Circular Letter No. 3802 — Clarifications on Measures for Payment Arrangement Initiators Regarding Participation in Payment Arrangements under Circular No. 3,682 of November 4, 2013

The Head of the Department of Banking Operations and Payment Systems (Deban), using the authority granted by Article 111, item II, letter “d”, of the Internal Regulations of the Central Bank of Brazil, annexed to Ordinance No. 84,287 of February 27, 2015, and considering the provisions of Circular No. 3,682 of November 4, 2013,

RESOLVES:

Article 1. The obligation to forward the information referred to in Article 24-A of the regulation annexed to Circular No. 3,682 of 2013 (RA) applies to:

I - a payment arrangement initiator that does not fall under the definition of a closed arrangement, as set forth in Article 2, item I, of the RA; or

II - a payment arrangement initiator that currently operates as a closed arrangement and meets the following conditions:

a) is classified, regarding the relationship, as a post-paid payment account or a checking deposit account;

b) is classified, regarding the modality, as purchase or transfer – in the latter case, provided that the settlement of payment transactions between end users implies fund transfers between different participants of the arrangement (in other words, transfers within the arrangement are not restricted to transactions in the ledger of a single participating institution); and

c) presents a volume of activity, over 12 months, greater than or equal to BRL 20,000,000,000.00 (twenty billion reais).

Article 2. The documentation referred to in item I of Article 24-A of the RA must be submitted, in paper or electronic form, by February 17, 2017:

I - to the Central Bank of Brazil, in any of its representations, addressed to the Department of Banking Operations and Payment Systems (Deban) or via the electronic address dipag.deban@bcb.gov.br; and

II - to legitimate interested parties, addressed to a representative or agent of the institution.

§ 1. A legitimate interested party is considered to be a company that provides payment services compatible with the activities foreseen in the arrangement and that has expressed its intention, to the initiator of the arrangement, to become a participant.

§ 2. In the case of item II of the main text of this article, the documentation may be made available on a specific Internet site, and in this case, the initiator must indicate the location and method of access to the legitimate interested party.

Article 3. The documentation referred to in item I, letter “a”, of Article 24-A of the RA refers to part of the arrangement’s regulations and to other documents that address the criteria and minimum conditions for participation and must:

I - present the conditions for participation in the arrangement in all modalities; and

II - have immediate effect, independent of the documentation presented within the scope of the authorization process currently underway at the Central Bank of Brazil.

§ 1. Participation criteria refer to the types of institutions eligible for each modality of participation.

§ 2. Minimum participation conditions refer to the operational, technical, financial, and other requirements for eligible institutions to become participants of the arrangement.

§ 3. The participation rules referred to in this article must observe the provisions of Section II, Chapter IV, of the RA, especially regarding the requirement for non-discriminatory rules.

§ 4. The requirement for non-discriminatory participation rules implies the need for any differentiated treatment to adhere to criteria of reasonableness and causality between the reason justifying the differentiation and the differentiation itself.

§ 5. The possibility of canceling a participant’s contract and license without adequate justification is included among the participation rules considered discriminatory.

Article 4. The documentation referred to in letter “b”, item I, of Article 24-A of the RA refers to contracts for each modality of participation and to other documents containing information necessary to make the decision to become a participant and to effectively participate in the arrangement.

§ 1. Examples of information referred to in the main text of this article include:

I - infrastructure, communication, and security requirements;

II - the process for qualifying terminals and payment transaction capture solutions, where applicable;

III - rules and procedures for exchanging information between participants and between participants and the initiator, such as message and file manuals and other forms of communication;

IV - specifications for issuing payment instruments;

V - rules regarding the acceptance of payment instruments, specifications for each capture method, processes for online and offline authorization, and pre-authorization processes;

VI - transaction routing rules, such as tables of issuer identification numbers (BIN);

VII - rules and procedures regarding the clearing and settlement process, including operational procedures, clearing and settlement message flows, and formatting and completion instructions for messages;

VIII - rules and procedures for contesting and returning transactions (chargeback) and for resolving disputes between participants and between participants and the arrangement initiator, indicating deadlines, decision-making instances, and applicable penalties for non-compliance with business contractual rules;

IX - rules related to “know your customer” policies and the prevention of currency offenses, money laundering, and terrorist financing, including regarding the maintenance and protection of end-user information for the payment service;

X - processes related to fraud prevention; and

XI - the structure of fees and any other forms of remuneration charged to the participant or between participants, including regarding the licensing, homologation, certification, and operation processes within the arrangement, as well as the triggering events, billing periodicity, and criteria used for differentiating calculation parameters and for deductions, where applicable.

§ 2. The rules and procedures regarding the clearing and settlement process referred to in § 1, item VII, of this article, must refer to the current process, so that the participant can begin to participate in the arrangement, and must be updated after the implementation of the centralized settlement system provided for in Article 26 of the RA.

Article 5. The homologation procedures for new participants referred to in letter “c”, item I, of Article 24-A of the RA must include:

I - procedures for requesting participation in the arrangement, indicating the deadline for the initiator’s statement regarding the adequacy of the request;

II - the specification and detailing of each homologation testing stage, indicating:

a) the method and parameters for conducting the tests; and

b) the deadline for conducting each testing stage and for the initiator’s statement regarding the results of the tests performed;

III - procedures prior to effective participation, with the deadline for the initiator’s statement regarding the completion of these procedures;

IV - criteria defining the order for starting homologation procedures, if there are simultaneous participation requests; and

V - the deadline and criteria for the start of activities by the participant after homologation.

Sole Paragraph. In carrying out the homologation procedures, the arrangement initiator must observe the provisions of § 3, Article 4, and Section II of Chapter IV of the RA, regarding the establishment of no criteria or procedures that represent unjustified barriers or difficulties to participation, such as excessively burdensome or merely dilatory procedures and discriminatory practices.

Article 6. Changes to any documents addressed in Articles 3 to 5 of this Circular Letter, subsequent to the availability required by Article 24-A of the RA, must, in accordance with Article 2, be immediately made available to the Central Bank of Brazil, to participants, and to legitimate interested parties.

Article 7. For the purpose of monitoring compliance with the requirement established in Article 24-A, item II, of the RA, the payment arrangement initiator must file with the Central Bank of Brazil, at its headquarters or in any of its representations, addressed to the Department of Banking Operations and Payment Systems (Deban), within one business day after compliance, a declaration attesting that it is qualified to initiate homologation procedures, signed by the director responsible for handling demands from the Central Bank of Brazil related to issues concerning the arrangement, without prejudice to the supervisory actions to be exercised by the Central Bank of Brazil.

Article 8. This Circular Letter enters into force on the date of its publication.

Flávio Túlio Vilela