Circular 13/2007 — Prohibition of Upfront Interest Collection

Friday, November 30, 2007 OFFICIAL GAZETTE (Third Section) 1

THIRD SECTION

BANK OF MEXICO

CIRCULAR 13/2007 regarding the general provisions referred to in Article 10 of the Law for Transparency and Regulation of Financial Services to limit the collection of interest in advance.

A logo appears at the margin, stating: Bank of Mexico.

CIRCULAR 13/2007

TO CREDIT INSTITUTIONS; LIMITED OBJECT FINANCIAL COMPANIES; MULTIPLE OBJECT FINANCIAL COMPANIES; POPULAR SAVINGS AND CREDIT ENTITIES; FINANCIAL ENTITIES ACTING AS TRUSTEES IN TRUSTS THAT GRANT CREDIT TO THE PUBLIC, AS WELL AS TO COMPANIES THAT USUALLY GRANT CREDITS:

The Bank of Mexico, based on what is provided in Articles 28 of the Political Constitution of the United Mexican States, sixth and seventh paragraphs; 24 and 26 of the Bank of Mexico Law; 10 and 22 of the Law for Transparency and Regulation of Financial Services; 48 Bis 3 of the Credit Institutions Law; as well as paragraphs 3 and 4 of Article 8, first paragraph of Article 10, first paragraph of Article 14 in relation to fraction II of Article 25 which grants the General Direction of Financial System Analysis the authority to participate in the issuance of provisions, and fraction I of Article 17 which establishes the attribution of the Central Banking Provisions Direction to issue provisions, all of the Internal Regulations of the Bank of Mexico published in the Official Gazette of the Federation on September 30, 1994, whose last modification was published in the aforementioned Official Gazette on April 26, 2007; with the objective of promoting the sound development of the financial system and transparency, as well as protecting the interests of the public, considering that:

a) On June 15, 2007, the "Decree by which the Law for Transparency and Regulation of Financial Services published in the Official Gazette of the Federation on January 26, 2004 is repealed, the Law for Transparency and Regulation of Financial Services is issued, and various provisions of the Credit Institutions Law and the Law for Protection and Defense of Users of Financial Services and the Law of the National Banking and Securities Commission are reformed, added, and repealed" was published in the Official Gazette of the Federation;

b) In accordance with these reforms, the Bank of Mexico is authorized to issue general provisions to determine the amounts and types of credits, loans, and financing regarding which Entities may not demand the collection of interest in advance, but only for periods that have already elapsed, and

c) Avoiding the collection of interest in advance promotes access to credit and protects the interests of the public.

It has resolved to issue the following:

GENERAL PROVISIONS REFERRED TO IN ARTICLE 10 OF THE LAW FOR TRANSPARENCY AND REGULATION OF FINANCIAL SERVICES TO LIMIT THE COLLECTION OF INTEREST IN ADVANCE.

1.- Definitions For brevity, in singular or plural, the following shall be understood as:

Credit:

Guaranteed Credit for Housing:

Credits, loans, and financing granted by the Entities;

The guaranteed credit related to housing referred to in the Law for Transparency and Promotion of Competition in Guaranteed Credit;

Entities: the following: (i) credit institutions; (ii) limited object financial companies; (iii) multiple object financial companies; (iv) popular savings and credit entities; (v) financial entities acting as trustees in trusts that grant Credit to the public, and (vi) companies that habitually grant Credits, and

2 (Third Section) OFFICIAL GAZETTE Friday, November 30, 2007

UDIS: the investment units referred to in the "Decree by which obligations that may be denominated in Investment Units are established and various provisions of the Federal Tax Code and the Income Tax Law are reformed and added", published in the Official Gazette of the Federation on April 1, 1995.

2.- Types and amounts of credits, loans, or financing

The payment of interest on Credits may not be demanded in advance, but only for periods that have already elapsed.

The provision in the preceding paragraph shall be applicable to Credits for amounts less than the equivalent of 900,000 UDIS, as well as to mortgage credits for any amount. This, regardless of whether the Credits are offered directly or through a third party.

The following operations are exempted:

a) Guaranteed Credit for Housing to promoters, urbanizers, constructors, and real estate developers, in order for them to construct real estate for subsequent commercialization. The foregoing shall also be applicable to Credits that Entities grant to third parties or to trusts, so that they in turn grant Credits to said persons for the purposes indicated;

b) Financial leasing;

c) Financial factoring;

d) Commercial discounting, and

e) Sight letters of credit.

3.- Information

When agreeing on the terms of the Credit with their clients, Entities are obligated to inform them of what is provided in the first paragraph of section 2.

TRANSITIONAL PROVISION

SINGLE.- These Provisions shall enter into force on December 13, 2007.

Respectfully,

Mexico, D.F., November 29, 2007.- BANK OF MEXICO: The General Director of Financial System Analysis, José Gerardo Quijano León.- Signature.- The Director of Central Banking Provisions, Fernando Luis Corvera Caraza.- Signature.

For any inquiries regarding the content of this Circular, please contact the General Manager of Authorizations, Inquiries, and Legal Control Control, located at Avenida 5 de Mayo, number 2, sixth floor, Colonia Centro, Mexico City, D.F., C.P. 06059, or at the phones 5237.2308, 5237.3200, or 5237.2317.