Regulation of Summaries and Sanctions for Non-Compliance with the Credit Card Law. Interest Rates in Credit Operations. Calculation Basis for Determining the Interest Rate to Apply

"2012 – Year of Tribute to Dr. D. Manuel Belgrano" COMMUNICATION “A” 5323 12/07/2012 TO FINANCIAL ENTITIES, TO NON-FINANCIAL COMPANIES ISSUING CREDIT CARDS:
Ref.: Circular
OPRAC 1 - 675
RUNOR 1 - 990
Regulation of summaries and sanctions for non-compliance with the Credit Card Law. “Interest rates in credit operations”. Calculation basis for determining the interest rate to apply . ______ We address you to inform you that this Institution adopted the following resolution which, in its pertinent part, provides:

“1. Establish that, in exercise of the powers conferred by articles 50 item a), 17, 48 and 54 of the Credit Card Law (LTC), the Central Bank of the Republic Argentina (BCRA) will initiate summaries and apply sanctions to financial entity issuers and to non-financial issuers who infringe the provisions of said law in the financial aspects of the operation, in accordance with the provisions set forth in points 2. to 4. of this communication.

2. Provide that the summary shall be initiated by resolution of the Superintendent of Financial and Currency Entities.
   The instruction shall proceed when an issuer (financial or non-financial entity) of cards does not observe the provisions of articles 16, 18, 19, 20, or 21, of Law 25.065 and/or when it is denounced by the Secretariat of Internal Commerce for transgressions to article 54 of the aforementioned legal text.

3. Provide that the processing of alleged infractions shall be conducted according to the following procedure:

3.1. Once the formal opening of the summary is ordered, exceptions of prior and special pronouncement shall not be admissible.

3.2. After the notification of the charges, the deadline to present defenses shall be ten (10) days. In this procedural stage, all documentary evidence must be attached for this purpose. Informal evidence shall only be admissible in those cases where documentary evidence could not be obtained by other means.

3.3. Once the defense has been presented, the fixed period has elapsed, or the relevant evidence has been produced, the person under investigation shall be granted a period of ten (10) days to present a written statement on the proceedings and, if applicable, to argue based on the merit of the evidence that has been produced.

3.4. Immediately and without further procedure, the administrative act resolving the proceedings shall be issued.

3.5. Attorneys-in-fact.
The persons under investigation may appoint attorneys-in-fact to act and represent them in all stages of the summary. The attorneys-in-fact must prove their authority from the first action they perform on behalf of their principals, through a certified copy of the power of attorney executed in legal form, or a private instrument with signatures certified by a public notary, which shall be attached to the records; or through a record in which the persons under investigation grant sufficient mandate with all practice powers to exercise the full processing of the file, drawn up before the official acting in the Superintendent of Financial and Currency Entities. Once the power of attorney is accepted, citations and notifications, including those of final resolutions, shall produce the same effects as if made to the principal.

Nevertheless, the appointment of an attorney-in-fact shall not release the accused from their appearance before the instruction, whenever the latter deems it necessary.

3.6. Domicile.
Notifications shall be sent to the domicile that the accused have established before the Superintendent of Financial and Currency Entities through Form 1113 and/or its equivalent in the respective mandatory electronic submission platform. In the case of issuers not covered by Law 21.526, notifications shall be sent to the domicile they have established before the competent local corporate control body.

In the first action taken in the summary by the accused or their attorney-in-fact, a special domicile must be established, or the previously established one must be ratified in compliance with current provisions, which shall remain in effect for all notifications to which there may be a right, unless a new one is established.

If the domicile of the accused is unknown in any way, notifications giving notice of the resolution shall be made by edicts published for three (3) days in the Official Bulletin of the Argentine Republic.

3.7. Notifications.
Notifications may be made by any means that provides certainty of the date of receipt of the instrument in which the notification was received and, if applicable, of the content of the closed envelope if it is used.

It may be made:

3.7.1. By direct access of the interested party, their attorney-in-fact or legal representative to the file, leaving an express record and prior justification of the identity of the notified party; a full copy of the act shall be certified, if requested.

3.7.2. By spontaneous presentation of the interested party, their attorney-in-fact or legal representative, from which it results that they have reliable knowledge of the respective act.

3.7.3. By writ, which shall be processed similarly to that provided by arts. 140 and
141 of the Civil and Commercial Procedural Code of the Nation.

3.7.4. By telegram with delivery advice.

3.7.5. By certified letter with receipt advice; in this case
the letter and attached documents must be exhibited in an open envelope to the authorized postal agent, before dispatch, who shall stamp them together with the copies that will be added to the file.

