Fintech Department Bulletin | Fintech Legal News Report No. 11
No charge for the use of physical points of sale (POS)
For businesses that are inactive due to the pandemic
By means of Resolution 222/2020 dated July 27, 2020, the National Secretariat of Domestic Trade reported that an agreement has been reached with the main suppliers of points of sale (POS) terminals (Prisma and Posnet) for applying a 100% discount over the monthly fee charged on inactive POS terminals in merchants whose activities are not exempted from the preventive, social and mandatory isolation in force.
For such purposes, “inactive” POS terminals are those that do not carry out transactions with electronic payment means during a calendar month or that the amount of transactions carried out through them during that period does not exceed the aggregate amount of AR$5,000 per POS terminal.
In addition, merchants that are entitled to this 100% discount will also be entitled to an additional 100% bonus over the fee, in the first calendar month in which they return to operate above an aggregate amount of AR$5,000.
This commitment shall be effective from August 1, 2020, to December 31, 2020.
The CNV updates its regulation on MiPyME electronic invoices
Aimed at facilitating secondary negotiation
On July 23, the National Securities Commission (CNV) published General Resolution No. 850/2020, which updated certain regulations related to the public offering of electronic SMEs invoices.
This amendment basically defines with more detail the role of depositary and registration agents in the deposit, transfer, and settlement of the tradable invoices and their related payments. According to the CNV, these further clarifications intend to foster the public offering of this type of instrument, which was originally approved by the Financial Productive Law 27,440 back in 2018.
Exchanges restrict the purchase and sale of crypto assets tied to the Dollar currency
To avoid potential violations of foreign exchange restrictions
As a result of the imposition of greater restrictions to receive successive transfers in foreign currency in bank accounts, as provided by the Central Bank of Argentina (“BCRA”) under Communication “A” 7072 dated July 16, 2020, some local crypto exchange platforms decided to restrict the purchase and sale of crypto assets tied to the value of the US dollar (the so-called stablecoins), in order to avoid that the use of this mechanism (mainly through cashing out in US$ account) could be deemed by the authorities as violations of foreign exchange restrictions in force.
The BCRA published reports on non-banking lending activities
The spotlight is put again on the high-interest rates charged by fintechs
The BCRA published the results of a study conducted during the first week of June 2020 regarding the rates offered by fintech lending companies, based on information obtained on at least 46 different companies.
Among the published results, the BCRA indicated that, in many cases, the real costs for obtaining a loan are not published by the companies or are made in an uneven manner and without a uniform criterion.
With respect to the universe of Fintech lending companies that do publish information regarding the cost of their loans, the BCRA found that 77% of these companies do so by means of loans that apply rates of at least 150% per annum, with the total financial cost exceeding 400% per annum.
Even though the BCRA affirms that the conclusions derived from the study are disturbing (even calling the average rates charged by these companies as “excessive”), it also clarifies that the BCRA is following closely the development of the activity, as it has the “potential” to strengthen financial inclusion in the country.
On the other hand, on June 30, the BCRA published another report on “Non-Banking Credit Providers” in general (which includes non-profit associations, appliances stores, and fintechs), also emphasizing on the interest rates they charge. Although in this case the total financial cost is not mentioned, it is informed that the nominal annual average interest rates charged by these entities are between 113% and 125% per annum.
This last report also mentions that the number of registered Non-Banking Credit Providers (288) triples the number of Financial Entities (78) and that, excluding credit card financing, they represent almost 10% of the total financing in the Argentine market. On the other hand, it was found that the distressed ratio of these companies’ portfolios is significantly higher than that of the banks, reaching an average of 36%.
It is worth noting that the BCRA has published these reports just after the Federal Government decided to criminally prosecute certain lending fintechs for fraud and usury.
After the publication of these reports, the Argentine Fintech Chamber stated that “it is not possible to analyze the cost of financing without discriminating repayment terms, types of clients, payment methods and risk segments, among many other factors“, also highlighting that lending companies only represent 25% of the companies in the fintech sector.
The BCRA grants a new license for a 100% digital bank
The new entity is Open Bank, an initiative of Banco Santander
In a Board of Directors meeting held on July 2nd, the BCRA approved the installation of a new 100% digital commercial bank in Argentina under the name of Open Bank Argentina, which will have Banco Santander Río S.A. as one of its main shareholders.
The announcement is interesting, in a context where the Federal Government and the regulator seemed to be adopting a more restrictive approach towards digital finance activities. This new license seems to be a positive sign for the future of the industry, though the new entity is promoted by a traditional bank in the market.
It is worth mentioning that, from now on, the new bank will still have to comply with all the preparation tasks for the formal launch of its operation.
