New Regulation to Prevent and Resolve Consumer Over-Indebtedness

Disposition No. 11/2023 of the Argentine Federal Consumer Protection Authority (CPA), published in the Official Gazette on July 14, 2023, approved the “Regulation for the Prevention and Resolution of Consumer Over-indebtedness”. Authorities in every jurisdiction were invited to adhere to it.

The new provision aims to mitigate consumer over-indebtedness, understood as the difficulty to pay off debts contracted in consumer relationships. To achieve this, the regulation establishes principles guiding the processing of over-indebtedness cases before the CPA, obligations for suppliers, and the creation of the Specialized Unit for Over-indebtedness (UES).

1. Principles 

• The consumer in debt will be presumed to have acted in good faith.
• Economic sustainability: indebtedness should not compromise the dignity of the consumer and their family.
• Prompt rehabilitation of over-indebted consumers: to enable them to contract new debts in the shortest time and to the lowest extent possible.

 2. Obligations  

• Prevention of over-indebtedness: advertising and commercial practices must avoid encouraging it.
• Responsible financing: consumers must receive advice on the appropriateness of getting credit, considering their individual needs and economic capabilities.
• Social force majeure: the provider of the credit must consider foreseeable but unavoidable situations preventing the fulfillment of obligations (e.g., job loss). This is expected to result in increased costs, which will be borne by consumers.
• Equality: different prices, interest rates, or conditions based on factors unrelated to the consumer’s solvency are not allowed.
• Duty to inform: written, clear, and free information about unfavorable credit history and solvency –including its source– must be provided, when it is the reason for denying credit or financing.
• Abusive clauses: the Disposition incorporates new guidelines for identifying abusive clauses. 

 3. The UES

The UES will control either ex officio or at the request of the interested parties:

• Contractual documents and supplier information (e.g., employee payroll, financial statements, etc.).
• Interest rates.
• Illicit commercial practices or systematic non-compliance. Moreover, it can request preventive measures from competent courts to ensure compliance with its requests and provide technical assistance in cases of over-indebtedness in proceedings before the mandatory conciliation system (COPREC) and consumer arbitration (SNAC). It will also be allowed to propose conciliated solutions.

The implementation of this extensive Disposition will require close monitoring, since it includes principles, duties, and obligations that may be subject to ambiguous interpretations, and might appear excessive concerning the Directorate’s regulatory powers. Additionally, it remains to be seen which jurisdictions will adhere.

While addressing the issue of over-indebtedness is essential, it is vital to recognize that it comes as a natural result of consumers’ freedom of choice and personal autonomy.