Banking Board of Ecuador

RESOLUTION No. JB-2015-3397

THE BANKING BOARD

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 Board, and the norms issued by control bodies, will remain in effect in all that does 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 Board will continue to act until it resolves all claims, appeals, and other administrative procedures it was hearing 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 on December 4, 2013, Mr. Carlos Eduardo Paredes Torres, filed an administrative claim before the control body, against BANCO INTERNACIONAL S.A., arguing in principal:

"(...) On November 6, 2013, we issued a letter to Banco Internacional making the respective claim regarding the protests of checks that were made against us due to the disqualification of the signature of one of our company's officials. This claim was answered by them on December 2, 2013, with letter No. USC-1181-2013, which bears the date of November 7, 2013.

Likewise, on November 19, 2013, we made the respective claim to Banco Internacional regarding the protest of a new check due to the disqualification of the signature of Mr. Olmedo Rodrigo Paredes Hernández, (...) it is also worth mentioning that in both cases, we were never notified by said Bank nor by any other entity in the financial system about the disqualification of the signatures of any of our officials. (...)"

From the above, he requests:

"(...) that the unjust protests to which we were subject be erased from our records and the reversal of the funds that were debited from our checking account."

THAT through letter No. DNAE-SAU-2014-00381 of January 21, 2014, the Subdirectorate of User Attention notified BANCO INTERNACIONAL S.A. of the claim filed against it, and requested it to submit proof of having carried out the notification provided for in article 66 of the General Regulation to the Check Law; and, with letter No. USC-153-2014 of February 24, 2014, the bank provided attention to what was requested by this control body and stated in principal:

"The Superintendence of Banks ordered the disqualification of the signature of Mr. Olmedo Rodrigo Paredes Hernández, from November 6 to December 6, 2013."

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Banco Internacional S.A. carried out the necessary procedures to notify the sanctioned party of that disqualification, but for some reason, the cause of which we do not know, apparently such procedure could not be completed, (sic) despite our interest in complying with current regulations";

THAT through letter No. DNAE-SAU-2014-01318 of March 6, 2014, the Bank was requested to present specific additional information contained in: a) Evidence of the notification of Disqualification carried out to the client in accordance with the Law and Regulation of Checks, b) Copies of the microfilms of the protested checks, and, c) Copy of the process for the application of the disqualification of authorized signatures in checking accounts; a request that was attended through letter No. USC-292-2014 received by this control body on March 20, 2014, and in its main part says:

"1.- We do not have the Notification of Disqualification, due to the short period of disqualification, and the term that the Regulation to the Check Law provides for such effect.";

THAT with letter No. DNAE-SAU-2014-022838 of May 5, 2014, this control body accepted the claimant's petition, resolving to order BANCO INTERNACIONAL S.A. to proceed to "(...) reverse the values of the fines charged on the protests of checks Nos. 652, 690, 749, 349, 604, 899 of checking account No. 510061576-5; consequently, it must return to Mr. CARLOS EDUARDO PAREDES TORRES the sum of US$5,863.33 corresponding to 10% of the amount of the aforementioned protested checks; and, credit that sum to said account." In addition, to send to this Superintendence the corresponding structure containing the elimination of the protest of the aforementioned checks;

THAT through a document received by this control body on May 13, 2014, BANCO INTERNACIONAL S.A. filed an appeal for reconsideration of the administrative act contained in letter No. DNAE-SAU-2014-022838 of May 5, 2014; and, with letter No. DNAE-SAU-2014-03664 of June 12, 2014, the control body resolved to REJECT the petition contained in the appeal for reconsideration filed; and, consequently, CONFIRM the administrative act contained in letter No. DNAE-SAU-2014-022838 of May 5, 2014, for the motivation contained therein;

THAT with a document entered into this control body on June 23, 2014, Dr. José Romero Soriano, Vice President-Legal Representative of Banco Internacional S.A., filed before the Banking Board an appeal for review of the administrative act contained in letter No. DNAE-SAU-2014-03664 of June 12, 2014, which was accepted for processing by Lic. Pablo Cobo Luna, Secretary of the Banking Board, through letter No. JB-2014-1640 of June 27, 2014;

THAT the appellant in his appeal document, in principal, argues:

"The General Regulation to the Check Law establishes the causes that motivate the disqualification of the signature of the drawer of a check, as a sanction for the commission of certain infractions to the Regulation itself. Concomitantly, it is also pertinent to remember, as a regulatory obligation, the prudent and conscious management of one's checkbook, understanding that one assumes the legal responsibilities for acts originating from the checking account contract."