3.7.6. By registered letter.

3.7.7. By the means indicated by the postal authority, through its concessionaires,
according to the regulations it issues.

3.8. Terms.
All terms shall be calculated in valid banking business days in the City of Buenos Aires.

The deadlines shall start to run from 0:00 hours on the day following the notification and expire at 24:00 on the day of their due date. Nevertheless, any written submission delivered within the first 2 hours of the banking hours on the next business day after the deadline has expired shall be considered validly presented.

To establish due compliance with the terms, the date and time of entry of any submission in the records of the Entry Desk of the Central Bank of the Republic Argentina shall be taken into account.

All terms shall be peremptory and non-extendable.

3.9. Evidence.
At the moment of presenting defenses and arguing pertinent defenses, all evidence to be produced must be offered and the documentary evidence available must be attached. If this is not available to the person under investigation, it must be identified, indicating its content, location, and the person in whose possession it is.

The Superintendent of Financial and Currency Entities is empowered to reject evidence that proves to be inappropriate -without any recourse for the person under investigation- giving a reasoned account of the rejection in the final resolution.

The production of the rejected evidence must be carried out within a period of fifteen (15) days, the timing of which shall be fixed by the Superintendent according to the circumstances inherent to the processing of the summary.

During the evidence period, resolutions shall be deemed tacitly notified, Tuesdays and Fridays or the next business day, if any of them is a holiday, shall be considered as viewing days.

The evidence of reports must concern concrete facts, clearly identified and disputed in the proceedings, its processing shall be the responsibility of the offeror and its production must be sought within the agreed term. The letters shall be signed, stamped and processed by the sponsoring lawyer with a transcription of the resolution ordering them and fixing the term in which they must be sent. When professionals depart from what is established in the order ordering them, or from legal forms, their disciplinary responsibility shall be made effective ex officio. If the deadline fixed to answer the report has expired and the public office or private entity has not sent it, the party who requested it shall be considered to have withdrawn from that evidence, without any processing, if within the third (3rd) day they do not request its reiteration.

3.10. New charges or modification of charges.
When from the summary or inspection activity, the existence of other infractions arises that, due to their characteristics, have sufficient entity to justify the formulation of imputations different from those already made or a significant aggravation of these, they shall be incorporated into the summary as an expansion of charges or modification of the already charged ones, or a new summary shall be initiated by separate file.

In the case of being incorporated into the pending summary, if the accused have already viewed the previous charges, a new view must be granted regarding the added or modified ones, according to the procedure regulated by these norms.

3.11. Report and final resolution.
Upon receipt of the defenses, production of the evidence that was appropriate, performance of all those diligences and actions considered necessary and opportune to gather records and elements of judgment, and receipt of the arguments, the instruction shall produce the draft resolution in which the conclusions resulting from the proceedings are formulated. The resolution that ends the proceedings shall be notified to the persons under investigation or to their attorneys-in-fact, if applicable.

The Superintendent of Financial and Currency Entities shall issue the resolution implying the conclusion of the summary.

Once the summary has been opened by the Superintendent, if its archiving is ordered before the issuance of the final resolution -for the corresponding reasons- such resolution must also be issued by the Superintendent of Financial and Currency Entities, taking into account that it is a form of termination of the process.

In the case of a fine, the amount must be deposited in the Central Bank of the Republic Argentina in “TRANSITORY PASSIVE ACCOUNTS-FINES LAW 25065” within the term of five (5) days following the date of notification of the resolution, under penalty of pursuing its collection through judicial means.

The action for collection of fines shall be promoted based on the copy of the resolution applying the fine, signed by two authorized signatures of the Superintendent of Financial and Currency Entities.

3.12. Recourse channels.
The recourse channels admissible by the imposition of the sanctions resolved in the summaries governed by this regulation shall be those provided for in Law 19.549 on Administrative Procedures and its Regulatory Decree (t.o.1991).

3.13. The provisions of Section 3. of the norms on “Processing and sanction in the
summaries provided for in article 41 of Law 21.526”, shall be applicable insofar as they are pertinent.

4. Determine that fines for infractions to the financial aspects regulated by Law
   25.065 and its regulation shall be applied by the Superintendent of Financial and Currency
   Entities in accordance with the provisions of article 48 of that law.

In this order, the following reference amounts are established for each type of infraction:

4.1. For non-compliance with the maximum level legally admitted for interest rates to be applied to financings (arts. 16, 18, 19, 20 or 21 of the LTC).
Reference Amount = Liquidated Interest x Adjustment Coefficient 1

The liquidated interest corresponds to the total determined for account summaries with such non-compliances.

