Fintech Department Bulletin | Fintech Legal News in Argentina | No. 24.
by Daniel Levi
In this bulletin, you will find a selection of the main legal news related to the fintech and digital banking market in Argentina.
Content
• Changes to Credit Card Law
• Payment of Salaries in Virtual Accounts
• Flexibilization of the Regime for Cross-Border Payment of Digital Services
• Precautionary measures regarding cross-border payment activities
• Reschedule of QR interoperability for cards and of “pull transfers”
• The limitation for receiving multiple transfers in dollars was derogated
• A bill proposes to eliminate tax deductions from electronic payments of small taxpayers
• Crypto-assets are included in the future tax “waiver” regime
• The online system for the registration of new PSP roles was enabled
• The CNV validates investments by minors
• Distribution of profits generated by virtual wallets
• Regulation for the prevention and solution of over-indebtedness
• Sanctions by the Central Bank for advertising unauthorized digital banking activities
Changes to Credit Card Law
Several aspects related to the issuing and acquiring business are deregulated
As part of Decree of Necessity and Urgency 70/2023, issued by the new Government of President Javier Milei on December 20th, and titled “Foundations for the Reconstruction of the Argentine Economy,” a specific chapter was introduced to deregulate and update various aspects of Law No. 25.065 on Credit Cards, which has regulated the sector since the late 1990s.
In the considerations of the Decree, the National Executive Branch justifies this reform by the need to “carry out a strong deregulation and simplification in the credit card market, adapting it to recent changes in relationship modalities and digitization technologies.” However, the introduced changes appear to go beyond a simple update of “forms,” as they also touch on economic aspects of the business.
Among the most significant modifications, the following are highlighted:
Economic Issues
One of the most relevant changes introduced by the Decree is the elimination of the cap on fees charged to merchants for credit and debit card transactions (the so-called “discount rate” or “merchant discount rate” charged by acquirers), as well as the settlement period for the latter.
Previously, the cap for this fee was 3% for credit card transactions and 1.5% for debit card transactions, with a settlement period of 3 business days for the latter. However, due to certain sectoral agreements reached in negotiations with the Government in 2017, most acquirers had agreed to gradually reduce the rate, and currently the discount rate for credit cards is at 1.8%, and for debit cards at 0.8%. Also, in mid-2021, banks had agreed with the Central Bank that the accreditation period for debit transactions would be 1 business day.
For these reasons, it will be interesting to see how the market reacts to this modification—whether acquirers decide to continue respecting the agreements previously reached with the Administration or not. It’s worth noting that the interchange fee received by issuers is still capped by the Central Bank, according to Communication “A” 6212, based on those agreements.
Furthermore, the Decree removes the previous prohibition for acquirers to set differential fees or charges among merchants of the same sector or regarding similar products or services. This prohibition aimed to prevent large businesses from obtaining more favorable discount rates than small businesses due to disparities in bargaining power with acquirers. However, in practice, differences were established based on other types of services (e.g., advertising), or acquirers were discouraged from reaching small businesses, leaving room for so-called aggregators or sub-acquirers with higher discount rates to absorb that segment.
Therefore, it will also be interesting to see if this modification alters the market practices known until now.
It is important to note that, regarding economic issues, the Decree did not modify the existing cap on financing rates for the payment of card statements (the so-called “revolving rate”), which remains at 25% above the rate applicable to personal loans (although the Central Bank still sets a lower cap for financial entities). It also did not modify the exchange rate applicable to foreign currency transactions. However, the Decree removed the cap on punitive interest rates (previously 50% of compensatory interest) but established that they cannot be capitalized. It also eliminated the nullity of clauses establishing fixed charges for delays in statement payments.
Formal Issues
Regarding formal aspects, definitions are expanded to recognize virtual or digital means, and electronic distribution of statements is encouraged.
In the same line, minimum user identification data that cards were required to contain and contract completion rules are eliminated, providing greater flexibility in contracting modalities, more aligned with current market practices.
