Banking Board Resolution JB-2015-3518

Banking Board of Ecuador

RESOLUTION No. JB-2015-3518

THE BANKING BOARD

CONSIDERING:

THAT this appeal is resolved in accordance with the First Transitory Provision of the Organic Monetary and Financial Code, published in the Official Register Second Supplement No. 332 on September 12, 2014, whose text states that resolutions recorded in the Codification of Resolutions of the Superintendency of Banks and Insurance and the Banking Board, and norms issued by control bodies, will remain in force to the extent they do not conflict with the Organic Monetary and Financial Code, until the Monetary and Financial Policy and Regulation Board resolves as appropriate; and with the second paragraph of the Third Transitory Provision, which establishes that the Banking Board will continue to act until it resolves all claims, appeals, and other administrative procedures it was handling as of the effective date of said code, within a period of one hundred eighty days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board, thereby granting this control body competence to hear and resolve the present review appeal;

THAT by Resolution No. 054-2015-F of March 5, 2015, the Monetary and Financial Policy and Regulation Board resolved to extend by an additional one hundred eighty days the period for the Banking Board to continue acting and resolve all claims, appeals, and other administrative procedures within its competence;

THAT by Official Letter No. IRG-DAyEU-V-R-2014-746 of July 9, 2014, the Regional Intendant of Guayaquil, within the claim filed by Mr. Wesley Leonardo Merchán Reyes against Banco Pichincha C.A., ordered:

ARTICLE 1.- "REJECT the claim contained in the repossession appeal filed by Banco Pichincha C.A.; and, consequently, CONFIRM the administrative act contained in Official Letter No. IRG.DAyEU-V-R-2014-466, of May 21, 2014.

ARTICLE 2.- NOTIFY the controlled financial institution BANCO PICHINCHA C.A. and Mr. WESLEY LEONARDO MERCHÁN REYES with the complete content of this official letter, so that they may exercise the administrative appeals established in the prevailing legal framework."

THAT by document filed with the Superintendency of Banks and Insurance on July 21, 2014, Mr. Antonio Acosta Espinosa, Acting President of Banco Pichincha C.A., filed a review appeal to Official Letter No. IRG-DAyEU-V-R-2014-746 of July 9, 2014, which was accepted for processing by the Secretary of the Banking Board via Official Letters No. JB-2015-1965 and 1966 of July 25, 2015;

THAT Article 1 of the General Law of Financial System Institutions, in force at the time the appeal was filed, in conjunction with Article 213 of the Constitution of the Republic, establish that the Superintendency of Banks is a technical audit, intervention, control, and supervision body for financial activities carried out by public and private entities comprising the National Financial System, with the purpose that offered activities and services comply with legal standards and serve the general interest;

THAT Article 52 and the first paragraph of Article 308 of the Constitution of the Republic

---

Banking Board of Ecuador

Resolution JB-2015-3518 Page No. 2

establish as a State duty, to guarantee citizens' right to have access to high-quality goods and services; to freely choose them; as well as to receive accurate and non-misleading information regarding their content and characteristics; and simultaneously consider financial activity as a public service, oriented to satisfy user needs;

THAT letters b) and o) of Article 180 of the General Law of Financial System Institutions establish the functions and powers of the Superintendent of Banks, among them ensuring the stability and correct functioning of the National Financial System; as well as requiring controlled institutions to present and adopt corresponding corrective and sanitation measures, when required;

THAT the present review appeal has as its antecedent the obligation undertaken by Mr. Wesley Leonardo Merchán Reyes with Banco Pichincha C.A., an institution that financed the acquisition of a 2010 Mazda3 SDN 1.6 MT F/L vehicle, engine No. Z6839011, chassis No. 9FCBK4265A0108464, color wine, financed by Banco Pichincha C.A. and contributed in property to Fideicomiso Automotores Pichincha, administered by Fideval S.A., Fund and Trust Administrator, as evidenced by the public deed executed before the Twenty-Third Notary of Guayaquil, containing the Adhesion Contract signed on August 19, 2010, in which appear as subscribers the spouses Mr. Wesley Leonardo Merchán Reyes and Mrs. Digna Germania Quimis Macías, in their capacity as Adherent Settlers; and on the other hand, Mrs. Jessica Mercedes Sellán Lalama, Special Attorney of fiduciary Fideval S.A. Fund and Trust Administrator, and legal representative of the Irrevocable Guarantee Mercantile Trust named Fideicomiso Automotores Pichincha;

THAT the appellant argues that due to non-compliance with the acquired obligation and the default incurred by Mr. Wesley Leonardo Merchán Reyes, fiduciary Fideval S.A., in its capacity as Legal Representative of the Pichincha Automobile Trust, executed the conventional alienation procedure, in accordance with the Adhesion Contract, for which, on December 21, 2012, they signed the corresponding delivery and receipt act for said vehicle, which guaranteed the obligation maintained by the claimant with Banco Pichincha C.A.;

