Right to an advance payment. An explanation of the expansion of the Consumer Protection Law

On November 4, Law No. 6624 was published, modifying Article 30 of Law No. 1334/98, “On the protection of Consumers and Users”. Through this modification, the consumer’s right to pay its debts in advance is recognized (or, better said, expanded).

It’s worth noting that the previous wording of article 30 of Law No. 1334/98 recognized the right to pay in advance only the entirety of the debt. Law No. 6624/20 extends this right by also allowing the debt to be paid partially in advance.

The new Law establishes that the consumer’s right to pay in advance may not be hindered, limited, or conditioned to the creditor’s payment of any penalty. Likewise, it is established that, in the event of early payment of debts, there will be a proportional reduction of interests. This reduction will be performed not considering unearned interests.

To make the right of advance payment effective, the debtor must communicate with the creditor and express his intention to pay the credit operation in advance, partially or totally. The creditor must immediately issue a clear, detailed, and transparent settlement of the debt up to the date of the communication.

To effectively cancel the obligation, the interest to be paid will consist of the fractional interest accrued at the time of the cancellation or of the advance payment of partial instalments, or the payment of the obligation without any other additional charges or penalties. The nominal rate, in annual terms or for annual periods, must be clearly provided in the contract.

This modification in the article’s wording seeks to safeguard the fundamental principle of “prohibition of abuse of rights“, making this a rule of public order which cannot be omitted, even in presence of the consumer’s consent.

Even though the SEDECO Resolution (Secretary of Consumer and User Protection) No. 390/2016 was already in force, with provisions similar to those of the new Law No. 6624/20, the application of the procedure was somewhat complex and even bureaucratic, often discouraging the exercise of these rights by consumers.

The modification of Article 30 consisted of incorporating the principles of Resolution No. 390/2019 into the Consumer and User Protection Law. Its purpose was to provide the information on credit operations with greater clarity and transparency, and hence ensure the effective exercise of the consumer’s right to obtain a proportional reduction in interest, which was previously difficult.

In addition, the new wording of Article 30 establishes administrative sanctions for those providers who deny or obstruct the full exercise of this right, as these obstacles are considered abusive.

In essence, this modification seeks to establish and guarantee the mechanism through which the consumer can pay in advance, in whole or in part, his debt on credit.

For more information, contact Ruth Schneiderman (rschneiderman@altra.com.py), from Altra Legal.