The need to approve the issuance contracts with the authorities is also eliminated by the Decree, although this requirement had little practical application, as authorities never issued opinions on the templates.
Some media articles also highlighted as novelties the expansion of the “issuer” definition, explaining that now any company with card issuance activity in its corporate purpose can act as an issuer, although previously there were no major restrictions as long as the entity was registered as such with the Central Bank, a requirement that is still imposed by the regulator.
It has also been emphasized as a novelty the elimination of the prohibition on reporting credit card debts to “credit bureaus” (e.g., Veraz, etc.). However, debts were always reported to the Central Bank’s debtor database, from which “credit bureaus” could subsequently extract information, so this does not seem to be a very substantive modification either.
Among other additional changes, we highlight the elimination of certain requirements on the content and wording of the issuance contract; the removal of the issuer’s obligation to provide identification materials to businesses; of the regime on losses and thefts, and card cancellations; of the obligation to provide electronic terminals for businesses; and of certain sanctioning powers of the Central Bank for certain reporting duties.
Finally, it is important to note that the Decree entered into force on December 29th, 2023, and still be subject to review by the National Congress in the coming days to determine its ratification or rejection, without prejudice to the validity of rights acquired during its effect.
Payment of Salaries in Virtual Accounts
The door is opened for salaries to be deposited in non-bank accounts
Through the same Decree mentioned above, the National Executive Branch has decided to modify Article 124 of the Labor Contract Law (Law 20.744), which previously stated that salaries could only be paid in cash or through accounts opened in banks or official savings institutions.
With this modification, it is now also allowed for salaries to be deposited into accounts opened “in other categories of entities that the authority responsible for the payment system considers suitable, secure, interoperable, and competitive.” Requirements for the gratuity of “salary accounts” were also eliminated.
This reform seems to make a clear reference to virtual accounts (CVU) opened in Payment Service Providers (PSPs) regulated by the Central Bank, although it remains to be seen if the Central Bank (as the authority of the national payment system) provides any confirmation regarding the qualification of such accounts as “suitable, secure, interoperable, and competitive,” for which it has issued various regulations in recent years.
Recall that this matter had already been the subject of several regulatory changes. In 2018 (through Resolution 168/2018 of the Ministry of Labor), the accreditation of salaries to mobile devices or other electronic media that allowed immediate fund transfers had been authorized. However, sometime later (through Resolution 179/2020), the same Ministry (under different authorities) had revoked this possibility.
Flexibilization of the Regime for Cross-Border Payment of Digital Services
The SIRASE system is eliminated, though minimum terms for access to the FX market are set
As part of the new package of measures implemented by the new National Government, on December 13th, the Central Bank issued Communication “A” 7917, through which, among other things, it decided to relax the regime for access to the foreign exchange market for payments of cross-border services that are furnished as from December 13th, 2023.
Among the changes implemented, the need for approvals from the SIRASE system was eliminated (which, we recall, required prior approval from the Tax Authorities and from the Secretariat of Commerce). However, at the same time, different terms were set for access to the official FX market, depending on the FX concept code used to transfer funds abroad.
For example, credit card expenses with foreign providers that are made through the international card network (S29) will continue to have immediate access to the FX market upon due date. The same will happen with payments made through local payment facilitators for the audiovisual services concept code (S23), such as streaming services.
For the rest of the typical digital services provided from abroad, one must wait at least 30 days from the service provision to access the FX market (between non-related companies) or 180 days (if it is between related companies), except for “Other personal, cultural, and recreational services” (S24), for which a 90-day period applies. There are exceptions to these terms when there is local or external financing in foreign currency, or when the generation of foreign exchange through exports is demonstrated.
Regarding services prior to December 13th, 2023, the Central Bank ordered the issuance of certain special foreign currency bonds, maturing in 2027 (called “BOPREAL”), which can be subscribed with debt accrued against the Central Bank for services payable abroad before December 13th, 2023. The conditions for subscribing to these bonds and their main characteristics have been regulated by the Central Bank through Communication “A” 7925 and Communication “B” 12697. In addition, by means of Joint Resolution 5466/2023, the Tax Authority and the Secretariat of Commerce established a “Census of Commercial Debt from Importers with Foreign Providers”, where past debts must be declared before next January 10th, 2024.
