SALARY GUARANTEED LOANS

Salary guaranteed loans consist of financing repaid through deduction of a sum equal to one-fifth of salary. They are issued in compliance with the General Legislation on financing, on anti-usury and on anti-money laundering in accordance with Article 1260 from the Civil Code and from the Bank of Italy Regulation (“Testo Unico Bancario”) on the seizure, attachment and assignment of wages, salaries and pensions and in accordance with Decree Law (“D.P.R.”) January 5th 1950 n.180 and the regulation approved by Decree Law (“D.P.R.”) n. 895/1950.

This form of financing is dedicated to employees with an open-ended contract.

The contract between the employee and the financial intermediary provides for the assignment of a percentage of its salary not exceeding one-fifth of net salary income and for a period not exceeding 120 months. Then the contract has to be notified to the employer in accordance with Articles 1264 and 1265 of the Civil Code. The employer is required to retain this instalment and pay it directly to the financial intermediary until full repayment of outstanding debt.

Therefore the employer and the employee are jointly indebted to the financial intermediary.

In a prudential approach regarding employees in private companies the financial intermediary requires a guarantee for the solvency and the stability of the employment relationship.

Before providing the loan, an accrued severance indemnity bond has to be issued as a guarantee. In case of termination of the employment it will be entirely devolved to the financial intermediary until full repayment of outstanding debt.

A life and work insurance policy represents a further guarantee, in accordance with Article 54 from D.P.R. no. 180/1950. This policy can be issued by INPDAP and private companies as well according to Article 1 paragraph 138 of Act 311 December 30th 2004.

PAYMENT DELEGATION

Payment delegation consists of financing repaid through payment delegation; it is issued in compliance with the General Legislation on financing, on anti-usury and on anti-money laundering (Article 1723, 2nd paragraph and Article 1269 from Civil Code).

It consists of an employee’s irrevocable mandate to his employer to devolve a percentage of his salary directly to the financial intermediary until full repayment of outstanding debt. That allows the employee who already has an existing loan against salary to have further access to loans against salary.

Regarding taxes, the maximum percentage rate applicable for the purposes of anti-usury for loans repaid through payment delegation is the same as for the salary guaranteed loans. They are considered similar under the following conditions:

• providing an employee’s irrevocable mandate to his employer to devolve a percentage of his salary directly to the financial intermediary
• refunding within a maturity period of 18 months to 10 years. If funding is made to an employee with a fixed-term contract, the refund period cannot exceed the expiration of the employment contract.
• monthly percentage cannot exceed one-fifth of net monthly income.
• financing is addressed only to employees with a fixed and continuous salary who have passed the trial period and are an effective part of the company
• financing is accessible to employees who are covered by insurance policies – D.P.R. no. 180/1950 – which can guarantee the recovery of the credit (for example life insurance policies)

Considering the requirements mentioned above, the loans repaid through payment delegation enter the same category together with salary guaranteed loans. Therefore the costs of insurance in case of death, disability, illness, unemployment are not included in the calculation of the Total Global Rate (“T.E.G.”) even if they are certified by an appropriate policy as derived from the exclusive fulfilment of legal obligations.

All other forms of delegation are treated like normal personal loans.

Regarding employees in Public Administration, the newsletter from Ragioneria Generale dello Stato (no. 63 - October 16th 1996) stated that such forms of financing (defined “optional” or “conventional” delegations) need to be issued in favour of one of the institutes mentioned in Art. 15 D.P.R. no. 180/1950 such as banks, financial intermediaries, insurance companies within the limits set in the already mentioned Testo Unico no. 180/1950. The newsletter stated also that the liability of the human and computing resources costs has to be established beforehand. Every delegation will therefore lead to costs which the financial intermediary must pay to the administration in order to obtain reimbursement of the monthly instalments.

PENSION GUARANTEED LOANS

Pension guaranteed loans consist of financing repaid through deduction of a sum equal to one-fifth of pension income; it is issued in compliance with the General Legislation on financing, on anti-usury and on anti-money laundering – Articles 1260 and following from Civil Code and from the Testo Unico on the seizure, attachment and assignment of wages, salaries and pensions, the amended and supplemented D.P.R. January 5th 1950 n.180 and the regulation approved by D.P.R. n. 895/1950.

This form of financing was introduced by Article 13 bis of Law no. 80/2005 which is a conversion of D.L. no. 35/2005 (Competitiveness Decree) and which supplemented Article 1 from D.P.R. no 180/1950. It implies that public and private pensioners can contract loans with banks and financial intermediaries and repay through deduction of one-fifth of their pension income, without affecting the absolute minimum imposed by law.

The repayment can be made through deductions of the following pension types: pensions and allowances issued by the State and by Individual Institutions, equivalent allowances issued by special security funds, disability and retirement benefits and pensions issued by the National Institute of Social Security, life annuities and capitals against institutions and funds depending on employment status.

As expressly established by law, all these forms of loans have to be covered by life insurance guarantees that ensure the recovery of the remaining credit in case of death of the borrower.

The contract between pensioner and the financial intermediary assigns a percentage not exceeding one fifth of net pension income and for a maximum period of 120 months and has to be notified by the Social Security Institution in compliance with Articles 1264 and 1265 of Civil Code. The Social Security Institution is required to withhold the percentage and pay it directly to the financial intermediary until the loan is repaid in full.