Brazil: Bank Customer Will Have Protection Of A Specific Code

On July 26, 2001, the Brazilian Monetary Council (CMN) approved a resolution that establishes the rights and obligations in the relationship between consumers and financial institutions. It is the Bank Consumer Code. After an opinion poll and analysis of over 280 suggestions from individual and corporate consumers and other entities, the CMN determines, among other obligations, that banks are precluded from automatically transferring funds from common bank accounts or savings account to other investment account without the prior consent of account holder.

According to the Brazilian Central Bank’s Head of Rules, some of the information now required refers to circumstances under which documents or payments may be rejected, as well as the penalties account holders are subject to, liability for bad checks, closing of deposit accounts, earnings, rates, tariffs, fines and any other kinds of charge. The banks are also required to publish their customer service number.

Some of these measures are aimed at forcing banks to clearly show all contractual conditions of their relationship with customers and, consequently, making consumer relationships equitable at the National Financial System level.

The resolution also bans the fixing of dates for drafts. It additionally precludes operations known as operações casadas (combined operations), like, for instance, the opening of a current account conditioned upon the contracting of insurance.

The Resolution number 2878 provides that in the operations and services to their customers and general public, financial and other institutions authorized to operate by the Central Bank of Brazil, without prejudice of the compliance with the other existing legal and regulatory provisions in relation and applicable to the National Financial System, shall adopt measures that ensure the following: (i) – transparency in the contractual relationships to protect customers and user public from non-equitable practices by way of prior and full knowledge of contractual clauses, including liability and punishment provisions; (ii) – timely answer to inquiries, claims and requests for information by customers and user public, so as to rapidly and efficiently clear doubts about the services rendered and/or offered, as well as operations made or resulting from the advertising by the institution that involves specially: a) contractual clauses and conditions, b) operating features, c) discrepancies in the performance of services; (iii) – clear and user-friendly contracts to be entered into by customers containing the terms; amounts; interest and delinquency rates; administration and commissions fees; delinquent charges, fines for default and other conditions; (iv) – receipt by customers of copy, whether hardcopy or electronically, of contracts as soon as they are executed, as well as receipts, payment vouchers and other operation pertaining documentation; (v) – effective prevention and reparation of property damage and pain and suffering caused to their customers and users.

The institutions shall clearly indicate to their customers the contractual and other conditions resulting from the regulatory provisions, including the following: (i) – liability for bad checks; (ii) – circumstances under which customers will be listed on the Bad Check Register; (iii) – customer punishment; (iv) – charges of the institution, specially those related to: a) return of checks for lack of funds or other reasons, b) deposit account maintenance fee; (v) – charges for checks and other papers clearance services; (vi) – arrangements for the closing of deposit accounts, including establishment of deadlines; (vii) – earnings, rates, tariffs, commission fees, fines and any other charge resulting from the credit lines, overdraft contracts, and general services: The overdraft contracts, in addition to the provisions related to the agreed rights and obligations, shall contain the provisions on the renewal of both overdraft contracts and credit facilities, and termination with indication of terms, tariffs and arrangements to be taken by the contracting parties.

The institutions will carry through the information or advertising they disseminate by any way or means of communication, in relation to contracts, operations and services offered or rendered, which shall be included in the agreement to be entered into. The advertising shall be disseminated in a way that the public can easily and rapidly identify it. The institutions may not make deceptive or abusive misrepresentations. Any kind of information or communication inducing the customer or user into error with respect to the nature, features, risks, rates, commissions, tariffs or any other form of earnings, terms, taxation, and any other data relating to the contracts, operations or services offered or rendered is deceitful. Among others, advertising containing discrimination of any kind that injures the competition or characterizes imposition or coercion is abusive. Whenever necessary and upon request from customers or users, shall prove the truthfulness and accuracy of information disseminated or published thereby.

At the contracting of operations with their customers, the Institution shall ensure the right to accelerated satisfaction of debt, totally or partially, with pro rated reduction of interest rates. The institutions shall use terms that allow, in a unequivocal and clear fashion, the identification and understanding of operations carried out and clearly indicate the amount, date, place and kind, particularly in the following cases: (i) – tables of service charges; (ii) – contracts related to their operations with customers; (iii) – newsletters and deposit account statements of any kind, including by electronic means. In the performance of services resulting from agreements entered into with other entities by financial institutions, no discrimination between customers and non-customers in relation to hours and place of assistance is allowed.

No operation conditioned upon or connected to the making of other operations or the acquisition of other goods and services is allowed. Additionally, this prohibition applies additionally to promoted or offered products and services or any other situation that implies artificial increase of price or interest rates paid on the operation that customer is interested in. In the case of a transaction that, by operation of law, implies contracting of an additional transaction, the contracting party is ensured the right to freely choose the institution which he/she is willing to have such additional operation contracted with.

São Paulo, August 30, 2001.