The Adjustment Coefficient 1 shall take a value according to the level of excess in the interest rate applied for the settlement of interest, according to the following scale -in which the applied interest rate is expressed as a multiple of the maximum rate admitted to settle interest-:

Less than 1.05 times: 0.25
Between 1.05 and 1.20 times: 0.50
Greater than 1.20 times: 0.75

This, without prejudice to the restitution that the issuer must make to the holder and other consequences that may derive.

4.2. For non-compliance with the obligation to exhibit to the public the financing rate applied to the Credit Card system (art. 16, last paragraph of the LTC).
Reference Amount = Liquidated Interest by credit cards issued in the establishments where the infraction was verified during the calendar month in which the lack was detected x Adjustment Coefficient 2.

The Adjustment Coefficient 2 is fixed at 0.1.

4.3. For non-compliance with the obligation to inform referred to in art. 54 of the LTC.

Reference Amount = Liquidated Interest in credit cards associated with offers not reported to the Secretariat of Internal Commerce during the validity period of the unreported offers x Adjustment Coefficient 3.

The Adjustment Coefficient 3 is fixed at 0.05.

The reference amounts defined in points 4.1., 4.2. and 4.3. may be increased up to 20 times, taking into account the gravity of the offenses, recidivism in them (when the issuer has been sanctioned by final resolution for an infraction or several, and during the next 12 consecutive months commits a new infraction) and the repetition of irregularities (when the issuer has incurred several infractions in a period of 12 consecutive months, in virtue of which a summary is processed).

In particular, recidivism shall be computed as follows:

• For those sanctioned by final resolution who commit new infractions within the period of twelve months following said decision, the fines will include an increase of 40%
  (forty percent) of the applicable reference amount.
• In cases of new recidivism, the fines to be applied will include an increase of up to
  100% (one hundred percent) of the reference amount.

5. The Central Bank of the Republic Argentina will give intervention to the Secretariat of Internal Commerce and to the local authorities of the provinces or of the Autonomous City of Buenos Aires that
   prove to be competent when it becomes aware of situations that could constitute infractions in commercial matters.

6. Replace points 2.1.1. and 2.1.2. of Section 2. of the norms on “Interest rates in the
   credit operations”, with the following:

“2.1.1. Financial Entities.
The rate may not exceed by more than 25% that which results from the average of the interest rates that the entity has applied, during the immediate previous month, weighted by the corresponding amount of personal loans without real guarantees granted in the same period.

Lines of credit established within the framework of programs and/or promotion measures or social aid and which additionally have an interest rate that does not exceed the survey rate published by the Central Bank of the Republic Argentina (BCRA) for deposits of more than one million pesos for the term of 30 to 35 days, of the immediate previous month, according to the type of financial entity that corresponds (public or private), increased according to the requirement of minimum cash, may be excluded from the calculation base to be averaged.

Financial entities that consider themselves to fall under the previously described circumstance must request prior authorization from the BCRA. The Superintendent of Financial and Currency Entities will analyze the credit lines subject to the presentation according to the guidelines indicated, applying a restrictive criterion.

2.1.2. Other Issuing Companies.
The rate may not exceed by more than 25% the average rates of the financial system for personal loan operations without real guarantee that the Central Bank of the Republic Argentina publishes monthly, elaborated on the basis of information corresponding to the second previous month taking into consideration what is provided for in the preceding point.”

Finally, we send you the sheets that, in replacement of those previously provided, correspond to be incorporated into the norms on “Interest rates in credit operations”. Likewise, it is recalled that on this Institution's website www.bcra.gov.ar, accessing “regulations” (“ordered texts”), the modifications made with texts highlighted in special characters (strikethrough and bold) will be found.

We salute you attentively.
CENTRAL BANK OF THE REPUBLIC ARGENTINA
Matías A. Gutiérrez Girault Alfredo A. Besio
Manager of Issuance of Norms
Deputy General Manager of Norms

ANNEX

INTEREST RATES IN CREDIT OPERATIONS B.C.R.A.
Section 2. Financings linked to credit cards.
2.1. Compensatory Interest.
2.1.1. Financial Entities.
The rate may not exceed by more than 25% that which results from the average of the interest rates that the entity has applied, during the immediate previous month, weighted by the corresponding amount of personal loans without real guarantees granted in the same period.

Lines of credit established within the framework of programs and/or promotion measures or social aid and which additionally have an interest rate that does not exceed the survey rate published by the Central Bank of the Republic Argentina (BCRA) for deposits of more than one million pesos for the term of 30 to 35 days, of the immediate previous month, according to the type of financial entity that corresponds (public or private), increased according to the requirement of minimum cash, may be excluded from the calculation base to be averaged.