Precautionary measures regarding cross-border payment activities
PIFO and EMLP programs of Visa and Mastercard are suspended
An issue that has somewhat gone unnoticed in the local Fintech market, amid electoral changes, is the recent issuance of various precautionary measures, both in the judicial sphere and at the level of the National Commission for the Defense of Competition (CNDC), against the “Payment Intermediary Foreign Exchange Operators” (PIFO) program of Mastercard and the “Expanded Merchant Location Pilot Program” (EMLP) of Visa.
These programs aimed to establish specific rules and additional costs for the operations of the so-called “international payment facilitators”, who essentially collect payments locally in the local currency of each country and then send the payments abroad to merchants of digital services located overseas.
The competition defense investigation in Argentina began based on a complaint made by the Fintech Chamber in October 2021 and was simultaneously accompanied by various requests for precautionary measures filed in court by some payment facilitators who felt affected by these programs.
The first to rule on the matter, in mid-September of this year, was the National Commercial Court, which, in a second instance, accepted the issuance of precautionary measures against the card brands ordering them to maintain operations with international collection agents under the same conditions as they were occurring.
Next was the Secretariat of Commerce, which, following the opinion of the National Commission for the Defense of Competition (CNDC), issued Resolution 2084/2023 in November 2023. This resolution provided, on the one hand, the precautionary suspension of the referred programs and, on the other hand, required collection agents to provide the necessary information to card acquirers to ensure transaction traceability and prevent fraud risks.
It is worth noting that these precautionary measures issued at the local level reflect similar discussions that have been taking place in other countries in the region, such as Chile, Peru, and Colombia.
Reschedule of QR interoperability for cards and of “pull transfers”
The discussion has been postponed to 2024
After the expectation generated by the Central Bank, which, after various twists and turns, had decided (through Communications “A” 7841 and 7861) to postpone until December 1st, 2023, the full validity of QR code interoperability for card payments and the operation of “pull transfers” for reloading virtual wallets (thus replacing the DEBIN tool), it ultimately decided to further reschedule the application of these two measures to February and March 2024, respectively, through Communication “A” 7905 issued on November 30th and Communication “A” 7934 issued on December 28th.
In this way, for both users who were reloading their e-wallets against debits from external accounts using the DEBIN system, and those who have not used the DEBIN system, must now reload their e-wallets against debits from external accounts through the “pull transfer” system from March 1st, 2024. Remember that the “pull transfer” tool was created by the Central Bank in 2022, through Communication “A” 7514, bringing the novelty that, unlike the recurring DEBIN system, it now requires the user to give initial consent at the originating entity to allow recurring debits to its account, as required by Communication “A” 7463.
On the other hand, regarding the interoperability of QR payments with credit cards, Communication “A” 7769 had originally established this obligation for card acquirers and sub-acquirers. The obligation is now deferred until February 1st, 2024.
It remains to be seen whether, with the new authorities of the Central Bank, the planned schedule is maintained or if discussions will continue around these two issues.
The limitation for receiving multiple transfers in dollars was derogated
There will no longer be limitations for monthly deposits
Through Communication “A” 7933 of December 28th, 2023, the Central Bank resolved to derogate certain security requirements that governed transfers, including the limitations that existed to receive more than one transfer per month in foreign currency.
These limitations generated several frictions for digital solutions of capital market agents that offered the acquisition of Dollar MEP in their applications, given that the settlement of said operations had to be deposited in bank accounts, according to Communication “A” 7340.
A bill proposes to eliminate tax deductions from electronic payments of small taxpayers
As part of the bill of Omnibus Law
Within the bill 0025-PE-2023 presented by the new National Executive Branch before Congress, which has been called the “Omnibus Law”, it is proposed to eliminate various tax withholdings on electronic payments made by small taxpayers.
