Banking Board of Ecuador

RESOLUTION No. JB-2015-3382

THE BANKING BOARD

CONSIDERING:

THAT through Resolution No. JB-2015-3237 of January 29, 2015, the Banking Board resolved: (...) "ACCEPT the claim contained in the review appeal filed by Mrs. Lilia Piedad Llumiquinga Aguilar; and, consequently, REVOKE the letter No. DNAE-SAU-2014-01883, of March 26, 2014, from Engineer Carolina Pesántez Benítez, National Director of User Attention and Education; as well as letter No. DNAE-SAU-2014-0548, of January 27, 2014; ADOPT the complaint presented and ORDER that BANCO PICHINCHA C.A. proceed with the refund, to Mrs. Lilia Piedad Llumiquinga Aguilar, of the values improperly paid with checks 601, 602, 615, 616, 618, and 619 of current account No. 3074969104, for a total value of USD 27,849 (twenty-seven thousand eight hundred and forty-nine United States dollars):" (...), fundamentally for the following considerations:

(...)

"THAT according to the last paragraph of the Second Transitional Provision of the Organic Code of Monetary and Financial Law, published in the Official Registry Second Supplement No. 332, of September 12, 2014, the Banking Board will continue to act until it resolves all appeals it was hearing on the date of entry into force of this Code, for a period of one hundred and eighty days;

THAT through communication received by the Superintendency of Banks and Insurance on November 5, 2013, Mrs. Lilia Piedad Llumiquinga Aguilar filed a complaint against Banco Pichincha C.A. regarding the payment of checks Nos. 601, 602, 615, 616, 618, and 619 of current account No. 3074969104 and requested that the regulatory body order the bank to provide the audio recordings of the call center and the videos showing the persons who cashed the checks for a total of US$ 27,849.00, as well as the return of the improperly collected values;

THAT Engineer Carolina Pesántez Benítez, Director of User Attention and Education, through letter No. DNAE-SAU-2014-00548, of January 27, 2014, informed Mrs. Lilia Piedad Llumiquinga Aguilar of the following response and disposition:

• That it is the obligation of the holder and authorized signatory to safeguard the checks provided by the bank, verify the numerical sequence of the check forms received, and conserve the checkbook with diligence and care;

• That the bank observed both legal and regulatory provisions as well as internal procedures for the payment of the claimed checks, since, as noted above, upon review of the signatures on the checks and the one registered at the bank, no notable difference or non-conformity is appreciated;

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• That Mrs. Lilia Piedad Llumiquinga Aguilar never notified the bank in writing about the theft or loss of the contested checks, nor did she request the suspension of payment, revocation of checks, or cancellation of check forms as established by law, prior to the bank's payment of part of the checks;

• That Banco Pichincha C.A. acted, at the time of payment of the contested checks, in accordance with the powers granted by the Check Law and its Regulations;

• That Banco Pichincha C.A. has not violated her financial rights nor failed in its obligations as custodian of her funds; and, no incorrect procedures by the bank in the payment of the checks claimed by Mrs. Lilia Piedad Llumiquinga Aguilar have been evidenced, as pointed out in article 5 section I, chapter IV, title XX, book I of the Compilation of Resolutions of the Superintendency of Banks and Insurance and the Banking Board to order the refund of values;

• That the request for the regulatory body to order the refund of the claimed values cannot be favorably addressed; therefore, the administrative file has been ordered to be archived; and,

• That Mrs. Lilia Piedad Llumiquinga Aguilar may resort to the competent jurisdictional bodies to have them hear, investigate, and resolve her claim in accordance with the law;

THAT through communication entered in this regulatory body on February 18, 2014, Mrs. Lilia Llumiquinga Aguilar filed an appeal for reconsideration regarding the content of letter No. DNAE-SAU-2014-00548, of January 27, 2014;

