“Debt is the worst poverty.” -Thomas Fuller
When we were shopping for appliances in Nicaragua, I didn’t understand the prices that were displayed. All I wanted to know was the total cost of a refrigerator, but instead the prices were listed in monthly installments on stickers that must have been glued on the appliances with super glue because they were impossible to remove!
It didn’t take me long to figure out that the majority of Nicaraguans can’t afford to pay the total cost upfront. Not only is credit “king” in Nicaragua, but the lack of consumer protection, the outrageous interest charged to buy on credit, and the lack of education about consumer rights in Nicaragua combine to make the worst poverty.
So, Let’s Get Real About Consumer Protection Rights in Nicaragua. (or the lack of them)
The first Consumer Protection law for Nicaragua was passed in 2013. Below is the link for the law in Spanish.
Law 842: Law of the Protection of the Rights of the People who are Consumers and Clients
1. Buying on Credit
It is convenient to want something, go to a commercial center, and have it on the same day, right? No advance payment (premium), without having to save for months to get it … but do you really know how much you pay for that credit?
Almost always when shoppers visit stores, appliance prices are set only in how it is to be paid monthly or fortnightly and are driven by the quota that best suits their abilities, regardless of the timing and amount they will pay for that credit.
Interests: I consulted most appliance stores that sell credit and found that the general interest rate is 4.5 percent per month (54% per year). Contrary to what many may believe, it is more expensive than using a credit card because the interest rate is less (50% annual interest in cordobas).
When getting a loan at an appliance or other commercial store should you get a loan with a longer term or a shorter term? The longer the term, the more expensive. Logically, if the loan is for a longer time, you should pay more for the product and add additional charges.
How much more? I will give you an idea: I quoted a TV advertised for 10,000 cordobas (9,999 it says in the shop). If not given a premium and it is financed for 12 months you will end up paying 17,232 cordobas. If financed for 18 months you will pay 20.448 cordobas; if you opt for a term of 24 months it would be 23.952 cordobas, 48 months and 40,128 cordobas. A 48 month loan (4 years) and you will have paid the equivalent of four televisions. (La Prensa)
Unbelievable! Buying on credit is expensive. However, remember that you are not only paying for the product, but also for people working in the store, the energy they consume, marketing and advertizing, air conditioning , and so on.
There are several options for consumers:
1. Consumers can save to buy the item. It is not necessary to spend a great amount of time-saving if you use this logic. If you bought a 10,000 cordoba TV on a 12 month credit term, the interest would be 4.5% per month. So, you could realistically save 450 cordobas a month to buy the item outright. You could save the money in 22 months. Let’s get real about consumerism. Most purchases are not needed, only wanted. If it is not vital to your life, then you can wait and save. Of course, this is a simple solution and not many people are willing to save for what they want.
2. Consumers could get a credit card with a lower interest rate than the commercial stores offer for their credit.
3. You can buy the item on a 12 month term and make an early termination of the loan by paying before the 12 month loan is up. This is a great option for those who are forced by circumstances to buy appliances or other needed items. For example, maybe your house was flooded, or damaged by an earthquake. In urgent cases, such as the ones above, you can buy on credit, but try to save enough to make an early cancellation and thus not pay a lot of interest.
All the stores surveyed said that if you want to make early termination, the principal balance will be paid to date and outstanding interest is eliminated. That is, we review how much has been paid to capital and pay the difference between that amount and the price agreed in the contract. (La Prensa)
This is the only way to save interest: total cancellation of the debt.
Once you cancel the credit do not forget to get a receipt of cancellation. According to Article 76 of Law 842 (Law on the Protection of the Rights of Consumers and Users) “once the consumer or wearer cancels the credit granted, the provider person shall be obliged to deliver within five working days of receipt of cancellation and other documents in which the respective credit provider signed by the person or his representative formalized.” ( La Prensa)
2. Promotions, Sales, and Rebates
I am a sale shopper and rarely pay full price for anything. Yet, living in Nicaragua, it is difficult to tell if the special promotions are a ruse to attract the attention of the consumers or the real thing. How does one decide if the item that is listed at 50% off the regular price is for real?
These promotions and special sales have drawn the attention of the Authority for Consumer Protection and Defense of Competition (Acodeco). According to data of the institution during the month of August they have inspected 6,455 local stores. In this audit 50 anomalies were recorded. (La Prensa)
44% of all irregularities recorded in the baratillo in August were listed as special sales. “The sales had an undated duration. For example, the promotions do not indicate when the special sale began or when it ended,” said Oscar Garcia, manager Acodeco.
Some local stores also advertised discounts on items that were not in stock. This happened to me when I ordered a strong plastic table for my children’s library that was on sale.
