/ Money Lending Operations. Proposed CMF General Applicability Rule. Requirements for Money Lending Operations Commissions Article 19 ter Law No. 18,010

Nicole Cartier
Senior Associate Alessandri
Capital Markets

From December 27, 2021 to January 23, 2022, the Financial Market Commission (CMF) has put out for consultation a draft General Applicability Rule (NCG) aimed at establishing the requirements to be met by commissions charged in money lending operations granted by the entities supervised by the CMF and those subject to its supervision[1], so that they are not considered interest.

This is important because in our legal system there is a Maximum Conventional Rate (MCR), which is a limit established for charging interest. Therefore, anything that is not considered interest will not be affected by such limit.

This draft also defines the terms and conditions under which the entities must make and report the contractual amendments that occur as a result of the enactment of the NCG.

It is noted that this project was the result of the legal mandate granted to the CMF by Law No. 21,314 of April 2021, by incorporating certain amendments to Law No. 18,010, which regulates credit operations and other money obligations.

I. Requirements, rules and conditions that commissions charged in respect of money lending transactions must comply with in order not to be considered interest.

1. The concept for which the payment is to be made, as well as the total charge or amount for the debtor, must have been informed clearly and in detail, and accepted by the debtor, expressly, prior to its collection and the rendering of the service.
2. That the information on the costs associated with the services that may be engaged in connection with the credit operations be made available to the public through the same channels used to make offers of money lending operations or the contracting thereof.
3. The consideration for the payments: a) Must correspond to actual, creditable and effectively rendered services to the debtor; b) May not be related to the evaluation, granting and payment of the credit; and c) May not have the purpose of reducing the risk of the debtors or ensuring compliance with their obligations.
   The draft NCG establishes a series of payments that will be considered interest, among which are those that the creditor is entitled to receive for sending mandatory periodic information, for liquidation certificates, for refinancing, among others.
4. Payments directly or indirectly received or entitled to be received by the creditor and which according to the law must be considered as commissions or not, must be part of the interest.
5. Payments that the creditor does not receive or is not entitled to receive, such as, for example: a) Prepayment charges; b) Charges for out-of-court collection; c) Insurance premiums that protect the payment of the debt or the goods given as guarantee and that do not require ratification for their contracting; and d) Commissions authorized under Article 19 bis of Law 18,010.

II. Deadlines and conditions for sending the annexes for the adaptation of the subscribed contracts

Institutions that must amend contracts relating to the operations referred to in Article 6 ter of Law No. 18,010[2], and which have been executed before the entry into force of the Rule must send their clients a letter informing them of the amendments and attaching an annex with the details of the amendments, for their acceptance or rejection.

The draft NCG establishes certain formal requirements to be met by such communication and the term for sending it, which may not exceed three months from the date of issuance of the Rule, and must, in any case, contemplate a term of at least twenty business days for the debtor to expressly accept or reject the amendments.

For the purpose of adopting measures to comply with the Rule, both as regards the adaptation of contracts and the communications to be sent to clients, it should be considered that the Rule would enter into force six months after its issuance.

[1] Banking companies, family allowance compensation funds, insurance companies or savings and credit cooperatives, or any other institution that places funds through massive money lending operations.

[2] Credits arising from the use of credit cards through a credit facilities or lines of credit accessing a bank checking account.