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Expressing the considerations preceding, it is understood, as a legal presumption, that every checking account holder knows the legal and regulatory provisions that govern the use and management of the checking account, as well as the sanctions to which one becomes liable in case of non-compliance, under the principle established in the Civil Code, that the Law obligates all inhabitants of the Republic, and ignorance of it excuses no one (Art. 13 C.C.)

Wisely, the Law establishes that no one may allege their lack of knowledge of a certain norm as a means of defense to avoid being sanctioned for having transgressed it. In line with what has been stated, the claimant cannot allege ignorance of the disqualification of his signature, originating in the non-payment of fines for the protest of checks, with the purpose that the Bank of my representation return the fine generated by the protest of the check subject of his claim, due to the cause of having been drawn by a disqualified signature.

THAT the third numeral of the appellant's foundations, in letter, says:

**"THIRD.- BACKGROUND AND FOUNDATIONS.

3.1 BACKGROUND.-

3.1.1 On October 8 and 21, 2013, checks numbers 564 and 747 drawn against checking account No. 510061576-5, whose ownership corresponds to the company DAVMOTOR Cía. Ltda. at Banco Internacional S.A., were presented for collection and were protested for insufficient funds. It is also important to note that, according to the account statements issued by the Superintendence of Banks and Insurance, Mr. Carlos Eduardo Paredes Torres at that date had three protested checks between July 30, 2012, and April 23, 2013, which represented a total of five protests at the national financial system level.

3.1.2 As a consequence of the above, the signature of Mr. Carlos Eduardo Paredes Torres was disqualified by the Superintendence of Banks and Insurance for a period of thirty days, from October 21 to November 21, 2013. The joint signature of Mr. Olmedo Paredes Hernández was disqualified from November 6 to December 6, 2013.

Nevertheless, between November 4, 5, and 6, 2013, checks numbers 652, 690, 749, 349, 604, 899 were presented for collection, which, due to the disqualification of the signature of Mr. Carlos Eduardo Paredes Torres, first, and that of Mr. Olmedo Paredes Hernández, subsequently, and being joint, were protested by the Bank of my representation.

3.1.3 Mr. Carlos Eduardo Paredes Torres, as legal representative of the company owning the account, through a communication dated November 6, 2013, a copy of which is attached, filed a claim with the Bank, from which it is clear that, despite denying it, he was aware of the disqualification of his signature, but that no bank in the system had informed him.""

THAT in relation to the above, it is pointed out that according to the file, BANCO INTERNACIONAL S.A. has not submitted evidence that it notified Mr. CARLOS EDUARDO PAREDES TORRES, in his capacity as Manager of the Company

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DAVMOTOR CIA. LTDA., regarding his disqualification to draw checks, as evidenced by what the bank itself stated, through letter No. USC-292-2014 of March 19, 2014, in which it says:

"1.- We do not have the Notification of Disqualification, due to the short period of disqualification, and the term that the Regulation to the Check Law provides for such effect.";

THAT regarding this, the General Regulation to the Check Law, in article 66, in the pertinent part, says:

"On its part, the bank will notify the control body's disposition to the sanctioned holder or holders, within fifteen (15) days.";

THAT regarding the norm cited above, the argument presented by the bank in which it states that: it has no record of the notification, due to the short period of disqualification; lacks foundation;

THAT regarding the checks protested for insufficient funds, the Bank alleges that the responsibility falls exclusively on the client, assuming that he knew of his disqualification before drawing the protested checks, since for the application of the corresponding actions, the bank is obliged to communicate to the Superintendence of Banks the protest of the check(s), according to the following detail:

CHECK No.	DATE OF PRESENTATION	VALUE	AVAILABLE BALANCE	CAUSE OF PROTEST
564	08/10/2013	$3,701.52	Account in overdraft with $5,069.15	Insufficient Funds
747	21/10/2013	$25,905.18	$3,216.25	Insufficient Funds

THAT the protest for insufficient funds of each check generates a fine of 10% of the amount of each of them, which in the case at hand is US$370.00 and US$2,590.52 for the protests of checks Nos. 564 and 747, respectively, for having been presented for collection with insufficient funds. Consequently, in the aforementioned protests, the bank acted in application of the current regulations for that effect; that is, in these protests, no incorrect procedures on the part of the Bank have been evidenced;

