Technical Standards for Transparency and Disclosure of Information in the Credit Card System

NCM-04
OF INFORMATION IN THE CREDIT CARD SYSTEM
Approval: 11/04/2022
Validity: 03/05/2022

THE COMMITTEE OF STANDARDS OF THE CENTRAL RESERVE BANK OF EL SALVADOR,

CONSIDERING:
I. That the second paragraph of Article 2 of the Law for the Supervision and Regulation of the Financial System requires that members of the financial system comply with current regulations and the adoption of the highest standards of conduct in the development of their business, acts, and operations in accordance with what is established therein.
II. That Article 16 of the Credit Card System Law establishes that the issuer or co-issuer of credit cards may not set or apply commissions that have not been agreed upon through the contract with the holder.
III. That Article 19-A of the Credit Card System Law establishes that when the cardholder does not make transactions for the purchase of goods or services and only proceeds to make payments on the debt, according to the description of the credit card statement, and the maximum approved credit line limit or availability is exceeded as a result of the accounting of conventional and delinquent interest, no commission may be charged for overdraft or additional surcharge.
IV. That Article 20-A of the Credit Card System Law establishes that the charging of a commission for membership, affiliation, or any other nature analogous to it is prohibited in credit cards with a credit line limit or availability equal to or less than two thousand United States dollars.
V. That Article 21 of the Credit Card System Law establishes that the issuer or co-issuer of credit cards must display to the public in their establishments and advertising: the maximum nominal interest rate, maximum effective interest rate, maximum delinquent interest rate, commissions, and surcharges applicable to each type of cards they issue.
VI. That Article 32 of the Law for the Supervision and Regulation of the Financial System establishes that the Superintendence may require supervised entities direct access to all data, reports, or documents regarding their operations through the means and form it defines.
VII. That Article 35 of the Law for the Supervision and Regulation of the Financial System establishes that directors, managers, and other officials holding positions of direction or administration in members of the financial system must

NCM-04
OF INFORMATION IN THE CREDIT CARD SYSTEM
Approval: 11/04/2022
Validity: 03/05/2022 conduct their business, acts, and operations complying with the highest ethical standards of conduct, and must ensure the efficient functioning of systems for recording, processing, storage, transmission, production, security, and control of information flows.
VIII. That Article 99 of the Law for the Supervision and Regulation of the Financial System, in letter a), establishes that it is the responsibility of the Committee of Standards of the Central Reserve Bank to approve technical standards and provisions that must be issued in accordance with the laws regulating the supervised entities, especially those related to information transparency requirements.
IX. That Article 99 of the Law for the Supervision and Regulation of the Financial System, in letter b), establishes that it is the responsibility of the Committee of Standards of the Central Reserve Bank to approve technical standards that provide the public with sufficient and timely information about the products and services offered by members of the financial system.

THEREFORE,

by virtue of the regulatory powers conferred by Article 99 of the Law for the Supervision and Regulation of the Financial System, AGREES to issue the following:
TECHNICAL STANDARDS FOR TRANSPARENCY AND DISCLOSURE OF INFORMATION IN THE CREDIT CARD SYSTEM

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to facilitate the application of the Credit Card System Law, developing the corresponding procedures and methodologies, and promoting transparency and disclosure of information in the credit card system.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are issuers, co-issuers, acquirers, administrators, or managers of credit cards, when they are:
a) Banks; b) Member companies of a financial conglomerate; c) Cooperative banks; d) Savings and credit societies; e) Federations of cooperative banks; and f) Other companies that, in accordance with their respective laws, are subject to the supervision of the Superintendence. The co-issuer, administrator, or manager of a credit card will be obligated to comply with these Standards when, by virtue of a contract, they may be entrusted, on behalf of the issuer, with the placement, contracting, and collection thereof.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Credit analysis or study: Process of verification by the issuer or co-issuer that qualifies the potential cardholder with the profile defined in the policy established for the granting of credit. This process can be carried out through automated risk measurement systems; b) Central Bank: Central Reserve Bank of El Salvador; c) Payment capacity: Evaluation of the flow of income and expenses or expenditures generated in a specific period of time, to determine if the cardholder can honor their financial obligations; d) Third-party charges: Amounts of money charged by the subjects obligated in these Standards to the user or client for services provided by third parties to meet requirements linked to operations that, according to what was agreed, will be at the expense of the user or client; e) Client: The natural or legal person with whom the subjects obligated in these Standards establish relationships of legal or contractual origin, for the supply of products or services, in the development of their activities; f) Co-issuer, administrator, or manager of a credit card: Legal person who, by virtue of a contract, carries out the administration or management of credit card operations, who may be entrusted, on behalf of the issuer, with the placement, contracting, and collection thereof; g) Entity: Subject obligated referred to in Article 2 of these Standards; h) Statement: Billing notice document that details, among other things, all transactions made by the cardholder during the billing period; i) Extra-financing: Additional credit to the authorized credit for cardholders, who have qualified based on policies and parameters established and defined by the issuers, co-issuers, or both, amortized through monthly installments or another form

