Lawyers Deem CAE Collection Practices Illegal and Unconstitutional: Over 1,500 Seizures Impact Thousands of Families

CAE: An Abusive Charge

Various lawyers across the country have criticized the procedures being utilized by the General Treasury of the Republic (TGR) against student loan debtors concerning the CAE, or State-Guaranteed Credit.

Legal professionals assert that the mechanisms in use are illegal and unconstitutional. Actions such as account and asset seizures undermine “due process” and violate laws protecting workers’ rights.

To date, over 1,500 individuals have faced seizures, with only 5% of the total opting for agreements. Thousands of Chilean families are now suffering economic, emotional, labor, and health repercussions due to this abusive charge.

Attorney Carlos Muñoz Lecerf, an accountant and Master’s in Teaching, states: “When the Treasury attempts to apply the tax code in the collection of the CAE, it ignores the principle of specialty of the CAE, which stipulates that the State-Guaranteed Credit can only be collected according to the procedures outlined in its own law.” In essence, the Treasury is misapplying the collection process, as the CAE is governed by its specific regulations: “According to the CAE law, civil procedures must be applied; at no point should the Tax Code, which pertains to taxes and liabilities, be invoked.”

The Illegality of the Mechanism

The attorney explains that the justification the Treasury uses for this collection method stems from a private legal analysis rather than originating from a public legal department: “This suggests a severe error, as they aimed to cater to the client’s preferences rather than what is legal.” The practitioner emphasized the need for an impartial analysis.

The Government and the Treasury rely on a law that expedited collections in 2024, signed by former president Gabriel Boric. This law modified the Tax Code to enable the collection of taxes and fiscal debts. They argue that the CAE represents a fiscal debt since it involves state funds; however, attorney Muñoz categorically asserts that this interpretation is bold: “A debt arising between the individual and the bank cannot be classified as a fiscal debt; it is a civil debt. The state provided funds to the bank and now claims the debt is with it because it was acting as a guarantor and subrogated that position.”

Another argument reinforcing the illegality is that, as previously mentioned, the CAE is governed by special regulations established by the CAE Law, making it impermissible to apply the Tax Code.

Diego Martínez, a lawyer and member of the CAE Debtors Legal Commission, points out another aspect arguing for the illegality of the process: the absence of proper debt liquidation, explaining, “For the state to collect from you, it must first pay the bank the guarantee to ‘inherit’ the credit (which is called subrogation). In most files, there is no evidence of that payment or certificate to prove it.”

Additionally, attorney Muñoz argues that “In public law, collections can only be made if explicitly authorized, and in this case, there was never an express authorization for the Treasury to proceed in this manner.”

The Unconstitutionality of the Collection Process

Furthermore, following the same logic, attorney Martínez emphasizes that the wrong procedure is being applied because the CAE arises from a credit contract between the student and a bank, thus constituting a civil debt, not a tax obligation.

The CAE regulation law (Law 20.027) has its own collection system and does not refer to the tax procedure used by the Treasury (Volume V of the Tax Code).

Martínez states: “By applying this procedure, the Treasury assumes a power that neither the Constitution nor the law expressly granted, which directly contradicts the principles of legality in Articles 6 and 7 of the Constitution: no state entity can exercise more power than that conferred by law, even under ‘extraordinary circumstances.’ Any actions taken beyond their jurisdiction are null.”

Simultaneously, Muñoz explains there are other unconstitutionalities that infringe on individuals’ institutional guarantees as outlined in Article 19, which includes: “The right to a natural judge, as the Treasury is acting as both judge and party, undermining due process by subjecting a process arbitrarily and affecting individuals’ property while causing arbitrary discrimination in how these debtors are treated compared to others.”

Another point mentioned by Martínez is that the amounts claimed do not align. “The state guarantee covers a maximum of 90% of the original claim made by the bank. However, the amount the Treasury typically collects often exceeds the original debt, without breaking down capital, interest, or adjustments, making it impossible to verify if the calculation is accurate and transferring the debt in UF during a period different from when the credit was supposedly paid, resulting in different UF calculations than when the guarantee payment was made.”

Steps for Debtors Upon Receiving a Collection Notification

Martínez provided guidelines for CAE debtors in the event they receive a collection notification from the General Treasury of the Republic (TGR) regarding the CAE, whether suggesting an agreement or announcing a seizure. The following steps should be taken:

1. Do not sign anything immediately. Signing a payment agreement before reviewing whether the debt is accurately charged may be seen as a recognition of the debt, potentially closing off your opportunity to defend yourself later. Review first, then decide.

2. Check how and when you were notified. If it was only via email and does not include a legal demand, it is merely a “notice,” not a valid notification.

3. Request the complete file. You have the right to know exactly what you are being charged for: capital, interests, adjustments, and the documents that prove the state indeed paid the bank the guarantee. The safest way to request this is through the Transparency Portal (Law No. 20.285).

4. Verify the amount. Compare what you are being charged today against what the bank originally claimed. The state guarantee covers a maximum of 90%. If the current amount exceeds the original debt or is not itemized, there is a claimable defect.

5. If the email includes an attachment called the list of debtors and an execution and embargo mandate, you must file an opposition within a deadline of 10 business days to formally contest it before the Treasurer with exceptions such as “non-impeding the title.” If you let it pass, you lose the opportunity to dispute this avenue.

6. If denied, an appeal exists before the Regional Treasurer, and if that also fails, judicial avenues open up (protection recourse, legal challenge before the Appeals Court).

How CAE Debtors Should Proceed

Attorney Muñoz recommends: “Initial passive-aggressive notifications are pointless; I suggest ignoring them. The other two are more significant. The lawsuit notification allows me to understand I have 10 business days to take action; after that period, there is a chance of being seized, and funds may be withheld. During those 10 days, exceptions can be presented at the Treasury, but those exceptions are futile, as there are only three, stating: I paid, this debt is not mine, or it is outdated, none of which apply to a CAE debtor since we cannot do anything with the Treasury.”

Finally, Muñoz advises that if one decides to protect their assets through measures such as withdrawing money from bank accounts, transferring property, or other protective actions, this should be done during those initial 10 days, as after that period, a letter may arrive announcing the seizure, and taking such actions will no longer be possible.

Regarding protection recourses, these are a valid avenue, but attorney Muñoz points out they are not being recognized by the court: “Currently, this is a possibility with a low chance of success. Lawyers should not offer this to all clients, as not everyone meets the conditions for a favorable ruling; typically, cases that progress involve specific situations: for someone who is ill, unemployed, has many debts, and facing pressure. It is not applicable to all cases.”

The attorney explained that the protection recourses that have advanced have been specific cases, for instance, unemployment, but they do not guarantee success.

La entrada Lawyers Deem CAE Collection Practices Illegal and Unconstitutional: Over 1,500 Seizures Impact Thousands of Families se publicó primero en El Ciudadano.