THAT through letter No. DNAE-SAU-2014-01883, of March 26, 2014, Engineer Carolina Pesántez Benítez, National Director of User Attention and Education, informed Mrs. Lilia Piedad Llumiquinga Aguilar that the factual and legal grounds of the reconsideration appeal filed against letter No. DNAE-SAU-2014-00548, of January 27, 2014, were the same as those exposed in the original complaint, for which reason the appeal was rejected and the content of the cited letter was ratified;

THAT on April 15, 2014, Mrs. Lilia Piedad Llumiquinga Aguilar, with the professional sponsorship of Doctor Marcelo Reyes Álvarez, under the protection of what is provided in article 137 of the General Law of Financial System Institutions and in article 6, of Chapter II "Norms for the application of reconsideration and review appeals in matters related to the financial system and the social security system; and, of appeal in private insurance matters, regarding administrative acts of the Superintendency of Banks and Insurance", of Title XVI "Of sanctions and of appeals in the administrative venue" of Book I "General norms for the application of the General Law of Financial System Institutions" of the Compilation of Resolutions of the Superintendency of Banks and Insurance and

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of the Banking Board, filed a review appeal before the Banking Board regarding the content of letter No. DNAE-SAU-2014-01883, of March 26, 2014;

THAT through letter No. JB-2014-981, of April 22, 2014, Licentiate Pablo Cobo Luna, Secretary of the Banking Board, requested that Mrs. Lilia Piedad Llumiquinga Aguilar complete the requirements provided in article 20 of chapter II, of title XVI, of book I of the Compilation of Resolutions of the Superintendency of Banks and Insurance and the Banking Board, a requirement that was attended through communication entered on May 2, 2014;

THAT through letter No. JB-2014-1143, of May 9, 2014, Licentiate Pablo Cobo Luna, Secretary of the Banking Board, accepted for processing the review appeal filed by Mrs. Lilia Piedad Llumiquinga Aguilar against letter No. DNAE-SAU-2014-01883, of March 26, 2014;

THAT through letter No. JB-2014-1144, of May 9, 2014, Licentiate Pablo Cobo Luna, Secretary of the Banking Board, informed Mr. Antonio Acosta Espinosa, Adjunct President of Banco Pichincha C.A., of the review appeal filed against the administrative act contained in letter No. DNAE-SAU-2014-01883, of March 26, 2014, issued within the complaint maintained against the bank by Mrs. Lilia Piedad Llumiquinga Aguilar; and, under the protection of what is provided in article 182 of the General Law of Financial System Institutions, extended by sixty additional days the term to resolve the referred review appeal;

THAT numeral 7, letter I) of article 76 of the Constitution of the Republic of Ecuador, provides as follows:

"Art. 76.- In any process in which rights and obligations of any order are determined, the right to due process shall be ensured, which will include the following basic guarantees:

(...)

7. The right of persons to defense will include the following guarantees:

(...)

I) The resolutions of the public powers must be motivated. There will be no motivation if the resolution does not enumerate the norms or legal principles on which it is based and does not explain the pertinence of their application to the factual background. Administrative acts, resolutions, or rulings that are not duly motivated will be considered null. The responsible officials will be sanctioned."

THAT article 213 of the Constitution of the Republic of Ecuador establishes as follows:

"Art. 213.- Superintendencies are technical bodies for surveillance,

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audit, intervention, and control of economic, social, and environmental activities, and of the services provided by public and private entities, with the purpose that these activities and services are subject to the legal framework and attend to the general interest. Superintendencies will act ex officio or upon citizen request. The specific powers of the superintendencies and the areas requiring the control, audit, and surveillance of each of them will be determined in accordance with the law.

(...);

THAT article 1 of the General Law of Financial System Institutions, in force on the date of presentation and processing of the complaint and the review appeal, textually provides as follows:

"Art. 1.- This Law regulates the creation, organization, activities, functioning, and extinction of private financial system institutions, as well as the organization and functions of the Superintendency of Banks, the entity in charge of the supervision and control of the financial system, in all of which the protection of public interests is taken into account.

