CMN Resolution No. 4656 — Regulates Direct Credit Societies and Peer-to-Peer Lending Societies

The Central Bank of Brazil, in accordance with Article 9 of Law No. 4,595 of December 31, 1964, makes public that the National Monetary Council, in a session held on April 26, 2018, based on Article 4, items VI and VIII, of the aforementioned Law,

R E S O L V E D:

CHAPTER I

OF THE OBJECT AND SCOPE OF APPLICATION

Art. 1. This Resolution regulates the direct credit society (SCD) and the peer-to-peer lending society (SEP), disciplines the carrying out of lending and financing operations between individuals through an electronic platform, and establishes the requirements and procedures for authorization for operation, transfer of corporate control, corporate reorganization, and cancellation of authorization for these institutions.

CHAPTER II

OF DEFINITIONS

Art. 2. For the purposes of this Resolution, the following are considered:

I - credit representative instrument: contract or credit title that represents the debt related to the lending and financing operation between individuals through an electronic platform;

II - electronic platform: electronic system that connects creditors and debtors through a website or application;

III - qualified participation: direct or indirect participation held by natural or legal persons or by investment funds, equivalent to 15% (fifteen percent) or more of shares representing the capital of a corporation; and

IV - control group: person, group of people linked by a voting agreement or under common control, or investment fund, that holds partner rights corresponding to the majority of the voting capital of a corporation.

Sole paragraph. The funds referred to in item IV of the caput may only participate in the control group together with a person or group of people.

CHAPTER III

OF THE DIRECT CREDIT SOCIETY

Art. 3. The SCD is a financial institution whose object is the carrying out of lending, financing, and acquisition of credit rights operations exclusively through an electronic platform, using financial resources that have own capital as their sole source.

§ 1. In addition to carrying out the operations mentioned in the caput, the SCD may provide only the following services:

I - credit analysis for third parties;

II - credit collection for third parties;

III - acting as an insurance representative in the distribution of insurance related to the operations mentioned in the caput through an electronic platform, in accordance with the regulation of the National Council of Private Insurance (CNSP); and

IV - issuance of electronic money, in accordance with current regulation.

§ 2. The denomination of the financial institution mentioned in the caput must include the expression "Direct Credit Society", and the use of a denomination or trade name containing terms characteristic of other institutions of the National Financial System or similar expressions in the vernacular or in a foreign language is prohibited.

Art. 4. The SCD must select potential clients based on consistent, verifiable, and transparent criteria, including relevant aspects for credit risk assessment, such as economic-financial situation, degree of indebtedness, ability to generate results or cash flows, punctuality and delays in payments, economic activity sector, and credit limit.

Art. 5. It is prohibited for the SCD:

I - to collect resources from the public, except through the issuance of shares; and

II - to participate in the capital of financial institutions.

Art. 6. The SCD may carry out the sale or assignment of credits related to the operations referred to in Art. 3 only to:

I - financial institutions;

II - investment funds in credit rights whose quotas are intended exclusively for qualified investors, as defined by the regulation of the Securities and Exchange Commission (CVM); or

III - securitization companies that distribute securitized assets exclusively to qualified investors, as defined by the regulation of the Securities and Exchange Commission (CVM).

CHAPTER IV

OF THE PEER-TO-PEER LENDING SOCIETY

Section I

Of the Object of the Peer-to-Peer Lending Society

Art. 7. The SEP is a financial institution whose object is the carrying out of lending and financing operations between individuals exclusively through an electronic platform.

§ 1. In addition to carrying out the operations mentioned in the caput, the SEP may provide only the following services:

I - credit analysis for clients and third parties;

II - credit collection for clients and third parties;

III - acting as an insurance representative in the distribution of insurance related to the operations mentioned in the caput, in accordance with the regulation of the CNSP; and

IV - issuance of electronic money, in accordance with current regulation.

§ 2. The denomination of the financial institution referred to in this article must include the expression "Peer-to-Peer Lending Society", and the use of a denomination or trade name containing terms characteristic of other institutions of the National Financial System or similar expressions in the vernacular or in a foreign language is prohibited.

