Banking Junta of Ecuador

RESOLUTION No. JB-2015-3406

THE BANKING JUNTA

CONSIDERING:

THAT this appeal is resolved in accordance with the First Transitional Provision of the Organic Monetary and Financial Code, published in the Official Register Second Supplement No. 332 of September 12, 2014, whose text states that resolutions contained in the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Junta, and the norms issued by control bodies, will remain in force insofar as they do not oppose what is provided in the Organic Monetary and Financial Code, until the Monetary and Financial Policy and Regulation Board resolves what corresponds, according to the case; and with the second paragraph of the Third Transitional Provision, which states that the Banking Junta will continue to act until it resolves all claims, appeals, and other administrative procedures it was handling as of the date of entry into force of the same, within a period of one hundred and eighty days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board;

THAT through a communication entered into the Superintendence of Banks and Insurance on July 18, 2011, Mr. Luis Morejón Morejón filed a complaint against Banco Pichincha C.A. for the non-inclusion in the amortization table of credits Nos. 48777900 and 59655200 of the premium corresponding to credit life insurance, which has led the bank to deny his request for the application of said insurance after the death of his wife, Mrs. Celia Esperanza Pinto Torres;

THAT with the supporting documentation provided by the complainant and by Banco Pichincha C.A., the National Directorate of User Attention and Education conducted a comprehensive analysis of the complaint and, under the articles 76, numbers 1 and 7 of the Constitution of the Republic of Ecuador and 180, letter o), of the General Law of Institutions of the Financial System, in harmony with article 5 of chapter IV "Procedure for the attention of complaints against institutions of the Financial System", of title XX "Of the Superintendence of Banks and Insurance", of book I "Norms for the application of the General Law of Institutions of the Financial System", of the Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Junta, concluded, through official letter No. DNAE-SAU-2013-0877 of February 23, 2013, that in the complaint "(...) an incorrect procedure is evident in the implementation of credit operations, subscribed by the debtors Mr. Luis Alfonso Morejón Morejón and his deceased spouse Mrs. Celia Esperanza Pinto Torres, lack of compliance and observance of legal regulations, as well as; to internal procedures and policies, which affect the financial rights of the complaining user, by Banco Pichincha C.A.;

THAT for the considerations noted, the National Directorate of User Attention and Education disposed "(...) that the complaint raised by Mr. Luis Alfonso Moretón Moretón is admissible; since the condition of insurable risk has been met, that is the unexpected death of Mrs. Celia Esperanza Pinto Torres, who (sic) maintained the status of debtor, in the two credit operations subscribed and accepted, the bank Banco Pichincha C.A. must issue the respective credit notes

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for the concept of return of values, of the credit operations: No. 487779-00, from installment thirty-one (31) to thirty-six (36) for the sum of USD$ 2,080.55; and, No. 596552-00, from installment nineteen (19) to thirty-six (36) for the sum of USD$ 13,994.06, both credit operations for a total of USD$ 16,074.61, recognizing the maximum legal rate permitted by the Central Bank for commercial credit, until the date in which the total effective payment occurs in the complainant's checking account. Evidence of the crediting of values in checking account No. 3108159804, shall (sic) be sent to this (sic) National Directorate, within a period of 72 hours from the notification of this administrative act.";

THAT through a communication entered into the Superintendence of Banks and Insurance on March 11, 2013, the Deputy President of Banca Pichincha C.A., with the professional sponsorship of Dr. Pablo Cadena Merlo, filed an appeal for reconsideration against the administrative act contained in official letter No. DNAE-SAU-2013-0877 of February 23, 2013, which, after rigorous analysis, was resolved by the National Directorate of User Attention and Education with official letter No. DNAE-SAU-2013-3258 of June 10, 2013, in the following terms:

"(...) the content of the administrative act, issued by the National Directorate of User Attention and Education, contained in letter No. DNAE-SAU-2013-0877 dated February 23, 2013, duly notified to the Head Office of Banco Pichincha C.A., on February 28 of the same year, is ratified in all its parts. Since the presentation of the appeal for reconsideration does not suspend the execution of the original resolution, please send evidence of the crediting of values in checking account No. 3108159804, to this (sic) National Directorate, within a period of 72 hours from the notification of the resolution of this administrative appeal for reconsideration.";

THAT through a communication entered into this control body on June 13, 2013, Mr. Antonio Acosta Espinosa, Deputy President of Banco Pichincha C.A., with the professional sponsorship of Dr. Pablo Cadena Merlo, files before the Banking Junta an appeal for review against the administrative act contained in official letter No. DNAE-SAU-2013-3258 of June 10, 2013;