(...);

THAT articles 24 and 26 of the Check Law, in force at the time the facts denounced in the complaint occurred, provide as follows:

"Art. 24.- The check is payable on sight. Any contrary mention shall be deemed unwritten.

Upon presentation of the check, the drawee is obligated to pay it or protest it. Otherwise, it will be liable for the damages and losses caused to the bearer or holder, independently of the other sanctions that may apply.

Banks are prohibited from placing in lieu of the protest any legend, with or without a date, stating that the check was presented for payment and not paid. The bank that infringes this prohibition will be sanctioned by the Superintendency of Banks with a fine equal to the value of the corresponding check, which will have the destination indicated in Art. 244 of the General Law of Banks, without prejudice to the sanctions provided in the preceding paragraph.

This provision is excepted for checks rejected due to formal defects and those presented after the maximum deadline indicated in Art. 58 of this Law.

(...)"

"Art. 26.- The presentation of the check to a clearinghouse is equivalent to presentation for payment.

(...);"

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THAT articles 60 of the Check Law and 22 of chapter III "General Regulation of the Check Law", of title XXV "General Provisions", of book I "General norms for the application of the General Law of Financial System Institutions", of the Compilation of Resolutions of the Superintendency of Banks and Insurance and the Banking Board, state:

"Art. 60.- The loss caused by the payment of a forged check not included in the drawer's numbering corresponds to the drawee.

The loss caused by the payment of forged checks, included in the drawer's numbering, corresponds to the drawer or the drawee, depending on which one has fault in the loss. If neither of the two has fault, the loss will correspond to the drawee.

If the drawer does not claim within six months of the drawee presenting the current account statement indicated in the previous article, in which the payment of forged checks is recorded, the loss caused by the payment of such checks will correspond to the drawer.

Any stipulation contrary to what is provided in this article is prohibited."

"ARTICLE 22.- For the declaration of fault in the payment of a forged or altered check, referred to in article 60 of the Check Law, the following aspects shall be considered, concerning the drawer: the negligence of the holder, his family members, factors, or dependents; the lack of immediate notice of the loss of the check; the incorrect manner of drawing that allows alterations. On the part of the drawee: the delivery of the checkbook to unauthorized persons; notable differences between the signature on the check and that registered at the bank, or other formal aspects of the check; lack of identification of the check collector; lack of cancellation or endorsement."

THAT article 14 of the General Regulation of the Check Law in force establishes:

'Banks may grant their customers credits in current account or occasional overdrafts in accordance with the provisions of the Law and its regulations.';

THAT in concordance with the preceding article, article 52, chapter I, title V of the General Law of Financial System Institutions indicates:

"ARTICLE 52.- Banks may grant their customers occasional overdrafts in current account without it being indispensable to subscribe a contract. The settlement of these current account overdrafts carried out by the bank, together with the current account statement of the debtor, shall be considered as an executable title enforceable through this channel.

It will accrue the maximum permitted interest rate and the respective commission in force on the date of the concession, plus the maximum late payment indemnity in force on the date of payment."

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THAT articles 34, 35, and 44 of chapter VII General Regulation of the Check Law, in force on the date of the collection of the checks, mention the following:

"ARTICLE 34.- In the case of loss, theft, destruction, or deterioration of checks or check forms, the account holder or the beneficiary, as applicable, may request the drawee bank to adopt one of the following actions: suspension of payment, revocation of checks, or cancellation of check forms.

"ARTICLE 35.- The suspension of payment or the revocation of checks, as well as the cancellation of check forms that have been lost, or stolen from the account holder or the bearer or beneficiary, the drawer on his own account or at the request of the bearer or beneficiary may present the corresponding written request at any bank office during public attention hours, whether normal or deferred hours"

"ARTICLE 44.- Cancellation is the act by which the holder requests the bank to declare one or several check forms void, and if these are presented for collection, the bank abstains from paying them because they are presumed forged.

For the cancellation to take effect, it will not be required that there be sufficient and available funds in the current account.