Section II

Of Lending and Financing Operations between Individuals through an Electronic Platform

Art. 8. Lending and financing operations between individuals through an electronic platform are financial intermediation operations in which financial resources collected from creditors are directed to debtors, after negotiation on an electronic platform, in accordance with this Resolution.

§ 1. The creditors referred to in the caput may be:

I - natural persons;

II - financial institutions;

III - investment funds in credit rights whose quotas are intended exclusively for qualified investors, as defined by the regulation of the Securities and Exchange Commission (CVM);

IV - securitization companies that distribute securitized assets exclusively to qualified investors, as defined by the regulation of the Securities and Exchange Commission (CVM); or

V - non-financial legal entities, except securitization companies that do not fall under the hypothesis of item IV.

§ 2. The debtors referred to in the caput may be natural or legal persons, residing and domiciled in Brazil.

Art. 9. The operations referred to in Art. 8 may only be carried out by the SEP.

Art. 10. The operations referred to in Art. 8 must be carried out without the retention of credit risk, directly or indirectly, by the SEP and by controlled or affiliated companies.

Sole paragraph. The provision in the caput does not apply to the direct or indirect acquisition, by the SEP and by controlled or affiliated companies, of subordinate quotas of investment funds in credit rights that invest exclusively in credit rights derived from operations carried out by the SEP itself, provided that this acquisition represents, at most, 5% (five percent) of the fund's equity and does not constitute assumption or substantial retention of risks and benefits, in accordance with current regulation.

Art. 11. In carrying out the operations referred to in Art. 8, the following procedures must be observed, successively:

I - unequivocal manifestation of will by potential creditors and debtors, on an electronic platform, to contract the lending and financing operation;

II - making available of resources to the SEP by the creditors;

III - issuance or execution, with the debtors, of the credit representative instrument;

IV - issuance or execution, with the creditors, of an instrument linked to the instrument mentioned in item III; and

V - transfer of resources to the debtors by the SEP.

§ 1. The instruments provided for in items III and IV of the caput shall be:

I - issued by the SEP or in its favor; or

II - executed with the SEP as a party.

§ 2. The instruments provided for in items III and IV of the caput must contain clauses that ensure compliance with the provision of Art. 10.

§ 3. The operations referred to in Art. 8 must be considered constituted only after compliance with the procedures provided for in this article.

Art. 12. The instruments provided for in items III and IV of the caput of Art. 11 must contain clauses providing, at a minimum:

I - the conditions of the contracted lending and financing operation, including the expected return rate agreed with the creditor;

II - the duties and rights of the creditors, debtors, and the SEP;

III - the indication that the SEP does not co-obligate itself and does not provide any type of guarantee in the operation;

IV - the linkage between the resources made available by the creditors to the SEP and the corresponding credit operation with the debtor;

V - the subordination of the enforceability of the resources made available by the creditors to the SEP to the payment flow of the corresponding credit operation;

VI - information on any guarantees provided;

VII - the conditions for the transfer of resources to the creditors;

VIII - the condition that the effectiveness of the instrument is linked to the transfer of resources to the debtors; and

IX - the manifestation of knowledge by the creditors regarding the risks of the lending and financing operation.

Sole paragraph. The conditions for the transfer of resources mentioned in item VII of the caput must be formulated based on transparent criteria that preserve the equality of rights among creditors.

Art. 13. The financial resources related to the operations referred to in Art. 8 must be transferred by the SEP:

I - within five business days, to the debtors, after the resources are made available by the creditors; and

II - within one business day, to the creditors, after the payment of each installment of the operation by the debtors, including in the case of early payment.

§ 1. The resources referred to in the caput must be segregated from the SEP's own resources.

§ 2. The resources made available must be returned to the creditors within one business day after the period referred to in item I of the caput, if the lending and financing operation is not constituted in the manner of Art. 11.