THAT regarding the checks protested for disqualification, it is noted that they occurred in accordance with the following detail:

CHECK No.	DATE OF PRESENTATION	VALUE	CAUSE OF PROTEST
652	04/11/2013	$5,317.94	Disqualification of authorized signature
690	04/11/2013	$23,507.95	Disqualification of authorized signature
749	04/11/2013	$25,757.41	Disqualification of authorized signature
349	05/11/2013	$345.00	Disqualification of authorized signature

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CHECK No.	DATE OF PRESENTATION	VALUE	CAUSE OF PROTEST
604	05/11/2013	$2,963.60	Disqualification of authorized signature
899	06/11/2013	$741.41	Disqualification of authorized signature

THAT in the present case, checks Nos. 652, 690, 749, 349, 604, 899 detailed above of checking account No. 510061576-5 were protested for having been drawn by a disqualified person, disqualification that was not notified to the account holder by the Bank, in accordance with what is provided in the aforementioned article 66 of the General Regulation to the Check Law, this caused fines of 10% of the value of each check to be generated, in order US$531.79, US$2,350.80, US$2,575.74, US$34.50, US$296.36, US$74.14, which should not be charged to the account holder; consequently, they are the responsibility of the bank that omitted the application of said procedure;

THAT it is insisted that from the review of the documents constituting the file of this procedure, it is not appreciated that the financial entity contributed to a timely and effective investigation of the claim, as it did not transfer to the control body the record of the notification of disqualification to the client for its own defense; on the contrary, it only attempts to transfer the responsibility of the management of the checking account to the client; on the other hand, the Superintendence of Banks has legal and regulatory authority to hear client claims, verify the conduct of the financial institution, and if pertinent, order the necessary corrections so that institutions subject to its control effectively apply procedures that guarantee the funds of their depositors;

THAT the second paragraph of article 5 of chapter IV "Procedure for the attention of claims against Institutions of the Financial System", title XX "Of the Superintendence of Banks and Insurance", 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 the Banking Board, provides:

"ARTICLE 5.- (...) If the situation that motivated the claim referred to in the previous paragraph originated in an incorrect procedure of the controlled institution, which caused harm to the claimant, 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 may not exceed fifteen (15) days from the notification to send, under the warnings of Law, the record of compliance with the order issued."

THAT finally, the claim presented by Mr. Carlos Eduardo Paredes Torres, in his capacity as Manager of the Company DAVMOTOR CIA. LTDA., originated in an incorrect procedure on the part of the controlled institution, since it did not notify of the disqualification that the claimant had to draw checks, in accordance with what is provided in the aforementioned article 66 of the General Regulation of Checks, a fact that resulted in the fines generated by the protested checks being debited;

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2014-1059 of December 23, 2014, recommended to the Banking Board to reject the petition

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contained in the appeal filed by the Vice President-Legal Representative of Banco Internacional S.A.; and,

IN exercise of its legal attributes,

RESOLVES:

SINGLE ARTICLE.- REJECT the petition contained in the appeal for review filed by Dr. José Romero Soriano, Vice President-Legal Representative of Banco Internacional S.A.; and, consequently, CONFIRM letter No. DNAE-SAU-2014-03664 of June 12, 2014, which ratified letter No. DNAE-SAU-2014-022838 of May 5, 2014, through which the control body ordered BANCO INTERNACIONAL S.A. that by having "(...) incurred in an incorrect procedure by not notifying the account holder of the disqualification sanction; therefore, it must reverse the values of the fines charged on the protests of checks Nos. 652, 690, 749, 349, 604, 899 of checking account No. 510061576-5; consequently, it must return to Mr. CARLOS EDUARDO PAREDES TORRES the sum of US$5,863.33 corresponding to 10% of the amount of the aforementioned protested checks; and, credit that sum to said account. By virtue of the preceding provision, his representative must send to the Superintendence of Banks and Insurance, to the National Directorate of Studies and Information through the corresponding structure, the corrected information containing the elimination of the protest of checks Nos. 652, 690, 749, 349, 604, 899 of the aforementioned checking account."

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

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

I CERTIFY.- Quito, Metropolitan District, on the eighth of May of two thousand fifteen.
Signature: Lic. Pablo Cobo Luna
SECRETARY OF THE BANKING BOARD