THAT with resolution No. JB-2014-2979 dated July 3, 2014, the Banking Junta resolved:

"(...) REJECT the claim contained in the appeal for review filed by Mr. Antonio Acosta Espinosa, Deputy President of Banco Pichincha C.A.; and, consequently, CONFIRM the administrative act contained in official letter No. DNAE-SAU-2013-3258 of June 10, 2013, through which Engineer Carolina Pesantez Benítez, National Director of User Attention and Education, ratified in all its parts the content of official letter No. DNAE-SAU-2013-0877 of February 23, 2013, through which it was ordered that the bank carry out "... the respective credit notes for the concept of return of values, of the credit operations: No. 487779-00, from installment thirty-one (31) to thirty-six (36) for the sum of usd $ 2,080.55; and, No."

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596552-00, from installment nineteen (19) to thirty-six (36) for the sum of usd $ 13,994.06, both credit operations for a total of usd $ 16,074.61, recognizing the maximum legal rate permitted by the Central Bank for commercial credit, until the date in which the total effective payment occurs in the complainant's checking account.";

THAT through a communication entered into this Superintendence on July 28, 2014, Mr. Antonio Acosta Espinosa, Deputy President of Banco Pichincha C.A., with the professional sponsorship of Dr. Pablo Cadena Merlo and lawyer Andrea García Díaz, files before the Banking Junta an appeal for reconsideration against Resolution No. JB-2014-2979 issued by the Banking Junta on July 3, 2014, arguing mainly the following:

"(...) Taking into account that in the 'OTHER CHARGES' sections of the SETTLEMENT documents signed by the client, values related to credit life insurance do not appear, it is concluded that the client always had knowledge that the credits were not protected by credit life insurance (...)"

"(...) In said amortization tables, there is no express reference to credit life insurance; consequently, said values correspond to the payment for fire insurance that covers the real estate property mortgaged by the debtors in favor of Banco Pichincha C.A. (...)";

THAT with official letter No. JB-2014-2009 of July 31, 2014, the Secretary of the Banking Junta, accepted for processing the appeal for reconsideration filed; and, with official letter No. JB-2014-2010 of the same date, notified Mr. Luis Alfonso Morejón Morejón, regarding the acceptance of said appeal;

THAT within the appeal filed by the bank, it is argued mainly that credit operations Nos. 596552-00 and 487779-00 did not have credit life insurance since at the date of their granting, which was August 2008 and 2009, they were not governed by the Operational Risk Policy Manual; that in the settlement documents corresponding to the mentioned credits, no reference is made to any value related to credit life insurance; and, that in the amortization tables signed by the spouses, values of US$ 13.61 (operation No. 487779-00) and US$ 13.9 (operation No. 596552-00) are registered in the 'INSURANCE' column starting from installment No. 26, but that in said tables there is no express reference to credit life insurance, for which reason those values correspond to fire insurance that covers the real estate property mortgaged by the debtors;

THAT regarding the argument that credit operations Nos. 596552-00 and 487779-00 did not have credit life insurance since at the date of their granting, that is August 2008 and 2009, they were not governed by the Operational Risk Policy Manual, it must be specified that this argument is inadmissible, since the bank itself transcribes what the policy contained in the

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Banking Junta of Ecuador

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"Manual of Credit Policies and Commercial Credit Processes" mentions, which as the bank asserts, is applicable to these two credits, and which in its pertinent part expressly states:

Credit Life Insurance

Credits granted to natural persons shall have credit life insurance in the following cases:

• When despite having adequate guarantees, the minimum required coverage is not had, that is 140% for mortgage guarantees and 160% for pledge guarantees regardless of the amount and term.
• All consumer, housing, and microenterprise credits

(...);

THAT the detailed credit operations are classified as: PRODUCTIVE CREDIT MIPE (MICROCREDIT) destined for the purchase of final goods;

THAT in the credit analysis process, according to the "Disbursement Means Small Business Segment One", the conjugal society formed by: Luis Alfonso Morejón Morejón and Celia Esperanza Pinto Torres, who jointly demonstrated as patrimonial real estate assets, a property located in the city of Ibarra, which according to the appraisal carried out on October 19, 2005, reflects a coverage of 160.4%;

THAT the defense argument raised by the appellant does not support nor justify the requirement to contract life insurance, solely because the property has coverage of 160.4%, at the date of qualification as mentioned in the referred manual;

