Resolution D-88-2025: Modifications to Insurance Premiums Excludable from Implicit Interest Rate Calculation - Debtor Balance Insurance

Montevideo, April 4, 2025
Ref: COMPILATION OF REGULATIONS AND CONTROL NORMS FOR THE FINANCIAL SYSTEM – Modifications regarding insurance premiums that can be excluded from the calculation of the implicit interest rate - Debtor Balance Insurance

The market is informed of Resolution D-88-2025 adopted by the Board of Directors of the Central Bank of Uruguay on April 2, 2025.

JUAN PEDRO CANTERA
Superintendent of Financial Services
2023-50-1-01770
Diagonal Fabini 777 - C.P. 11100 - Tel.: (598 2) 1967 - Montevideo, Uruguay - www.bcu.gub.uy

CIRCULAR NO. 2473

BOARD OF DIRECTORS - RESOLUTION
Montevideo, April 2, 2025.

BOARD OF DIRECTORS

HAVING VIEWED: the resolution of the Superintendent of Financial Services SSF-2023-615 of November 29, 2023, which modifies articles 339, 350, 379, and 383 of the Compilation of Regulations and Control Norms for the Financial System and incorporates articles 350.1 and 353.4 into said Compilation.

RESULTING FROM: I) that the aforementioned resolution did not enter into force while the Board of Directors exercised its right of assumption within the timeframe established in the procedure provided for in resolution D/160/2012 of June 14, 2012; II) that Article 14 of Law No. 18.212 of December 5, 2007, establishes that insurance premiums should not be considered within the implicit interest rate of an operation and, to ensure such exclusion is not undermined, the Central Bank of Uruguay may determine a cap, beyond which the respective amounts will form part of the implicit rate of the credit operation, which must respect legal maximums; III) that the central banking authority is reaffirmed in Articles 4 and 6 of Decree No. 344/009 of July 27, 2009, and, in application thereof, this cap was established at 6 U.I. (six indexed units) per month or at a monthly premium of 6‰ (six per mille) on insured balances, as provided in Article 339 of the Compilation of Regulations and Control Norms for the Financial System; IV) that the Superintendent of Financial Services formulated a regulatory project introducing modifications regarding the aforementioned exclusion, decreasing the cited cap to 2‰, eliminating the 6 U.I. (six indexed units) cap, and including additional information requirements for clients regarding this insurance, establishing that such exclusion could not consider sums that are reimbursed by insurers to lending institutions for commissions, administrative expenses, or other items related to insurance management.

CONSIDERING: I) that the purpose pursued by the legal provision, while recognizing that the insurance premium is a consideration in exchange for coverage of a risk (death with unpaid debtor balances transferred to heirs) and not a consideration paid for the current availability of money and the possibility of deferring its return over time (which constitutes the interest rate), is to prevent the risk that – under the guise of insurance cost – true interests are concealed, placing the operation above usury rates (without this having legal consequences), presenting as a “premium” something that in substance is not one (and thus violating the duty of transparency); II) that – consequently – the grounds and purpose sought by the regulation approved by the Superintendent of Financial Services are shared, which includes several modifications aimed at deepening transparency in this matter; III) that the Central Bank of Uruguay must operate between two limits: the percentage cannot be so low relative to the covered risk that it nullifies the unequivocal legislative intent to exclude insurance premiums from the calculation of the implicit interest rate; the percentage cannot be so high relative to said risk that it distorts the concept of premium to add a different (and concealed) additional cost to the credit operation (which – like any cost not excluded by the legislator – should be computed for the calculation of the implicit interest rate); IV) that furthermore, when setting the maximum cap, it must be kept in mind that the legislative exclusion does not refer only to the pure premium, but to the premium that the policyholder pays for all concepts (known as the commercial premium); V) that – in exercise of the power assigned by law – to account for the difference between credit companies, as well as the cost absorbed by the financial entity regarding the insurance (which forms part of the commercial premium), the working group created from the agreement signed with the CAF, named “Consultancy on the regulatory framework of financial system and payment companies,” suggests that the cap to be considered under Law No. 18.212 should be 2.5‰ (two and five per mille), a percentage that reasonably contemplates other components of the commercial premium not included in the pure or net premium received by insurers in this case; VI) that likewise, considering the potential impact that the change may have on budgetary projections possibly made by financial companies and consequently on their results, as well as the fact of the prolonged period during which the current regulatory framework has governed, the new regime will be applied starting January 1, 2026, and subsequently, the percentage will be evaluated for reduction to that originally disposed of by the Superintendent of Financial Services.

