Bill 552.

Summary.

The bill proposes adding provisions to Decree Law 9 of February 26, 1998, concerning credit agreements entered into by banks. It would require each agreement to prominently state the initial interest rate, the exact method for calculating it, the financial index used to determine changes, and the maximum rate applicable over the life of the credit agreement. Banks would periodically submit this information to the Superintendency of Banks.

For variable rates, reference indices would have to be objective, public, and verifiable, with a methodology accessible to the public. They would have to reflect conditions in national or international financial markets and receive prior authorization or recognition through regulations issued by the Superintendency of Banks of Panama. The bill excludes calculations based solely on a bank’s internal decisions without a verifiable indicator and requires each bank to publish the indices on its website every 6 months.

The variable rate would be determined by an objective, verifiable formula established in advance in the agreement, combining a public index with a margin set by the bank. The financial institution would need the debtor’s express consent to change the elements of that formula unilaterally during the agreement. If the reference index falls, the bank would have to reduce the rate proportionally under the agreed formula, apply the change automatically at the next adjustment period, and notify the customer in writing. Variable-rate agreements would state the initial range and maximum interest rate; the provision extends this requirement to all bank financial products.

Penalties, late-payment charges, fees, and other surcharges arising from default would have to be reasonable, proportionate, and clearly specified. Individual or cumulative penalties could not exceed 20% of the principal originally lent. The bill prohibits abusive or disproportionate charges and regulates their application to mortgage loans and vehicle financing secured by collateral that can be repossessed upon default. At maturity, the bank would provide a detailed statement of principal, interest, and penalties. An automatic extension of the credit agreement or a unilateral increase in its term would require an express agreement formalized through an amendment to the contract. The Superintendency of Banks of Panama would oversee these rules and could order the removal of clauses that conflict with them.

The provisions assign the banking authority responsibility for oversight, regulation of indices, correction of clauses, and adjustment or refund of improper charges. They make violations subject to the sanctions under Title IV of Decree Law 9 of February 26, 1998, set out the additions to the Consolidated Text of Decree Law 9 of February 26, 1998, and provide that the proposed law would take effect upon promulgation. The provisions may be of interest to the Superintendency of Banks of Panama, banks, and borrowers, including those with mortgage loans and vehicle financing.