Section III

Of Prohibitions

Art. 14. It is prohibited for the SEP:

I - to carry out lending and financing operations with its own resources;

II - to participate in the capital of financial institutions;

III - to co-obligate itself or provide any type of guarantee in lending and financing operations, except in the case of Art. 10, sole paragraph;

IV - to remunerate or use for its benefit the resources related to lending and financing operations;

V - to transfer resources to debtors before their availability by creditors;

VI - to transfer resources to creditors before payment by debtors;

VII - to keep resources of creditors and debtors in an account under its ownership not linked to the lending and financing operations referred to in Art. 8; and

VIII - to link the fulfillment of the credit operation to the effort of third parties or the debtor, in the capacity of an entrepreneur.

Art. 15. The financial resources and credit representative instruments linked to lending and financing operations cannot be used, directly or indirectly, to guarantee the payment of debts or obligations of the SEP.

Section IV

Of Limits

Art. 16. The creditor of the lending and financing operation referred to in Art. 8 cannot contract with the same debtor, in the same SEP, operations whose nominal value exceeds the maximum limit of R$15,000.00 (fifteen thousand reais).

§ 1. In addition to the limit referred to in the caput, the SEP may establish other limits for creditors and debtors, regarding lending and financing operations.

§ 2. The provision in this article does not apply to creditors who are qualified investors, as defined by the regulation of the Securities and Exchange Commission (CVM).

Section V

Of Information Provision

Art. 17. The SEP must provide information to its clients and users about the nature and complexity of the contracted operations and offered services, in clear and objective language, in order to allow broad understanding of the flow of financial resources and the risks incurred.

Sole paragraph. The information mentioned in the caput must:

I - be disclosed and kept updated in a visible location and legible format on the institution's website, accessible on the home page, as well as on other channels of access to the electronic platform;

II - appear in contracts, advertising and promotional materials, and other documents intended for clients and users; and

III - include a prominent warning that lending and financing operations between individuals constitute risky investment, without guarantee from the Credit Guarantee Fund (FGC).

Art. 18. The SEP must inform potential creditors of the factors on which the expected return rate depends, disclosing, at a minimum:

I - the expected payment flows;

II - the interest rate agreed with debtors;

III - taxes;

IV - fees;

V - insurance; and

VI - other expenses.

Sole paragraph. In addition to the provision in the caput, the SEP must inform potential creditors that the expected return rate also depends on losses derived from eventual default by the debtor.

Art. 19. The SEP must disclose monthly the average delinquency, by risk classification, of the lending and financing operations referred to in Art. 8 related to the last twelve months.

Art. 20. The SEP must carry out an analysis of the profile of potential creditors, in order to verify if they meet the risk profile of the operations referred to in Art. 8.

Section VI

Additional Provisions

Art. 21. The SEP must use a credit analysis model capable of providing potential creditors with indicators that impartially reflect the risk of potential debtors and lending and financing operations.

Art. 22. For the carrying out of the lending and financing operations referred to in Art. 8, the SEP must select potential debtors based on consistent, verifiable, and transparent criteria, including relevant aspects for credit risk assessment, such as economic-financial situation, degree of indebtedness, ability to generate results or cash flows, punctuality and delays in payments, economic activity sector, and credit limit.

Art. 23. The collection of fees related to the carrying out of the lending and financing operation referred to in Art. 8 and to the provision of services mentioned in Art. 7, § 1, is permitted, provided that they are provided for in the contract executed between the SEP and its clients and users.

Sole paragraph. The SEP must adopt a fee policy consistent with the economic viability of lending and financing operations, in order to promote the convergence of its own interests and those of its clients.

Art. 24. The SEP must monitor the operations referred to in Art. 8 and provide information to creditors and debtors regarding these operations.

Sole paragraph. The monitoring referred to in the caput must be:

I - carried out through the recording and control, in specific accounts and in an individualized manner, of the flow of resources between creditors and debtors and of any partial or total defaults; and

II - maintained until the final settlement of the operation.

CHAPTER V

COMMON PROVISIONS TO DIRECT CREDIT SOCIETIES AND PEER-TO-PEER LENDING SOCIETIES

Section I

Of Authorization for Operation

Art. 25. The SCD and the SEP must be constituted in the form of a corporation.