ATTENTIVE TO: what has been stated, what is provided by literal A) of Article 38 of Law No. 16.696 of March 30, 1995, in the wording given by Article 11 of Law No. 18.401 of October 24, 2008, literal F) of Article 14 of Law No. 18.212 of December 5, 2007, Articles 4 and 6 of Decree No. 344/009 of June 27, 2009, resolution D/160/2012 of June 14, 2012, opinions of the Legal Advisory Office No. 2020/177, No. 2023/051, and No. 2023/271 of the Legal Advisory Office, and other antecedents appearing in file No. 2023-50-1-1770,

IT IS RESOLVED:

1. Substitute in Chapter V – Active Interest Rates, of Title I – Relationship with Clients, of Book IV – Protection of users of financial services, of the Compilation of Regulations and Control Norms for the Financial System, Article 339 with the following:

ARTICLE 339 (EXCLUSIONS FOR THE PURPOSES OF CALCULATING THE IMPLICIT INTEREST RATE).
For the determination of the implicit interest rate in credit operations carried out by institutions, the concepts established in the regime of Article 14 of Law 18.212 of December 5, 2007, shall be excluded, observing the following limits:

1. The sending of the statement of account, when optional for the cardholder, up to a maximum amount equivalent to 10 U.I. (ten indexed units).

2. Premiums for insurance contracts, single or monthly, provided by insurance companies registered with the Central Bank of Uruguay, up to the equivalent of a monthly premium of 2.5‰ (two and five per mille) on insured balances.
   In the case of credit operations associated with credit cards, this limit will apply to the monthly balance.
   This limit will not apply to insurance covering risks associated with goods pledged, mortgaged, or held in trust as collateral for the credit.

3. Expenses derived from notice of delay in payment of installments or extrajudicial collection management, up to:
   i. The cost of sending a collated telegram, according to the tariffs currently in effect for this concept in the Tariff Schedule of the National Administration of Telecommunications (ANTEL), provided this expense is duly documented.
   ii. The minimum honorarium amount established for the concept of “Minutes of protests, intimations, notifications, declarations, and verifications (of facts, inventories, and drawings) and their protocolization” of the Official Tariff of the Association of Notaries of Uruguay, in those cases where the exceptional intervention of a Public Notary is necessary, and for justified reasons.
   To allow this expense and corresponding taxes to be excluded, they must be duly documented.
   iii. The equivalent to 50 U.I. (fifty indexed units) per operation, for other expenses derived from notice of delay in payment of installments or extrajudicial collection management, with a maximum of 10 U.I. (ten indexed units) for each month in which management or notices were effectively carried out.
   In the case of credit operations associated with credit cards, the limit will be 10 U.I. (ten indexed units) for expenses derived from management or notices carried out between two consecutive statement closing dates, with a maximum of 50 U.I. (fifty indexed units) per year.
   TRANSITIONAL PROVISION: The percentage established in numeral 2) of this article will begin to govern on January 1, 2026; maintaining until that date the currently in-force percentage of 6‰ (six per mille).

2. Substitute in Section II – Information to Clients, of Chapter VI – Information and communication with clients, of Title I – Relationship with Clients, of Book IV – Protection of users of financial services, of the Compilation of Regulations and Control Norms for the Financial System, Article 350 with the following:

ARTICLE 350 (PRIOR INFORMATION ON INTERESTS AND CHARGES).
Institutions, prior to the contracting of any product or service, must provide each client with information on all interests, charges, expenses, commissions, fees, insurance, fines, taxes, or other amounts necessary for the contracting and maintenance of the respective product or service, indicating concept, amount, billing periodicity, and whether they are mandatory or optional. Likewise, those amounts that the client must pay to third parties distinct from the institution, directly related to the contracting of the respective product or service, must be indicated. In cases where the amount cannot be established with precision in numerical values, such eventualities must be indicated, specifying the method of calculation (base and rate to apply, if applicable). This information must be updated, sufficiently detailed, and clear, so that the potential client can know the total cost of the operations, and compare among the different alternatives offered in the market. In cases where the value of any of the informed amounts may vary, such eventualities must be clearly indicated along with the method of communicating such variations, as established in Article 360. This requirement may be fulfilled by including a reference to the respective clauses of the contract. When the client, at the time of granting the credit, contracts a debtor balance coverage insurance offered by the institution itself, they must be provided, additionally, with the information referred to in Article 350.1. Institutions must implement mechanisms and procedures that allow verifying that the previously detailed information was effectively provided to each client. Such updated information must also appear on the institution’s website, if it exists, in an easily accessible place, alongside information on the respective products or services offered.

3. Incorporate into Section II – Information to Clients, of Chapter VI – Information and communication with clients, of Title I – Relationship with Clients, of Book IV – Protection of users of financial services, of the Compilation of Regulations and Control Norms for the Financial System, Articles 350.1 and 353.4:

ARTICLE 350.1 (PRIOR INFORMATION ON DEBTOR BALANCE COVERAGE INSURANCE).
Institutions that, upon granting credits, offer their clients the contracting of debtor balance coverage insurance in case of death, must provide them with the following information:
a. Name of the insurance company that the institution has contracted to provide the insurance coverage. b. Indication of how the amount of insurance to be paid will be calculated. When the premium is paid monthly, it must be detailed whether the agreed premium percentage will apply to the total owed, including future-due credits.
c. Indication of the scope of coverage. It must be clarified whether this covers the total owed, including future-due credits. Likewise, the criterion regarding the coverage of past-due credits that remain unpaid on the date of the debtor's death must be indicated.

