office, which handled and won a class action lawsuit involving more than 100 people for $250,000.
According to the Cyan representative, all the regulations constitute “acts of justice” towards the population and were achieved due to the correlation of political forces in the Legislative Assembly, headed by Nuevas Ideas.
“We, the 56 deputies of the cyan bench, have given our vote in favor of all these initiatives. Without that great majority that we have, what we have achieved today would not be possible,” he stated.