Art. 26. The SCD and the SEP must permanently observe the minimum limit of R$1,000,000.00 (one million reais) regarding paid-up social capital and net equity.

Art. 27. Investment funds may participate in the control group of the SCD and the SEP, in the manner of Art. 2, item IV, and sole paragraph.

Sole paragraph. The Central Bank of Brazil may require additional paid-up social capital and net equity, if the authorization request contemplates the provision in the caput.

Art. 28. The operation of the SCD and the SEP depends on prior authorization from the Central Bank of Brazil, as provided in this Resolution and in other current regulatory provisions.

Art. 29. The requirements for the examination of authorization requests for the operation of the SCD and the SEP are:

I - carrying out the corporate act of constitution, in accordance with current legislation;

II - payment and remittance to the Central Bank of Brazil, in accordance with Law No. 4,595 of December 31, 1964, of the social capital; and

III - election or appointment of members of the statutory bodies, observing current regulation.

Art. 30. The Central Bank of Brazil may require the execution of a shareholders' agreement, including an express definition of the control group, direct or indirect, of the institution subject to the authorization process.

Art. 31. The authorization process for the operation of the SCD and the SEP must be accompanied by the presentation of a request, via protocol, to the Central Bank of Brazil, accompanied by:

I - a justified justification;

II - documentation identifying the persons who make up the economic group of which the institution is a member and who may come to exercise direct or indirect influence on its business;

III - documentation identifying the control group of the institution and the holders of qualified participation in the institution, with their respective corporate participations;

IV - documentation informing the type of fund, the form of quota negotiation, the number of quota holders, the list of the six main quota holders, the total value and composition of assets, the segments of operation, the profitability history, the time horizon, and the divestment policy, in the case of Art. 27;

V - proof of the origin and respective financial movement of the resources used in the venture by the controllers and holders of qualified participation;

VI - demonstration of the compatibility of economic-financial capacity with the size, nature, and objective of the venture, to be met, at the discretion of the Central Bank of Brazil, by the control group or, individually, by each member of the control group;

VII - authorization, signed by all members of the control group and all holders of qualified participation:

a) to the Federal Revenue Secretariat of Brazil for the provision of information to the Central Bank of Brazil regarding the last three fiscal years, for exclusive use in the respective authorization process; and

b) to the Central Bank of Brazil for access to information contained in public or private registration systems, including administrative or judicial processes or procedures, of any nature; and

VIII - declaration, signed by the participants of the control group and the holders of qualified participation, regarding the non-existence of restrictions that may, in the judgment of the Central Bank of Brazil, affect their reputation, applying, where applicable, the requirements established in Arts. 2 and 3 of the Regulation Annex II to Resolution No. 4,122 of August 2, 2012.

§ 1. The justified justification mentioned in item I of the caput must include, at a minimum:

I - type of institution (SEP or SCD);

II - social capital;

III - indication of services provided, including interest in issuing electronic money;

IV - target audience;

V - location of the headquarters and any dependencies;

VI - market opportunities that justify the venture;

VII - competitive differentials of the institution;

VIII - manifestation regarding the interest in opening a settlement account from the beginning of its activities; and

IX - systems and technological resources.

§ 2. It is prohibited for the administrator and manager of the investment fund that comes to be part of the control group or hold qualified participation in the SCD or SEP to hold positions in the administration bodies of the institution.

§ 3. In the case of a fund whose administrator or manager is a legal entity, the prohibition in § 2 applies to the members of the administration bodies of these entities.

Section II

Of Cancellation of Authorization for Operation

Art. 32. The dissolution of the SCD or SEP or the change of its corporate object, which results in its decharacterization as a society integrated into the financial system, implies the cancellation of the respective authorization for operation.

Art. 33. The requirements for the cancellation, upon request, of the authorization for operation of the institutions referred to in this Resolution are:

I - deliberation in a general assembly; and

II - instruction of the respective process before the Central Bank of Brazil, in the terms and conditions established by it.