Thus, it is proposed that the entities that administer debit, credit, purchase and similar cards, the payment facilitators, the aggregators and other processors of electronic means of payment, as well as the financial entities, may only make tax withholdings, when they are required by the competent national or local tax authorities, as long as the monthly amounts they process for the tax payer exceed the equivalent of 10,000 Units of Acquisition Value (UVA).
It is still uncertain whether the bill will be approved. Likewise, we will have to wait for the reaction of the provinces to this particular regulation, because it not only refers to national tax withholdings, but also to local ones, so some interjurisdictional conflict on this issue may be expected.
Crypto-assets are included in the future tax “waiver” regime
As if they were assets located abroad
Within the same Omnibus Law project mentioned above, the creation of an Asset Regularization Regime is foreseen, for the declaration of assets held as of December 31st, 2023, that have not been declared in the past for tax purposes.
As a novelty for purposes of this Bulletin, we highlight the express introduction of crypto-assets and cryptocurrencies as assets subject to externalization. In this sense, they are introduced into the category of “Goods located abroad”, regardless of who was their issuer, who is their owner or where they were deposited, custodied or stored.
The online system for the registration of new PSP roles was enabled A new 60-day period was established to comply with this registration
Through Communication “A” 7769, the Central Bank had stipulated that activities involving payment acceptance through immediate transfers, card acquiring and sub-acquiring, and cash collection agencies, must be registered in the Central Bank’s Payment Service Providers (PSP) Registry before October 1st, 2023.
However, the Central Bank only enabled the online application for submitting registration requests on October 17th, as stated in Communication “B” 12648. It was established that PSPs already engaged in these activities would have a new 60-day period to request registration, thus extending the deadline until December 17th, 2023.
Additionally, the Central Bank clarified that PSPs required to register in more than one role must complete the registration for a first role before proceeding with the next one.
The CNV validates investments by minors
Subject to compliance with certain protection rules
In September 2023, the National Securities Commission (CNV), through Resolution 977/2023, implemented a special regime aimed at minors, allowing them to subscribe participations in “Money Market” Open Investment Funds from the age of 13, either on their own behalf or through their legal representatives.
One notable feature of this measure is the ability to make online subscriptions via the internet, with prior authorization from their legal representatives. To ensure the security and traceability of these transactions, linking an account opened in a licensed bank (CBU) or registered PSP (CVU) is a requirement, both in the name of the minor and their legal representative.
Furthermore, the investment system must provide specific access that includes financial education content related to investments in Open Investment Funds. These educational resources are designed to meet the needs of minors in this age range, and it is prohibited to include offers of negotiable securities or services from agents associated with the Funds. In this way, the CNV validates and establishes certain rules for investment tools that some market participants had already enabled for teenagers over 13, based on legal principles and precedents from the Central Bank that recognize a certain progressive autonomy for minors to make such decisions.
Distribution of profits generated by virtual wallets
On August 24th, 2023, the Central Bank issued Communication “A” 7825, imposing on Payment Service Providers that Offer Payment Accounts (PSPCP) the obligation to transfer to their customers the entire compensation they receive from deposit accounts in financial institutions where their customers’ funds are deposited.
According to a press release by the Central Bank issued on the same day, this provision applies to funds deposited in e-wallets that, by the decision of the customers, are not invested.
We recall that, towards the end of 2021, through Communication “A” 7429, the Central Bank had established that the entire balance of these funds should be subject to a 100% reserve requirement, indirectly restricting banks’ ability to generate returns on these funds. This measure was partially relaxed in September 2022, through Communication “A” 7611, which allowed up to 45 percent of the reserve requirement to be met with certain bonds of the National Treasury.
The Argentine Chamber of Fintech issued a statement expressing its opposition to the new measure by the Central Bank, pointing out the lack of prior consultation with the sector.