NCM-04
OF INFORMATION IN THE CREDIT CARD SYSTEM
Approval: 11/04/2022
Validity: 03/05/2022 that allows the calculation of interest on outstanding balances; j) Cut-off date: Date until which transactions and calculations made during the period elapsed between two consecutive statements are updated and incorporated; k) Payment deadline: Last date on which the cardholder must make at least the minimum required payment, to avoid default; l) Interest: Price charged for the use of credit availability on the disbursed capital balance, whether for the acquisition of goods or services, or for cash withdrawals; m) Waivable interest: Interest generated by transactions made during the period between the last cut-off date and the current cut-off date, which are waived by the issuer or co-issuer upon payment of the cash balance; n) Law: Credit Card System Law; o) Credit limit: Maximum amount agreed upon in the credit opening contract, which the issuer, co-issuer, or both, make available to the cardholder in accordance with the conditions agreed upon in the contract; p) Membership: Annual, semi-annual, or quarterly charge made to the client by the issuer or co-issuer of the credit card for its use, given that the card is associated with a national or international brand; q) Default: Non-compliance incurred by the cardholder when they do not make at least the minimum payment indicated in their statement on the payment deadline; r) NIT: Tax Identification Number; s) Administration Body: Collegiate body that performs the administration function of the entity; for the purposes of these Standards, it refers to the Board of Directors or Administrative Council, as applicable; t) Cash payment: Total amount that the cardholder must pay no later than the payment deadline; u) Minimum payment: Minimum amount that the cardholder must pay no later than the payment deadline, indicated in the statement to avoid default; v) Billing period or cycle: Period comprised between the day following the cut-off date of the previous month and the cut-off date of the current month; w) Surcharge: Economic penalty applied by the financial entity to the client for failing to comply with contractual obligations, due to facts attributable to the same; the description or definition of the surcharge must be included in the contract or its annexes; x) Capital balance: Value formed by the balances of capital from purchases and cash withdrawals, excluding interest, commissions, and surcharges, which may have two components: a first component (A), if any, corresponding to the capital balance determined on the cut-off date of the statement of the previous month, and a second component (B) corresponding to the capital balance generated in the period

NCM-04
OF INFORMATION IN THE CREDIT CARD SYSTEM
Approval: 11/04/2022
Validity: 03/05/2022 of billing of the statement of the current month, considering the amortization made by the cardholder on both components (A and B) during the billing period of the statement of the current month; y) Delinquent capital balance: Sum of the capital balances of delayed minimum payments; z) Overdraft: Percentage or fixed amount applicable to the cardholder when the purchases made by them exceed the initially authorized credit limit; aa) Superintendence: Superintendence of the Financial System; bb) Credit card: It is a means or private document, signed, nominative, and non-transferable, resulting from a credit opening contract that allows the holder or cardholder to use it as a means of payment to acquire goods and services in affiliated businesses or institutions or to withdraw cash in financial institutions and dispensers authorized by the issuer; cc) Cardholder or card holder: The natural or legal person authorized for the use of the credit card and who is responsible for all charges and purchases made personally or by those authorized by the same; dd) Effective interest rate or EIR: Total annual cost of financing on the lent capital, expressed in annual percentage terms; for informational and comparison purposes, it incorporates all charges inherent to the financing received. It includes interest, commissions, and surcharges that the cardholder is obligated to pay according to the contract; and ee) User: Any natural or legal person who operates with the entities or makes use of the services that they provide to the general public, without any contractual relationship with the entity.

CHAPTER II
PROCESS OF AUTHORIZATION TO ISSUE OR CO-ISSUE CREDIT CARDS

Authorization Request
Art. 4.- The entity interested in operating as issuers, co-issuers, managers, or administrators of credit cards must request authorization from the Superintendence to act as such, being subject to the provisions contained in Articles 3 and 4 of the Law and those established in these Standards. The authorization request to operate credit cards must be accompanied by the following information and documentation:
a) Copy of the testimony of the deed of incorporation of the entity and its modifications duly certified; b) Copy of the bylaws of the company, if they are not included in the project of the deed duly certified;