Sole paragraph. The provision in the caput does not apply to the extinction of the society resulting from merger, total spin-off, or incorporation, provided that the resulting or successor society is a financial institution authorized to operate by the Central Bank of Brazil.

Art. 34. The Central Bank of Brazil may condition the cancellation upon request of the authorization for operation of the SEP to:

I - transfer to another SEP of the operations negotiated through the electronic platform; and

II - publication of a statement of purpose, in the terms and conditions it specifies.

Art. 35. The Central Bank of Brazil may cancel the authorization for operation of the SCD or SEP when it is found, at any time, one or more of the following situations:

I - lack of habitual practice of the operations referred to in Arts. 3 and 7;

II - operational inactivity;

III - non-location of the institution at the address informed to the Central Bank of Brazil; and

IV - interruption, for more than four months, without justified reason, of the sending to the Central Bank of Brazil of the statements required by current regulation.

§ 1. The Central Bank of Brazil, prior to the cancellation referred to in the caput, must:

I - disclose to the public its intention to cancel the authorization for operation of the society, with a view to the possible presentation of objections within a period of thirty days; and

II - initiate an administrative process, notifying the society at the address provided to the Central Bank of Brazil to manifest regarding the intention to cancel.

§ 2. In the case of item III of the caput, or if the representative of the interested institution is not found, the notification referred to in item II of § 1 shall be carried out by means of a public notice.

Section III

Of Authorization for Transfer of Corporate Control and for Corporate Reorganization

Art. 36. The following depend on authorization from the Central Bank of Brazil:

I - the transfer of corporate control and any change, direct or indirect, in the control group, which may imply alteration in the effective management of the institution's business, resulting from:

a) shareholders' agreement;

b) inheritance and acts of disposition of will, such as donation, advance of legitime, and constitution of usufruct; and

c) act, isolated or together, of any person, natural or legal, or group of people representing a common interest;

II - acts of merger, spin-off, or incorporation; and

III - change of corporate object.

Sole paragraph. The provisions of item I of the main text do not apply to transfers of corporate control to legal entities when there is no entry of new natural persons into the final controlling body of the institution.

Art. 37. The requests referred to in Art. 36 must observe the following conditions:

I - in the cases provided for in Art. 36, item I, the documents must be presented and the conditions provided for in Art. 31, items II to VIII, of this Resolution must be met; and

II - in the cases provided for in Art. 36, items II and III, a justification for the operation must be presented.

Sole paragraph. In analyzing the processes referred to in the main text, the Central Bank of Brazil may require the presentation of complementary documents and compliance with other requirements provided for in Art. 31.

Section IV

On Communication of Changes in Qualified Participation

Art. 38. The following operations must be communicated to the Central Bank of Brazil, in accordance with current regulations and within fifteen days from the respective act or deliberation:

I - entry of a shareholder with qualified participation or with rights corresponding to qualified participation;

II - assumption of the status of shareholder holding qualified participation; and

III - expansion of the qualified participation held by a shareholder by a percentage equal to or greater than 15% (fifteen percent) of the institution's capital, cumulatively or not.

§ 1º In the occurrence of the situations described in the main text, the Central Bank of Brazil may require compliance with the content of Art. 31, items V to VIII, with a view to examining the origin of resources and the reputation of those involved.

§ 2º From the receipt of the information referred to in the main text, the Central Bank of Brazil will have a period of sixty days to adopt the measures mentioned in § 1º.

§ 3º After examining the aspects of the operation referred to in the main text and finding any irregularity, the Central Bank of Brazil may determine that the operation be regularized, through its unwinding or the alienation of the qualified participation.

Section V

Additional Provisions

Art. 39. The Central Bank of Brazil may, during the examination of the requests referred to in this Resolution:

I - request any additional documents and information deemed necessary for the decision on the request, including from authorities abroad; and

II - summon controllers and administrators for interviews, as well as for providing clarifications and additional information.