Financial entities that consider themselves to fall under the previously described circumstance must request prior authorization from the BCRA. The Superintendent of Financial and Currency Entities will analyze the credit lines subject to the presentation according to the guidelines indicated, applying a restrictive criterion.

2.1.2. Other Issuing Companies.
The rate may not exceed by more than 25% the average rates of the financial system for personal loan operations without real guarantee that the Central Bank of the Republic Argentina publishes monthly, elaborated on the basis of information corresponding to the second previous month taking into consideration what is provided for in the preceding point.

2.1.3. Method of Calculation.
2.1.3.1. The rates shall be applied to the financed balances between the due date of the current monthly statement and the date of the first previous monthly statement where the outstanding balance arose.

2.1.3.2. Between the date of cash withdrawal and the due date of the monthly statement payment.

2.1.3.3. From the dates agreed for the total or partial cancellation of the credit until
effective payment.

2.1.3.4. From the due date until payment when claims are made, not accepted or justified by the issuer and consented by the holder.

Version: 6th COMMUNICATION “A” 5323
Validity:
12/07/2012

INTEREST RATES IN CREDIT OPERATIONS B.C.R.A.
Section 2. Financings linked to credit cards.
2.2. Punitive Interest.
2.2.1. Limit.
The punitive interest rate may not exceed by more than 50% the compensatory interest rate that the issuing entity applies for the financing of credit card balances.

2.2.2. Method of Calculation.
It shall be applied when the agreed minimum payment indicated in the monthly statement is not paid and on the amount due.

It may not be capitalized.

2.3. Advertising.
2.3.1. Financial Entities.
The procedure established in Section 4. shall be observed.

2.3.2. Other Issuing Companies.
They must exhibit on boards placed in customer service locations, the compensatory interest rate applied in financings linked to credit cards.

2.4. Other Provisions.
The provisions contained in Sections 1., 3., and 4. shall be applicable to financial entities, insofar as they refer to aspects not specifically contemplated in this
Section.

Version: 4th COMMUNICATION “A” 5323
Validity:
12/07/2012

B.C.R.A.
ORIGIN OF THE PROVISIONS CONTAINED IN THE NORMS ON “INTEREST RATES IN CREDIT OPERATIONS” ORDERED TEXT ORIGIN NORM Sec. Point Para. Com. Annex Cap. Sec. Point Para.
OBSERVATIONS
1.1. 1st “A” 49 Unique II 1.1. 1st S/Com. “A” 2390, pt. 1.
2nd “A” 3052
1.2.1. “A” 49 Unique II 1.1. 2nd S/Com. “A” 2390, pt. 1.
1.2.2. “A” 49 Unique II 1.1. 3rd S/Com. “A” 2390, pt. 1.
1.3. “A” 49 Unique II 1.2.
1.4. “A” 49 Unique II 1.3. S/Com. “A” 2689, pt. 1.
1.5.1. “A” 49 Unique II 1.4.
1.5.2. “A” 2385
“A” 2586
2.
2.
1st
1st
1.6.1. 1st “A” 3044
2nd “A” 476 1. 2nd
1.6.2. “A” 476 3. S/Com. “A” 476, pt. 3.
1.6.3. “A” 476 4.
1.6. Last. “A” 3052
1.7.1. 1st “A” 49 Unique II 1.5. S/Com. “A” 3052.
2nd “A” 476 2. S/Com. “A” 3052.
1.
1.7.2. “A” 49 Unique II 1.5.
2.1.1. 1st Law 25.065 Art. 16 para.
1st. S/ Com. “A” 3123,
3266, 4003 and 5323.
2.1.2. 1st Law 25.065 Art. 16 para.
2nd. S/Com. “A” 3123,
4003, 5150 and 5323.
2.1.3. Law 25.065 Art. 20.
2.2.1. Law 25.065 Art. 18.
2.2.2. 1st Law 25.065 Art. 21.
2nd Law 25.065 Art. 18 para.
2nd.
2.3. Law 25.065 Art. 16 Last.
para.
2.
2.4. “A” 3052
3.1. “A” 49 Unique II 2. S/Com. “A” 2689, pt. 2.
3.2. 1st “A” 49 Unique II 2.1. 1st S/Com. “A” 2689, pt. 2.
3.2.1. “A” 49 Unique II 2.1. 1st S/Com. “A” 2689, pt. 2.
3.2.2. “A” 3052
3.
3.2.3. “A” 49 Unique II 2.1. 2nd S/Com. “A” 2689, pt. 2.