Based on these constant irregularities detected, the Authority for Consumer Protection and Defense of Competition increased the fines for these anomalies, so that the fines have gone from $300 to $600. I am thrilled to read this!!!
“In both places most shops had their windows posters announcing huge discounts of up to 50%, but when checking items, most only recorded 10% and 20% lower prices,” Oscar Garcia said.
According to La Prensa, some 420 cases of misleading advertising has served the Authority for Consumer Protection and Defense of Competition (Acodeco) during the first half of this year.
Consumers can report misleading advertising free by calling 130 or writing through @acodecoresuelve Twitter account and report the name and specific location of the property and the possible anomaly. Great news!!!
3. Tips in Restaurants included in the Bill.
When we eat out, which isn’t often, we noticed that the tip (propina) was included in the bill. This happened to me last year at the airport in Managua, after I discovered that this was illegal. I drew their attention to it and made them remove it from my bill. Always check your bill!
The Consumer Protection Authority (Acodeco) will begin operations next week to identify businesses that include tips in bill. Also, you can report it to the above Twitter account.
4. Detailed Information in Phone Plans
If you are like me, it is extremely confusing when buying minutes for a cell phone in Nicaragua. My Claro minutes would run out in a day and I rarely made many calls. I think I was charged for the Claro text messages I opened, I could never call a Movistar number from a Claro number unless I was using promotional minutes, and my unused minutes didn’t roll over to the next month.
It was all too much for me, so I bought a plan from Claro with unlimited minutes and some internet data.
As for the telecommunications sector, in Article 84 of the Consumer Protection Law, it suggests that such companies are required to “provide detailed information about calls and balances to all users. Payments and receipts must be made in national currency, the cordoba, and the official exchange rate is set based on what the Central Bank of Nicaragua. ( La Prensa )
On telephone recharges it is suggested that these have a maturity of at least one month and “special promotions will have general advertising to expose the real value of airtime minutes”.
Furthermore ,the law requires telecommunication companies to ensure quality service, ie good signal coverage network for 24 hours, both basic and cellular. (La Prensa)
Oh boy! I wonder how long it will take before this part of the law will be enforced. I may send a twitter message because we have never had a good cell phone signal in La Paloma.
5. Education Initiatives
This is the key to understanding Consumer Rights!
The executive director of the National Institute of Consumer Protection, Marvin Pomades, admits that Law 842 is little known by Nicaraguan consumers. He said, “Barely one percent of the population knows of Law 842.” Therefore, it is very important to educate consumers about their rights.
Another reform to be added to Law 842 is to incorporate the subject of the rights of users and consumers into the school curriculum. Definitely!! I believe it is important to start budget and consumer right’s education in elementary school. This can be done simply and in a fun way for the children.
The initiative to amend the Law on Protection of Rights of Persons and clients, according to the deputy Licet Montenegro, emerged from the Movement for the Defense Consumers, who saw the need for greater protection mechanisms for consumers. “These are issues that we are living and that consumers need a solution,” he said while expected to soon join the parliament agenda.
The executive director of the National Institute of Consumer Protection, Marvin Pomares, believes it is still too early to introduce amendments to a law that only has three years of being in force, but I disagree.
Some reforms discussed include:
1. The creation of a National Consumer Protection Agency that would have among its functions “request reports from the companies of which consumers have complained.”
The proposal, presented by the independent deputy Licet Rosario Montenegro Altamirano, also suggested that the National Consumer Agency, which would have a maximum period of 60 days to resolve complaints or administrative claims.(La Prensa)
2. Proposed changes to real estate development.
It is also proposed in Article 52 to impose more regulations in the real estate sector. For this, a committee that would comprise the Diprodec, the Institute for Housing, Urban and Rural, the Superior Council of Private Enterprise, representatives of the Mayor of Managua, insurance companies, among others would be created. ( La Prensa )
3. Article 19 in the proposed reforms empowers consumers to bring their complaints of mistreatment, discrimination, and malpractice in the medical services offered in their medical pension plans to a review board.
Upon receipt of the complaint, the Diprodec developed in coordination with the Ministry of Health and the Nicaraguan Social Security Institute report thereon “to analyze the behavior of these EMP (EMPs Company) for the users.” In the same initiative, however, not the types of penalties if the user wins the lawsuit. ( La Prensa )
In conclusion, I believe that Nicaragua has tried to protect the rights of consumers. It is a beginning and can only get stronger with education, awareness, and independent review boards. “Presently, current institutions responsible for monitoring consumer complaints have a passive attitude to consumer complaints,” said a representative of Indec.
To Pomades,”Law 842 is very good. It is a law that actually protects users and consumers, but what should be done is to force regulators to fulfill their role of protecting consumers.
What consumer protection rights are most important to you?