ARTICLE 353.4 (INFORMATION RELATIVE TO THE PROCEDURE TO ACCESS DEBTOR BALANCE INSURANCE COVERAGE).
Institutions must keep available to the public, on their website, information on how the beneficiary or co-debtor of the deceased debtor must proceed so that the contracted debtor balance insurance coverage operates.
Additionally, they must indicate the actions that will be taken for the total cancellation of the deceased’s debt in case coverage is denied, respecting in such situations the payment plan agreed upon with the deceased debtor or another alternative, provided it is more favorable for the beneficiary or co-debtor of the deceased debtor.

4. Substitute in Title IV – Credit Card, of Book IV – Protection of users of financial services, of the Compilation of Regulations and Control Norms for the Financial System, Articles 379 and 383 with the following:

ARTICLE 379 (STATEMENTS OF ACCOUNT).
The statements of account or other reports sent to clients must include, at minimum:
a) The closing date or period comprising the information and the payment due date. b) The authorized credit amount and the available limit with indication of the corresponding currency. c) The date, description, and amount of each operation carried out. d) The interest rates (compensatory and default) applied during the period. e) Any other charge agreed upon for any concept, with indication of its mandatory or optional character, provided the client was duly informed of the same amount. f) Taxes that may apply. g) A table showing, with equal relevance:
i) the Cash Payment amount (that which cancels the entire debt), ii) the Minimum Payment amount, iii) the interest amount (interest accrued as of the statement of account due date, in case no payment is made), iv) the value-added tax on interest. h) Payment methods. i) Indication of the amount and date of the last payment made in case of pending balances. j) The compensatory interest rate corresponding to each financing alternative. k) The compensatory and default interest rates governing the billing period following that of the purchases reported in the statement of account. l) A clarifying note, with a link from the table where the minimum payment is indicated, warning that making only minimum payments will significantly increase the time it takes to pay off the debt, as well as cost more. m) A box, on the front of the statement of account, stating what is provided in Article 352. n) The date of the next statement of account due date. o) A notice about automatic card renewal, if applicable, indicating the date and charge. This notice will be included in the statement of account of the month prior to the issuance of the card by automatic renewal. p) A record, in the statement of account of the month prior to proceeding to fill in the incomplete negotiable instrument referred to in Article 372, indicating the date on which it will be completed in case the client does not cancel the owed balance or agree on a payment method before that date. This record will not be necessary in case the institution opts to communicate via another of the forms provided in Article 355. The interest rates referred to in sections d), j), k) must be expressed in effective annual terms, which must be reported without including value-added tax. Any charge to be included in the statement of account must have been expressly agreed upon and informed to the client priorly with indication of its amount and reason for charging. Statements of account must be sent to the client on a monthly basis, unless otherwise expressly indicated by the client. If there are no purchases, interests, charges, or debts in the billing period, it will not be necessary to send the printed statement of account, and if sent, it will be free of charge for the client. If the client requests, the possibility will be provided, free of charge for the client, to substitute the physical statement of account with electronic delivery or a notice indicating the electronic address where to obtain it and the possibility of picking it up at the institution’s offices. This right must be recorded in the printed statement of account, provided it has a specific cost for the cardholder. The statement of account must be delivered to the client’s physical or electronic address, as agreed, at least three calendar days in advance of the due date.

ARTICLE 383 (CARDLET/BROCHURE).
Institutions must deliver a cardlet/brochure to each client before signing the contract, in which the aspects listed below are indicated:
a) The responsibility of the parties in case of theft, loss, or forgery of the card, attending to what is stated in Articles 365 and 367 and the manner in which the client must carry out the reporting procedure for these events, according to what is established in the contracts. b) The current compensatory and default interest rates, or an explanation of how the client can inform themselves of the same. c) The charges, expenses, commissions, fees, insurance, fines, taxes, and other applicable amounts, indicating concept, billing periodicity, and the mandatory or optional character of each, and the manner in which the client can inform themselves of the current amount of the same. When the client is offered the contracting of a debtor balance coverage insurance, the detailed information in Article 350.1 must be provided. d) The credit limit granted or the manner in which this will be communicated to the client when their card is activated. The cardlet/brochure must be delivered before signing the contract and will refer to the contract clauses that describe or explain the functioning of the aspects enumerated above. In case any of the preceding items could change, the conditions for modification must be indicated, as well as the means and timeframe that will be used for prior notice to the client. This requirement may be fulfilled by including a reference to the respective clauses of the contract. The delivery of this cardlet/brochure fulfills what is established in Article 381 regarding notification of the credit limit and in Articles 350 and 350.1 regarding the delivery of information on interests and charges.

5. Entrust the Superintendent of Financial Services with communicating what is disposed of via Circular, keeping in mind what is provided by Articles 105 and 106 of the Administrative Regulation.
   (Today’s Session – Minutes No. 3760)
   (File No. 2023-50-1-1770)

Jorge Christy
Secretary General
Publishable Resolution
Signer: Jorge Eduardo Christy Davies Date: 03/04/2025 19:17:12 CIRCULAR NO. 2473