THAT regarding the argument that in the settlement documents corresponding to the mentioned credits, no reference is made to any value related to credit life insurance, it is worth indicating that in the amortization tables of the credits there is a column named "insurance" without specifying which insurance it is about; however, it is noteworthy that in said column, starting from installment No. 26 of both credits, values for insurance of US$ 13.61 and 13.9 are charged, corresponding to credit operations Nos. 487779-00 and 596552-00, in order. Likewise, in the loan or promissory note contracts, in Clause First it indicates: "The value of each installment comprises a capital installment and an interest installment and must be paid with the sums corresponding to the insurance(s) that is/are applicable, (...)" without specifying which insurances are meant;

THAT the situation described leads to conclude that the spouses Morejón-Pinto did not have clear, precise, timely, reasonable, adequate, validated,

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truthful and complete information, as required by article 9 of Paragraph II "Right to information on financial products and services", of section II "Rights of the user of the financial system", of chapter III "Code of user rights of the financial system", of title XIV "Code of transparency and user rights" of book I "General norms for the application of the General Law of Institutions of the Financial System" of the Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Junta, whose literal text expresses:

ARTICLE 9.- Access and receive directly clear, precise, timely, reasonable, adequate, validated, truthful and complete information, related to the products and services offered by the institutions of the financial system, especially in the financial, legal, juridical, operational, fiscal and commercial aspects, among others, including their associated risks:

(...)

9.2 Receive a clear exposition of the conditions and procedures established in the contract and other instruments in order to avoid interpretation errors. The terms shall be expressed clearly and in the Spanish language. In case of doubt, they will apply in favor of the user, (...);

THAT from what is exposed, it is clearly verified an incorrect procedure by the entity for not delivering clear, truthful and complete information to its clients, for which the use of article 5, of chapter IV "Procedure for the attention of complaints against institutions of the financial system", of title XX "Of the Superintendence of Banks and Insurance", of book I "General norms for the application of the General Law of Institutions of the Financial System", of the Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Junta, whose literal text disposes:

"ARTICLE 5.-" If the result of the analysis carried out by the Superintendence determines the need for the controlled institution to introduce corrective measures that regularize the situation that motivated the complaint, the Superintendent of Banks and Insurance or the official who has the delegation of said authority, will issue the corresponding disposition.

If the situation that motivated the complaint referred to in the previous paragraph, originated in an incorrect procedure of the controlled institution, which has caused harm to the complainant, the Superintendence of Banks and Insurance may order the return of the claimed values, in exercise of the functions and attributes contemplated in letters b) and o) of article 180 of the General Law of Institutions of the Financial System, granting the legal representative of the entity a period that cannot exceed fifteen (15) days from the notification to send, under the legal warnings, the proof of compliance with the order issued."

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THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2015-0320 of April 15, 2015, recommended to the Banking Junta to reject the claim contained in the appeal filed by the Deputy President of Banco Pichincha C.A.; and,

IN exercise of its legal attributes,

RESOLVES:

SINGLE ARTICLE.- REJECT the claim contained in the appeal for reconsideration filed by Mr. Antonio Acosta Espinosa, Deputy President of Banco Pichincha C.A.; and, consequently, CONFIRM resolution No. JB-2014-2979 issued by the Banking Junta on July 3, 2014, through which it ratified the administrative act contained in official letter No. DNAE-SAU-2013-3258 of June 10, 2013, in which Engineer Carolina Pesantez Benítez, National Director of User Attention and Education, ratified in all its parts the content of official letter No. DNAE-SAU-2013-0877 of February 23, 2013, through which it was ordered that the bank carry out "(...) the respective credit notes for the concept of return of values, of the credit operations: No. 487779-00, from installment thirty-one (31) to thirty-six (36) for the sum of usd $ 2,080.55; and, No. 596552-00, from installment nineteen (19) to thirty-six (36) for the sum of usd $ 13,994.06, both credit operations for a total of usd $ 16,074.61, recognizing the maximum legal rate permitted by the Central Bank for commercial credit, until the date in which the total effective payment occurs in the complainant's checking account."

COMMUNICATE.- Given in the Superintendence of Banks and Insurance, in Quito, Metropolitan District, on the eighth of May of two thousand fifteen.

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

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I CERTIFY.- Quito, Metropolitan District, on the eighth of May of two thousand fifteen.

Lcdo. Pablo Cobo Luna
SECRETARY OF THE BANKING JUNTA