Banks communicate the creation of a digital payments company
It will operate under the name “DIMO”
On June 1st, the incorporation of the company Play Digital S.A. was published in the Official Gazette (see publication). The purpose of this entity will be, among others, to provide electronic payment services as well as to operate electronic money transfer systems over the internet and/or any other means of digital or virtual payment. The shareholders of this new entity are some of the largest private banks in the country.
In this sense, the financial entities that incorporated the company informed this relevant fact to the National Securities Commission (CNV) and local stock markets.
As reported by the banks in these relevant facts, the purpose of this initiative is to develop and offer a payment solution linked to the bank accounts of users of the financial system. In addition, other financial entities are expected to be joining the project in the near future.
The incorporation of this new entity could be seen as another evidence of a more active role adopted by local banks in the fintech ecosystem, in addition to the recent and massive launch of the “cuentas DNI” by Banco Provincia, as well as the recent license granted to Open Bank of Banco Santander.
Rumors about a new payment platform
This would be “Transfers 3.0” project.
In recent days, certain press releases reported that the BCRA would be designing a project called “Transfers 3.0”, which would aim to create an interoperable payment platform between all types of accounts, virtual and bank accounts, where card and QR payments would also coexist, as well as payments with cell phones.
As highlighted in these press releases, the platform would have a free tranche for businesses that do not exceed a certain monthly billing.
So far, no official information has been published, so we will have to wait for further announcements from the regulator in order to know the accuracy and eventual details of this initiative.
A Civil Code reform validates the use of electronic addresses
For all contractual purposes
On June 30, Law No. 27,551 was published, through which certain provisions related to lease agreements were fundamentally modified.
However, together with these amendments, a general reform to section 75 of the Argentine Civil and Commercial Code was also approved, allowing the parties to any private agreement the ability to set in their contracts an electronic address in which all notifications, communications, and subpoenas delivered therein shall be considered effective.
Although in practice the parties already used to establish electronic addresses (e-mails) in order to receive contractual notifications, this reform reinforces the validity of said practice by giving greater legal force to notifications made by email or other types of electronic communications agreed by the parties (e.g., via mobile applications or WhatsApp), which are usually the communication channels adopted by fintech and digital banking companies.
Digital companies accused of violations of the Consumer Defense Law
Mainly due to abusive provisions and misleading information
On June 4, the Undersecretariat for Consumer Protection accused the digital delivery companies “Rappi”, “Glovo”, and “Pedidos Ya” for possible violations to the Consumer Protection Law No. 24,240, mainly related to the inclusion of abusive provisions in their terms and conditions and to the publication of misleading information.
The accusation sustains that the terms and conditions of these platforms have provisions that would be abusive since they discharge the companies from all liability towards consumers, requiring clients to waive constitutional rights to hire their services. In addition, it is observed that these terms and conditions set forth a foreign governing law and foreign applicable jurisdiction, thus breaching consumers’ rights to be governed by their local laws and courts.
Even though the core of these companies is not necessarily in the fintech market, it is a precedent of caution for companies in the digital financial industry, since most of them use general terms and conditions to build their contractual framework with their users. This precedent may anticipate a more vigilant approach from authorities regarding the content of those legal terms.
Discussion of laws that may impact the Fintech market moves forward
Promotion of the Knowledge-Based Economy and the Home-Office Regime
On June 25, the House of Deputies proceeded with the half-approval of the Draft Bill that would modify the Promotional Regime for Knowledge-Based Economy (Law No. 27,506). It should be noted that said law has been suspended since January 20, 2020, by means of Resolution No. 30/2020 of the Ministry of Productive Development.
The Draft Bill will soon be debated by the Senate. Although the text may undergo changes in its legislative treatment, the main proposed changes to the original law are, among other changes, to increase the requirements for applying to the promotional tax regime, facilitate entry for small businesses, exclude self-development activities and increase benefits for hiring staff from vulnerable sectors.
Likewise, last July 30, the Federal Congress (with 40 affirmative votes and 30 negative votes) approved the new Home-Office Law, under number 27,555. This new law regulates remote work in the country, including certain requirements that raised some concerns in corporate sectors (such as the “disconnection” right, the ability of employees to demand the return to physical offices at any time, and the reimbursement of costs, among others).
Although the project gained significant attention considering that much of the country is still under mandatory isolation due to the pandemic, this new law (which is still waiting for official publication and further regulation) would come into effect only 90 days after the end of the isolation period.
This report contains summaries of standards that are published and to which we refer. They are in no way complete or imply legal advice. If you require legal advice, please contact us.