NCM-04
OF INFORMATION IN THE CREDIT CARD SYSTEM
Approval: 11/04/2022
Validity: 03/05/2022 c) Legible copy of the entity's NIT; d) Certification of the Minutes Point of the Entity's Administration Body in which the agreement to request authorization from the Superintendence to issue or administer credit cards is recorded; e) Report issued by an external audit firm that certifies the amount of paid-up social capital of the entity as of the date of the request; f) Description of the source of funds with which it will operate; g) Economic-financial feasibility study, which must include the financial bases of the operations projected to be developed for at least two years, the commercial plans, and the market segment they will serve. The economic-financial feasibility study must be prepared by a professional with extensive experience in the formulation and evaluation of projects or by a company backed by professionals of that category; h) Organizational chart of the entity and number of employees with which it will operate; i) Audited financial statements corresponding to the last two years, accompanied by the notes and the external auditor's report, and a copy of the financial statements corresponding to the month immediately preceding the entity's request; j) Copy of the accounting manuals, policies, and internal regulations of the entity related to the operation of credit cards and the description of the accounting system; k) Description of the computer systems to operate credit cards, which must contain at least what is detailed in Annex No. 1 of these Standards; l) Brands of the cards that will be issued, their characteristics, and their scope of application, whether national or international; m) Models of credit opening contracts for the issuance and use of credit cards, which must comply with the aspects indicated in current legislation and in Chapter III of these Standards; n) Description of the complaint reception system that operates twenty-four hours a day; o) Study on the risk of new products or services, prior to their launch; as well as also in the event of important changes in the operational or computer environment; p) Name or corporate name of the entity's external audit firm; q) Copy of the Legal Representative's credential duly certified; r) Detail of the shareholders, whether natural or legal persons, including the percentage of shareholding:
i. Natural person: full name, age, profession or occupation, expression of the type of identity document and its number, graphical representation of the NIT, domicile, and nationality.
ii. Legal person: name of the company, NIT, domicile, and Taxpayer Registry Number;
s) Copy of the graphical representation of the NIT and Unique Identity Document of the shareholders or a certified copy of the passport in the case of foreigners, of those whose shareholding is greater than 1% of the entity's social capital; t) Audited financial statements of the last two years of the shareholders that are legal persons, with a shareholding greater than 10% of the entity's social capital; u) List of the persons who make up the Administration Body; v) Copy of the graphical representation of the NIT and Unique Identity Document of the persons who make up the Administration Body or a certified copy of the passport in the case of foreigners; w) List of the managers and other officials of the entity, indicating their email and contact phone number; x) Have effective internal controls for the management of risks of transactions made with credit cards online or by any other means; y y) Manual that describes the formulas and the process used for the calculation and settlement of interest, commissions, surcharges, minimum payment, among others. Detail of how the minimum payment, cash payment, or intermediate payments between the minimum payment amount and the cash payment are applied to the amortization of debt, interest, commissions, and expenses. They must present, by way of example, a numerical exercise that illustrates the application of the formulas for each product. The Superintendence will verify compliance with the requirements imposed on the entity prior to its incorporation into the list of issuers and co-issuers referred to in Article 8 of these Standards. Likewise, the entity must have credit policies approved by its Administration Body, which it must send to the Superintendence within a period not exceeding sixty days after the approval of the Administration Body of the entity. In case of modifications, the period for their submission cannot be greater than thirty days. This article is exempt from applicability to banks, to subsidiary companies that issue or administer credit cards and are part of financial conglomerates authorized by the Superintendence as part of them prior to the validity of the Law, and to savings and credit societies whose authorization to operate includes the issuance of credit cards. Subsidiaries of banks or exclusive-purpose holding companies that are constituted and request authorization to operate credit cards after the validity of the Law must previously comply with the provisions established in the Banks Law, in

NCM-04
OF INFORMATION IN THE CREDIT CARD SYSTEM
Approval: 11/04/2022
Validity: 03/05/2022 the Standards to Authorize Banks and Exclusive-Purpose Holding Companies to Make Share Investments in Salvadoran Companies (NPB1-10) and in the Standards to Determine the Companies that can be part of Financial Conglomerates (NPB4-33).

The other entities subject to the supervision of the Superintendence that require authorization to issue, co-issue, or administer credit cards must attach to the request only the information indicated in letters d), k), l), and m) of this article. Federations of cooperative banks that wish to administer the credit cards of their affiliates must send, in addition to the information indicated in the letters mentioned above, the characteristics that those entities affiliated with the federation that can operate with a credit card must meet.

Authorization for Foreign Legal Entities
Art. 5.- Banks constituted, according to foreign laws, that intend to operate credit cards in El Salvador, must obtain prior authorization to constitute themselves as a bank or branch of a foreign bank, in accordance with the provisions established in the Banks Law.

Credit Card Managers
Art. 6.- The entity subject to these Standards must send to the Superintendence, a certified copy of the contract signed with the manager of a credit card, which must comply with the regulations established in the applicable laws and standards, within a period of thirty days after its signing.

Deadline for Authorization
Art. 7.- After receiving the request with the information and documentation required in Article 4 of these Standards, the Superintendence will have a period of sixty business days to authorize the entity interested in issuing or co-issuing credit cards. The Superintendence will warn the entity to correct deficiencies or present additional documentation or information when this is not sufficient to establish the facts or information they intend to prove, thereby interrupting the period indicated in the previous paragraph. The entity will have a maximum period of fifteen business days to resolve the observations or present the additional information required by the Superintendence. If no response is received from the entity interested in issuing or co-issuing credit cards within the period indicated in this paragraph, it will be understood that the applicants have withdrawn and the file will be archived. The Superintendence may extend the previous period before its expiration at the request of the entity, for which it must present a written document justifying the reason for the extension. The extension period cannot exceed sixty business days and will count from the expiration date of the original period. Once the documents have been duly corrected by the entity, the Superintendence will verify the computer systems and resolve on the authorization request to operate credit cards

NCM-04
OF INFORMATION IN THE CREDIT CARD SYSTEM
Approval: 11/04/2022
Validity: 03/05/2022