Regulatory Alerts2016-04-11 | Circular 8/2016Added
Circular 8/2016 — Modification to Circular 22/2010 (Refunds and Prepayment Commission)
The Bank of Mexico amends Circular 22/2010 to prohibit financial institutions from charging prepayment commissions on mortgage credits for housing unless the borrower explicitly chooses this option, which must be registered with the Bank, or selects a substitute product. The amendment also mandates that institutions refund remaining portions of advance-paid commissions upon early contract termination, calculated on a pro-rata daily basis, with an exception for contracts terminated within thirty days. These provisions apply to credit institutions and multiple-object financial societies, with the prepayment commission rules taking effect on October 1, 2016, and the refund rules on January 1, 2017.
Monday, April 11, 2016 OFFICIAL GAZETTE (First Section) 88
CIRCULAR 8/2016 addressed to credit institutions and multiple-object financial societies regulated, regarding the Modification to Circular 22/2010 (Refunds and Prepayment Commission).
At the margin a logo, which says: Bank of Mexico.
CIRCULAR 8/2016
TO CREDIT INSTITUTIONS AND MULTIPLE-OBJECT FINANCIAL SOCIETIES REGULATED:
SUBJECT: MODIFICATION TO CIRCULAR 22/2010 (REFUNDS AND PREPAYMENT COMMISSION)
The Bank of Mexico, with the purpose of continuing to promote the sound development of the financial system and the protection of the public's interests, by fostering competition, transparency and mobility of users of financial services, in view of the practices observed in the determination and charging of commissions for early termination of active, passive and service operations, as well as for the early payment of mortgage credits on properties intended for housing, has resolved to regulate such commissions in a specific manner, in order to address the circumstances that give rise to their charging.
For the above reason, based on articles 28, paragraphs sixth and seventh, of the Political Constitution of the United Mexican States, 24 and 26, of the Bank of Mexico Law, 4, 4 Bis and 22, of the Law for the Transparency and Ordering of Financial Services, 4, first paragraph, 8, paragraphs fourth and seventh, 10, first paragraph, 14 Bis, first paragraph, in relation to 17, fraction I, 14 Bis 1, first paragraph, in relation to 25 Bis 1, fraction IV, and 25 Bis 3, fraction II, of the Internal Regulations of the Bank of Mexico, which grant it the authority to issue provisions through the General Legal Directorate and the General Directorate of Affairs of the Financial System, respectively, as well as Second, fractions I and X, of the Agreement on the Assignment of Administrative Units of the Bank of Mexico, has resolved to add a second and a third paragraphs to section 4, as well as a section 8, to the "General Provisions establishing prohibitions and limits on the charging of commissions", contained in Circular 22/2010, to remain in the following terms:
GENERAL PROVISIONS ESTABLISHING PROHIBITIONS AND LIMITS ON THE CHARGING OF COMMISSIONS
- LIMITATIONS AND PROHIBITIONS ON THE CHARGING OF COMMISSIONS IN CREDIT OPERATIONS
"...
In addition to what is provided in the previous subsections, Financial Entities that offer Credits with mortgage guarantee for the acquisition, construction or remodeling of properties intended for housing, as well as for the refinancing of said Credits, in which they grant to the borrowers the right to amortize the outstanding amount, in whole or in part, on any date prior to the stipulated date for such effect, shall not establish Commissions for this concept, except in the case that, at the time of the celebration of the referred Credit, they allow the borrowers to choose between: (i) the stipulation of said Commissions, provided that they have been registered with the Bank
Monday, April 11, 2016 OFFICIAL GAZETTE (First Section) 89
of Mexico, as "Prepayment Commission", in accordance with what is provided by Circular 36/2010 issued by this Central Institute, or (ii) a different type of that product with the characteristics that said Financial Entities have determined to offer in substitution of the referred Commissions.
For the purposes of what is provided in the previous paragraph, said Financial Entities must leave record, in the respective contracts of the Credits indicated in said paragraph, of the choice they granted to the respective borrowers."
"8. REFUND OF REMAINING COMMISSIONS
8.1 In the case of Credits, bank money deposits or any other active operations, passive or services documented in the adhesion contracts referred to in the Law for Transparency and Ordering of Financial Services, in accordance with which the Financial Entities that celebrate them charge, in advance, Commissions for periods determined, said Financial Entities must adhere to what is provided in this section.
In the event that the respective Client exercises the right to terminate the adhesion contract corresponding, the Financial Entity in question must refund to him the remaining amount of the Commission resulting from the following calculation:
a) It will be divided (i) the number of days counted between the date of termination of the contract, excluding that day, and the date that should correspond to the conclusion of the period for which the respective Commission was charged, including that day, between (ii) the total number of days foreseen for said period, including the first and last day of that period, and b) The result obtained from the calculation indicated in subsection a) above will be multiplied by the amount of the Commission that the Financial Entity has charged.
As an exception to what is provided by this section, Financial Entities will not be obligated to refund the remaining Commission previously referred to in the case that the number of days corresponding to sub-subsection (i), of subsection a), of the previous paragraph, is equal to or less than thirty."
TRANSITORY
UNIQUE. What is provided in this Circular will enter into force as follows:
I. The addition of the second and third paragraphs to section 4 established in this Circular will enter into force on October 1, 2016. As an exception to what is indicated in this fraction, what is provided by the referred paragraphs of section 4 cited will not be applicable to those mortgage credits for the acquisition, construction or remodeling of properties intended for housing, as well as for the refinancing of said credits, that Financial Entities have offered to celebrate with the respective applicants and that, upon the entry into force of said paragraphs, are pending to be formalized through the signing of the respective contract.
II. The addition of section 8 established in this Circular will enter into force on January 1, 2017.
Mexico City, April 6, 2016.- The General Legal Director, Luis Urrutia Corral.- Rubric.- The General Director of Affairs of the Financial System, Jesús Alan Elizondo Flores.- Rubric.
Monday, April 11, 2016 OFFICIAL GAZETTE (First Section) 90
For any inquiry regarding the content of this Circular, please contact the Department of Authorizations, Consultations and Legal Control, at the phones (55) 5237-2308, (55) 5237-2317 or (55) 5237-2000 Ext. 3200.