Significant Changes to the Regulatory Framework of Personal and Secured Loans

Through Communication "A" 5590 the Central Bank adopted a system of "benchmark interest rates" for personal and secured loans granted to individuals who are not considered MSMEs (Micro, Small and Medium-Sized Enterprises), and which constitutes the maximum interest rates that financial institutions may apply to these types of loans. These interest rates will be reported monthly by the BCRA and will be calculated on the basis of the product of the interest rate fixed under a 90-day LEBACs term and a multiplicative factor, between 1.25 and 2.00, depending on the loan type (personal, secured and purchase of portfolio) and the group to which the financial institution belongs (as the groups are defined in the Communication). Failure to comply with the maximum interest rates, in any month, will have the following consequences: (i) an increase in the minimum cash requirement in pesos, and (ii) the application of sanctions set forth in Section 41 of the Financial Institutions Act.
Then, the Central Bank issued Communication "A" 5591 by which changes to the regulatory framework of fees and charges for basic financial products were established. In particular, this Communication provides that financial institutions and non-financial credit card issuers should have prior authorization from the Central Bank to increase their fees for “basic products or services”. The Communication specifies which of the financial services are considered “basic”, which includes the maintenance of savings accounts in pesos, the issuance and replacement of debit cards, automated teller machine (ATM) withdrawals, maintenance of checking accounts, etc.).
Through Communication "A" 5592 the Central Bank then introduced the concept of "Total Nominal Annual Financing Cost" as an expression of the cost of borrowing. As detailed, the total financing cost ("TFC") shall not be expressed as an Effective Annual Rate but as a Nominal Annual Rate, and it shall be determined by adding to the interest rate the effect of fees and charges related to the transaction. Moreover, the publication of the TFC should differentiate the tax burden of the loan.
Finally, the Central Bank issued Communication "A" 5593 (as amended by Communication "A" 5603) which adopted regulations regarding credit assistance to “non-financial credit providers”, considered to be those legal entities which are not financial institutions under the Financial Institutions Act and offer credit to individuals who are not considered MSMEs (including mutual associations, cooperatives and non-financial issuers of credit and/or purchasing cards, among others). The Communication states that the Superintendence of Financial and Exchange Entities will provide two records for the registration of "non-financial credit providers": (i) one for "non-financial issuers of credit and/or purchasing cards "and (ii) another for "other non-financial credit providers." In both cases, such registration will be a requirement for them to qualify for financing from financial institutions. Also, the "non-financial credit providers" registered within the records will be bound to report their shareholders and directors to the BCRA, as well as the qualification of their borrowers which will be incorporated into the Central Debtors database of the BCRA, among other duties. In the event of non-compliance of any of these regulations by: (i) "non-financial companies issuing credit and/or purchasing cards", they will have a restricted access to financing from financial institutions for a period of 12 consecutive months (this situation shall be reflected in the relevant records while this restriction is in force), and (ii) "Other non-financial credit providers", they will be unsubscribed from the relevant records and, consequently, they will have a restricted access to financing from financial institutions and may not be re-enrolled in such records for a period of 12 consecutive months.