THAT by Official Letter No. BP-ACE-2015-0499, received at the Superintendency of Banks on June 5, 2015, Banco Pichincha C.A. submitted the details of AUTOSEGURO product payments for credit operation No. 851481-00, in the amount of US$ 14,726.60, with a due date of August 19, 2015. From the submitted payment table, it is observed that the last regular debit made to Mr. Wesley Leonardo Merchán Reyes was on December 11, 2012, that is, before the date of signing the vehicle delivery and receipt act; and that from that date onward no additional payments are recorded, until February 7, 2014, when the bank made several automatic debits to the claimant's account, an amount totaling US$ 8,078.88;

THAT Article 1583 of the Civil Code establishes that the convention or agreement between parties constitutes a mode of extinguishing obligations. Consequently, after the vehicle delivery by the debtor, any and all remaining balance of the loan granted by Banco Pichincha C.A. was extinguished; therefore, it is not justified for the aforementioned bank to charge installments or dividends from the vehicle guarantee;

THAT Article 9 and the first paragraph of Article 10 of Chapter 1 "Of fees for financial services"; Title XIV "Of information transparency"; Book I "General norms for the application of the General Law of Financial System Institutions, the Codification of Resolutions of the Superintendency of Banks and Insurance and the Banking Board, in force at that time, determine:

ARTICLE 9.- "No additional fees shall be charged on financial services already billed. In the case of credits that are overdue, generate default interest, and are not yet in a judicial recovery process, the extrajudicial collection management fee shall be the only additional item charged. For preventive recovery management, no value shall be charged.

Extrajudicial collection management shall be considered a differentiated billed financial service, and shall apply exclusively when collection actions have been duly documented." Emphasis added

ARTICLE 10.- "Extrajudicial collection, including the method for determining it and the concepts used for its calculation, must be stated in the adhesion contract signed by the client with the financial system institution. Automatic charging of extrajudicial collection to debtors, that is, by the mere fact of incurring default, is considered an unauthorized practice. Charges must be reasonable and proportional to the management effectively performed.

(...)";

THAT the control body found no documents justifying the values debited by Banco Pichincha C.A. In this regard, it should be noted that trusts were constituted with the purpose of obtaining an adequate and expedient means to collect assets delivered to users under the credit or loan modality for the acquisition of movable or immovable goods; however, it is observed, in the case under review, the existence of certain clauses that operate to the financial detriment of the user, due to legal expenses and fees that this control body cannot admit or accept as being transferred to the user under any title. The fee schedule for additional credit charges is determined and regulated in the Codification of Resolutions of the Superintendency of Banks and Insurance and the Banking Board, and applies obligatorily to all entities of the financial system;

THAT Banco Pichincha C.A. failed to comply with legal provisions, as it charged loan installments after the vehicle delivery by Mr. Wesley Leonardo Merchán Reyes; consequently, the debt was extinguished, and therefore, it is not justified, in accordance with law, for the bank to justify charging US$ 8,078.88 to Mr. Merchán, as it is evident that the financial institution falls under Article 5 of Chapter IV "Procedure for handling claims against Financial System Institutions"; Title XX "Of the Superintendency of Banks and Insurance"; Book I "General norms for Financial System Institutions"; of the Codification of Resolutions of the Superintendency of Banks and Insurance and the Banking Board, which determines:

---

Banking Board of Ecuador

Resolution JB-2015-3518 Page No. 3

ARTICLE 5.- "If the result of the analysis conducted by the Superintendency determines the need for the controlled institution to introduce corrective measures that regularize the situation that motivated the claim, the Superintendent of Banks and Insurance or the official with delegation of said authority shall issue the corresponding disposition.

If the situation that motivated the claim referred to in the preceding paragraph originated from an incorrect procedure by the controlled institution, which caused harm to the claimant, the Superintendency of Banks and Insurance may order the refund of the claimed values, in exercise of the functions and powers contemplated in letters b) and o) of Article 180 of the General Law of Financial System Institutions, granting the legal representative of the entity a period that may not exceed fifteen (15) days from notification to submit, under legal precautions, proof of compliance with the issued order. (...)." (emphasis added);

THAT the National Legal Intendency, via memo No. INJ-DNJ-SAL-2015-0501 of July 8, 2015, recommended to the Banking Board reject the claim contained in the review appeal filed by the Acting President of Banco Pichincha C.A.; and,

IN exercise of its legal powers,

DECIDES:

SINGLE ARTICLE.- REJECT the claim contained in the review appeal filed by Mr. Antonio Acosta Espinosa, Acting President of Banco Pichincha C.A.; and, consequently, CONFIRM Official Letter No. IRG-DAyEU-V-R-2014-746 of July 9, 2014, through which the Regional Intendant of Guayaquil rejected the repossession appeal filed by Banco Pichincha C.A. and ratified the content of Official Letter No. IRG-DAyEU-V-R-2014-466 of May 21, 2014; with the clarification that the amount the bank must refund Mr. Wesley Leonardo Merchán Reyes amounts to US$ 8,078.88.

COMMUNICATE.- Given at the Superintendency of Banks, in Quito, Metropolitan District, on July 15, two thousand fifteen.

(Signature) Econ. Rodrigo Landeta Parra GENERAL INTENDANT (S) PRESIDENT OF THE BANKING BOARD SESSION (E)

I CERTIFY.- Quito, Metropolitan District, on July 15, two thousand fifteen.

(Signature) Lcdo. Pablo Cobo Luna SECRETARY OF THE BANKING BOARD