On March 31, 2022, the Board of Directors of the Central Bank of Paraguay (“BCP”) issued Resolution No. 30, Act No. 17 (the “Resolution”) approving the Information Transparency and Integrity Regulation for Monetary Credit Grantors that operate with their own resources or those of third parties that do not represent any deposit-taking (“OCD”). The Resolution is added to three other previous BCP regulations that essentially included OCDs as subjects of Law No. 861/96 and its amendments (“LDB”), established the obligation for OCDs to register before the Superintendence of Banks (“SIB”) to operate legally, and established the supervision and control of the SIB over the OCDs.
As stated by the BCP, the Resolution seeks to ensure information transparency, promote a market in which customers have clear and understandable information that allows them to make better decisions, and thus motivate greater consumer confidence and promote competition. in the market. The Resolution will be in force for OCDs as of September 1, 2022.
The main 10 new facts introduced by the Resolution are:
- Mandatory Application of Other Regulations: The Resolution clarifies exhaustively that, under the scope of the current supervision and control applicable to OCDs, they must observe in mandatory manner the following regulations issued by the BCP: (i) Good Corporate Governance Regulation; (ii) Regulations on Interest Rate; and (iii) Rules on Management of Claims and Queries.
- Specific definition of Expenses, Commissions and Penalties: In order to avoid misunderstandings, the BCP replicated exactly the same definition given to the terms “Expenses”, “Commissions” and “Penalties” in the regulation applicable to financial entities that they carry out intermediation (Res. 2, Act 60). This, in turn, is tied to the limitations that apply to each one, as explained in item 6.
- Comprehensive Risk Management Policy: OCDs are required to have policies that establish the procedures and management mechanisms to identify, measure, control and monitor the risks to which they are exposed.
- Credit Management Policy: OCDs are required to have policies that establish the procedures and tools used to assess, assume and control the credit risk of their clients.
- Minimum Information and Advertising: OCDs are required to publish (in an easy and understandable way) and permanently update on their websites (or in the delivery of printed brochures for OCDs individuals without a website): (a) their comprehensive risk management and credit management policies; (b) price list (detailing the interest rate, commissions, expenses and penalties); and (c) good corporate governance policies and formation of their board of directors and governance bodies.
- Limitations on Expenses, Commissions and Penalties: The BCP replicated, in art. 6 of the Resolution, exactly the same limitations and prohibitions that have been applied since 2015 to financial entities that carry out intermediation. This way, OCDs are also now limited to charging only expenses, commissions and penalties that meet the guidelines of art. 6 of the Resolution and that also fall within one of the categories and denominations included in the Annex of Res. 2, Act 60; all others are prohibited unless prior authorization is obtained from BCP (with due technical justification).
- Interest Rates: In addition to clearly clarifying Res. 17 – Act 62’s application on Interest Rates to OCDs, the definition for the term “Interest” included in said regulations is replicated and it is established that any charge that does not fall within the scope of regulations on commissions, expenses and penalties as authorized by the BCP, will be computed as part of the amount that makes up the interest rate.
- Mandatory Contracts: The signing of a contract (whether in-person or digitally) to agree on the operation of clients with OCDs becomes mandatory, and must include the amount of the credit, expiration, interest rate, commissions, expenses and penalties. For OCD contracts without a website, the brochures referenced in item 5 must be included as part of the contract, and must be signed, verifiable and available to the SIB. For both, physical and digital contracts, the client must have the opportunity to desist, free of charge, after knowing the details of the operation.
- Loan Portfolio Assignment: For loan portfolio purchase operations, the BCP requires: (i) notification about the assignment, made within 5 days after formalizing the purchase; (ii) the buyer must ensure and corroborate that said notification were made correctly; (iii) the notification can be also made by means of a data message with a digital signature; (iv) the purchaser OCD must include proof of the notification in the file of each client whose debt was acquired; and (v) in any case, the assigned debtor must know the name of the new creditor and the address to perform all payments of the respective debt.
- 10. Sanctions: Failure to comply with the Resolution is subject to sanctions (applied to OCD entities as well as their directors, representatives, accountants, trustees and auditors) imposed by BCP. Depending on the level of importance of the offense, the sanctions vary between warnings, fines of 100-5000 monthly minimum wages, limitation on the exercise of activities and the prohibition of distribution of dividends or opening of new offices for up to 2 years.
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