Regulation for the prevention and solution of over-indebtedness
Impact on credit and “buy-now-pay-later” solutions
On July 14th, 2023, Disposition 11/2023 of the National Directorate of Consumer Defense was officially enacted, ratifying the approval of the “Regulation of Action for the Prevention and Solution of Consumer Over-indebtedness” (the “Regulation”). The primary purpose of the Regulation is to ensure the effectiveness of rights enshrined in the National Constitution, Law 24,240 of Consumer Defense, and human rights treaties, thus protecting the interests of individuals in consumer situations.
The Regulation creates a Specialized Unit for Over-indebtedness (“UES“), tasked with supervising complaints channeled through the Federal Single Window for Consumer Defense (“VUF”). Its main mission is to detect cases of over-indebtedness and commercial abuses.
The Regulation implements a preventive monitoring system to oversee commercial practices and contractual clauses that may harm consumers. In this regard, specific behaviors that will be subject to observation are mentioned, such as debt collection claims that simulate being judicial and unfounded threats. Simultaneously, guidelines are established for the application of interest rates in situations involving charges that were not adequately informed. Additionally, various practices are prohibited, including the unilateral imposition of charges by providers and the misuse of security instruments to guarantee obligations.
The UES is given the power to examine transactions that led to over-indebtedness in cases where there are concerns about their ultimate destination. Furthermore, the unit may be required to provide assistance to both consumers and conciliation mediators. It is worth noting that the UES could be summoned by the Council of Conciliation, Arbitration, and Good Practices (COPREC) or the National Consumer Arbitration System (SNAC) to provide specialized guidance and opinions on issues related to over-indebtedness.
Sanctions by the Central Bank for advertising unauthorized digital banking activities
Mainly directed at fintech companies
Throughout 2023, the Central Bank has been publishing the results of various proceedings and investigations targeting fintech companies that, according to this institution’s criteria, engaged in advertising or practices typical of banking activities without being licensed banks.
For example, the Central Bank has recently issued Resolutions 430/2023 (November), 386/2023 (October), and 42/2023 (February), where it fined Fintech companies such as IUDU, Reba, or Satoshi Tango for using terminology specific to banking activities (e.g., “digital banking,” “banking,” “virtual bank account,” etc.) without having the license to operate as a bank. The fintech Ualá had also been subject to a similar penalty at the end of 2022, through Resolution 304/2022, for such violations.
In mid-2023, news also emerged about the conclusion of the investigation that the Central Bank had initiated years ago against Afluenta’s platform for conducting unauthorized financial intermediation, resulting in a fine imposed in Resolution 205/2023. This case was not only relevant in terms of advertising but also in the substance of the activity since it involved a peer-to-peer (P2P) lending platform where Afluenta claimed to be facilitating a mere “mediation” between two parties and not actual “financial intermediation.” The conclusion of this summary occurred, coincidentally, with the issuance of Communication “A” 7406 by the Central Bank, establishing a specific regulatory framework for crowdlending platforms, where Afluenta decided to voluntarily register.
It is worth noting that all the aforementioned resolutions are not yet final, so they could still be under discussion in higher instances. However, they are interesting to evidence the Central Bank’s proactivity in these matters.
In this regard, we also highlight the judicial discussion that has taken place throughout last year around the legal nature of the fintech Wenance’s lending activity, following the request for the opening of its preventive reorganization process, which was rejected at first instance by the intervening judge who believed it engaged in unauthorized “financial intermediation” (and, therefore, should be governed by the insolvency regime applicable to financial institutions). However, the Appeals Chamber of San Isidro later accepted the opening of the regular reorganization process, which, through a resolution dated September 11th, 2023, reversed the prior decision, stating that this company was registered with the Central Bank as a Non-Financial Credit Provider and not as a financial institution.
Please, do not hesitate to contact us should you require any additional information on these matters.
Sincerely,
Daniel Levi
María Shakespear
Pablo J. Torretta
Luciana Liefeldt
Franco Montiel
Jorge Pico
————————————
This bulletin 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.