Art. 40. The Central Bank of Brazil may, during the examination, deny the requests referred to in this Resolution if it verifies:

I - existence of facts that may, in the judgment of the Central Bank of Brazil, affect the reputation of the members of the control group and holders of qualified participation, applying the requirements set forth in current regulations;

II - falsity in the declarations or documents presented in the instruction of the process;

III - discrepancy between the declarations and documents presented in the instruction of the process and the facts or data found in the analysis;

IV - evidence that allows concluding the economic or technical unviability of the undertaking; or

V - refusal to provide information requested about the investment fund that integrates the control group or evidence of concealment of the real status of partners and other interested parties, in the case of Art. 27.

Sole paragraph. In the cases referred to in the main text, the Central Bank of Brazil will grant a period for the interested parties to contest.

Art. 41. The Central Bank of Brazil may archive the requests referred to in this Resolution when requests for presentation of additional documents, provision of information, appearance for interviews, or other requests related to the process are not met within the specified deadline.

CHAPTER VI

FINAL PROVISIONS

Art. 42. Resolution No. 3,921, of November 25, 2010, shall enter into force with the following alteration:

"Art. 1º Financial institutions and other institutions authorized to operate by the Central Bank of Brazil, except credit cooperatives, microentrepreneur and small business credit societies, peer-to-peer lending societies, and direct credit companies, must implement and maintain a remuneration policy for administrators in accordance with the provisions of this Resolution.

............................................................" (NR)

Art. 43. The Regulation Annex II to Resolution No. 4,122, of 2012, shall enter into force with the following alteration:

"Art. 12. The Central Bank of Brazil may determine the removal of members of statutory or contractual bodies with mandates in force if circumstances pre-existing or subsequent to their election or appointment are found at any time that characterize non-compliance with the conditions provided for in Arts. 2º and 3º of this Annex II Regulation." (NR)

Art. 44. Resolution No. 4,538, of November 24, 2016, shall enter into force with the following alterations:

"Art. 1º ........................................................

Sole paragraph. ................................................

..................................................................

II - to financial institutions and other institutions authorized to operate by the Central Bank of Brazil under extrajudicial liquidation regime;

III - to consortium administrators and payment institutions, which must follow the rules issued by the Central Bank of Brazil in the exercise of its legal competence;

IV - to direct credit companies; and

V - to peer-to-peer lending societies." (NR)

Art. 45. Resolution No. 4,571, of May 26, 2017, shall enter into force with the following alterations:

"Art. 3º ........................................................

..................................................................

X - lending and financing operations between persons through an electronic platform; and

XI - other operations or contracts with credit characteristics, which are so recognized by the Central Bank of Brazil.

............................................................" (NR)

"Art. 4º ........................................................

..................................................................

XVIII - other classes of institutions subject to regulation by the Central Bank of Brazil, authorized to carry out or acquire credit operations referred to in this Resolution, in accordance with the regulation issued by the Central Bank of Brazil;

XIX - other classes of institutions authorized to carry out or acquire credit operations referred to in this Resolution and subject to regulation by an authority other than the Central Bank of Brazil, observing the requirements provided for in §§ 2º and 3º;

XX - direct credit company; and

XXI - peer-to-peer lending society.

............................................................" (NR)

"Art. 15. .......................................................

..................................................................

II - differentiated schedules for the start of observance of the provisions of Arts. 4º, items XX and XXI, 5º, 6º, 7º, 9º and 10, §§ 1º and 4º, of this Resolution." (NR)

Art. 46. Resolution No. 4,588, of June 29, 2017, shall enter into force with the following alteration:

"Art. 4º The activity of internal audit is admitted in credit cooperatives, securities brokerage companies, currency brokerage companies, securities distribution companies, microentrepreneur and small business credit societies, credit, financing and investment societies, leasing companies, real estate credit societies, savings and loan associations, mortgage companies, direct credit companies, and peer-to-peer lending societies:

............................................................" (NR)

Art. 47. The Central Bank of Brazil is authorized to issue rules and adopt measures necessary for the execution of the provisions of this Resolution.

Art. 48. § 3º of Art. 8º of Resolution No. 4,122, of 2012, is hereby revoked.

Art. 49. This Resolution enters into force on the date of its publication.

                             Ilan Goldfajn President of the Central Bank of Brazil