Fintech Department Report | Argentina Fintech Legal News | # 7
In this newsletter, you can find a brief summary of the recent legal developments that we consider relevant for the Fintech environment in Argentina.
New caps for the interest rates applicable to the revolving of credit cards
Last February 19, 2020, the Central Bank of Argentina (“BCRA”) established new (lower) caps for the interest rates applicable to the revolving of credit card balances, by means of Communications “A” 6911 and 6912.
Prior to the issuance of these Communications, the regular interest rate for the financing of credit card balances (the so-called “revolving”) was limited by the Credit Cards Law (and related regulations of the BCRA), which indicated that the rate could never exceed more than 25% above the interest rate charged for unsecured personal loans.
In the case of “banking” issuers, the basis for calculation only considered the rate for the personal loans granted by the same banking issuers. In the case of “non-banking” issuers, the basis for calculation considered an average of the market rate for personal loans, including not only the rate charged by banks but also the one charged by non-banking institutions.
On the other hand, the Credit Cards Law established that default interest rates could not exceed more than 50% of the regular interest rate.
With the new Communications, now the BCRA set the cap of the regular interest rate for “banking” issuers at a 55% nominal annual rate (when the rate was currently around 100% p.a.).
In the case of “non-banking” issuers, the BCRA established that the basis for the calculation of the cap cannot consider anymore the rate charged in personal loans granted by non-banking entities (this amendment caused a reduction of the cap from 127.12% to 86.33% per annum).
Bill of law
In parallel to these new rules dictated by the BCRA, the senators of the official governing party filed in Congress a new bill of law in order to amend the Credit Cards Law, as follows:
– It proposes to eliminate the former cap applicable to both the regular and default interest rates and, instead, it proposes to fix the cap (for both rates together) at the reference interest rate for monetary policy published by the BCRA from time to time (this rate is currently at 40% p.a.).
– It proposes, in addition, that the Full Financial Cost (Costo Financiero Total) charged on credit card balances (which include not only interest, but also charges and fees) cannot exceed a cap that the BCRA may establish from time to time.
It is worth mentioning that the amendments proposed by this bill of law will only be in force once and if the bill of law is voted and approved by both chambers of Congress and is passed by the Executive Branch.
Restrictions on the use of the Direct Debit and Recurrent DEBIN
By Communication “A” 6909, the BCRA introduced certain amendments to the National Payments System.
Firstly, it prohibits the collection of “loans” through the use of the Direct or “Automatic” Debit and the Recurrent DEBIN, which were mechanisms that allowed automatic debit from the client’s bank accounts without depending on the client’s authorization for each debit (these mechanisms were broadly used by fintechs for the smooth and timely collection of loans).
Later on, the BCRA clarified, in a separate announcement, that this prohibition only forbids the use of the “inter-banking” direct debit (debits from a banking entity different from the one in which the client has its account) and only applies for loans granted after the issuance of this new Communication.
In any case, the BCRA saves the possibility of collecting loans either through manual deposits performed by the client or through “spot” DEBINs authorized by the client at each payment date.
On the other hand, this new Communication amends the procedure for the reversion of debits by clients. From now on, any reversion request must be credited in the client’s account within 72hs. without a discussion on the merits, while the former procedure was more burdensome for consumers in this respect.
Lastly, this new rule mandates that, in the contracts executed with clients, banks must include the right of customers to stop direct debits up to the business day before the due date, and the alternative to revert any debit within 30 days after the debit date.
Reduction of the legal banking reserve for the financing of “Ahora 12”
Through Communication “A” 6910, the BCRA allowed banking entities that are adhered to the program “Ahora 12” (which is a subsidized program promoted by Government for enabling purchases with credit card in “installments without interest”) to deduct from the legal banking reserve (as from March 1, 2020) up to 35% of the financings in Pesos granted by each bank under such program (the deduction cannot exceed the 4% of all concepts subject to the legal banking reserve).
Freezing of banking fees on financial products
By Communication “A” 6912, the BCRA suspended for 180 business days the ability of banks to increase or introduce new fees on financial products granted to financial consumers (except for any increases or new fees communicated to the BCRA before the issuance of this new restriction).
It is worth reminding that, pursuant to section 2.3.4 of the rules on “Protection of users of financial services”, banks must communicate to clients with a 60-day prior notice any increase or introduction of new fees, so therefore, under this new restriction, future increases or new fees may only be implemented 60 days after the termination of the suspensive term.
Do not hesitate to contact us should you require any further information on these matters.
Pablo J. Torretta
This report contains a summary of regulations published in Argentina. The summary as such is not complete and does not imply advice of any kind. Do not hesitate to contact us shall you require assistance on these matters.