When the bank verifies that the check has been issued by the holder or by any person authorized for this effect, and therefore the cancellation request was based on false or fraudulent facts, declared judicially, it will proceed to close the current account for a period of three years and will communicate the incident to the Superintendency of Banks and Insurance."

THAT from the constitutional, legal, and regulatory provisions transcribed in the preceding considerations, it is derived that the Superintendency of Banks is a technical entity for surveillance, audit, intervention, and control of economic activities, and of the services provided by private entities subject to its control, with the purpose that these activities and services are subject to the legal framework and attend to the general interest;

THAT regarding the due process norms alleged by the appellant, it must be indicated that the User Attention and Education Directorate requested explanations related to checks Nos. 601, 602, 615, 616, 618, and 619 of current account No. 3074969104 questioned by Mrs. Lilia Piedad Llumiquinga Aguilar in application of the right to defense that assists her to present defenses;

THAT from the review of the file, it can be verified that, regardless of whether or not there was notable non-conformity in the checks paid by the drawee bank regarding the signature registered by the account holder, the expert reports account for the fact that it is indeed not her signature, so it is concluded that the collection of the checks was a fraudulent act by which funds belonging to the claimant were stolen;

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THAT, in attention to the client's transactional profile, it is very striking that Banco Pichincha C.A. allowed the payment of the checks presented for collection, for values of USD 4,750, USD 4,500, USD 4,830, USD 4,690, USD 4,536, and USD 4,543, sums absolutely unusual and even exorbitant considering the management of the account by the holder, less so in such short periods, a circumstance that should have generated alerts in observance of the duty of care for third-party funds, in order to avoid the serious economic harm caused to the client;

THAT in order with what was analyzed, it is also striking that for the payment of one of the checks, when there were no longer sufficient funds in the account because all the others had been paid previously, the bank authorized, without precedents with this client, an overdraft that had not been requested by her, obliging her to incur debt with the financial entity without having consented to such, debt that the account holder has even had to honor despite never having received those funds;

THAT from the CD sent by Banco Pichincha C.A. containing the recordings of the telephone calls made to the call center by Mrs. Lilia Piedad Llumiquinga Aguilar on October 20, 2013, it has been verified that the information provided by the person answering the call, claiming to be the holder of the current account, was not adequately validated, so the bank should not have allowed the payment of the checks, which constitutes a non-observance of security procedures by the financial institution;

THAT the lack of timely notification by Mrs. Lilia Piedad Llumiquinga Aguilar regarding the loss of the checks, prior to their presentation for collection, confirms that it was a theft of the forms to perpetrate a fraudulent act, and this does not exclude the bank from its responsibility to observe security procedures, which did not occur as explained above; and,

(...)

THAT through communication of March 17, 2015, Mr. Antonio Acosta Espinosa, Adjunct President of Banco Pichincha C.A., filed an appeal for reconsideration against the administrative act contained in resolution No. JB-2015-3237 of January 29, 2015;

THAT the Banking Board, in the session held on April 22, 2015, in accordance with what is established in the second paragraph of article 3, chapter II, title XVI, book I of the Compilation of Resolutions of the Superintendency of Banks and Insurance and the Banking Board, heard the appeal referred to in the preceding paragraph and determined that it does not comply with what is provided in the first paragraph ibidem, that is, that there are no new elements of fact or law that motivate the elaboration of corresponding reports, for which reason it decided to deny it outright; and,

IN exercise of its legal attributes,

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RESOLVES:

SINGLE ARTICLE.- DENY the appeal for reconsideration filed by Mr. Antonio Acosta Espinosa, Adjunct President of Banco Pichincha C.A., against the administrative act contained in resolution No. JB-2015-3237 of January 29, 2015; and, consequently, CONFIRM said resolution.

NOTIFY.- Given at the Superintendency of Banks and Insurance, in Quito, Metropolitan District, on the twenty-second of April of two thousand fifteen.

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

I CERTIFY.- Quito, Metropolitan District, on the twenty-second of April of two thousand fifteen.

Lic. Pablo Cobo Luna SECRETARY OF THE BANKING BOARD