Venezuela: Rules For The Protection Of Financial Services Users In Venezuela

The Superintendency of Banks and Other Financial Institutions (hereafter the "Superintendency") has responded to the letters rogatory from the Constitutional Chamber of the Supreme Court which formed part of the decision of January 24, 2002 and concerned indexed credits and loans for the acquisition of vehicles with reserved ownership under the "balloon payment" scheme. The Superintendency issued Resolution No. 147-02, dated August 28, 2002, named "Rules for the Protection of Users of Financial Services" (hereafter the "Rules") and published in Official Gazette No. 37.517 dated August 30, 2002.

The Rules apply to all institutions and entities subject to inspection, supervision, surveillance, regulation and control by the Superintendency under the Decree with the Status of a Law to Reform the General Law of Banks and Other Financial Institutions (hereafter the "Decree-Law"). Financial services are all operations performed by the institutions and entities subject to the Decree-Law with their clients and the general public.

For the purposes of applying the Rules, institutions are universal banks, commercial banks, mortgage banks, investment banks, financial leasing companies, money market funds, savings and loan institutions, foreign exchange firms and border exchange operators.

Responding to the Users of Financial Services and the General Public

Institutions must promptly and carefully respond to any petitions, claims and applications from their clients. Users of the Financial Services will have access to correct, timely and appropriate information concerning the state of their business upon request.

Institutions must inform and guide the public correctly in terms of the services or procedures for performing any operation or transaction, communicating by verbal, written, visual, audiovisual, virtual or any other means. A list of services offered, together with details of their cost and form of processing them must be posted at the offices and agencies of the Institutions. The Institutions must continuously strive for excellence with regard to their services and customer needs. Furthermore, priority should be given to attending to the needs of disabled, senior and pregnant citizens.

The Institutions must adopt secure, transparent and reliable systems to handle funds and conduct other operations for their clients. The Superintendency will carry out inspections and evaluations to verify that such requirements are met and, when necessary, to apply corrective measures under the provisions of the Decree-Law.

In respect of agreements prepared and entered into with clients, no excessive clauses likely to infringe upon the rights of the Users are permitted. Accordingly, the Rules specifically state that the following conditions are unacceptable:

1. Those authorizing Institutions to unilaterally amend the agreements, except those concerning a duly registered public offer.

2. Those establishing the payment or increase in the price of commissions for services not rendered; or those providing that the client may be charged commission or expenses for services not expressly requested or accepted thereby, except those established by a duly registered public offer.

3. In fixed term agreements, clauses reserving to the Institutions the authority to unilaterally terminate the agreement earlier, unless there exists a valid cause to this effect in the contract.

4. Those excluding, totally or to a significant extent, the liability of the Institutions for damage or loss caused to their clients as a result of an action or omission attributable to the Institutions.

The Institutions must keep available copies of any relevant public offer, in case their clients request them. They must also publish the terms of the same in a conspicuous place at their agencies or offices, or disseminate them using electronic media, in legible print and in Spanish.

Information before and during the agreement

Before formalizing any operation, transaction or renewal, the Institutions must require that their clients read the agreements, attesting in writing to such fact in the client file, along with the rest of the information contained therein. The Institutions must also comply with the provisions on Accession Agreements in the Consumer and User Protection Law, especially those contained in Articles 18 to 2.

Such agreements must be drafted in clear terms and printed in visible, legible text to simplify their understanding by the client. Furthermore, clauses in Accession Agreements that limit the equitable rights of the consumer must be printed in bold in order to facilitate their immediate, easy comprehension. In any case, the beneficiaries of credit operations are required to read the full text of the agreement before signing it, in order to verify that it includes the terms and conditions upon which the credit operations were approved.

Institutions are required to publish at their offices, branches and agencies, the interest rates, commissions and expenses applicable to borrowing and lending transactions, setting out in detail any variations in accordance with the terms and modalities of the various financial instruments and operations. When requested to do so by clients, Institutions must produce the formulae for calculation of interest and commissions charged or paid on borrowing and lending rates; and the forms or mechanisms for payments in full, partial payments, lapses, renewals, charging and amortization applicable to such transactions. If there are changes to the methodology of such calculations, Institutions must notify their clients in writing and prior to implementation.

Regarding amortization and partial or full payments for credit operations, Institutions must provide clients and users upon request with vouchers evidencing the payments and payouts. Such receipts must include clear information on the interest rate and commissions applied and detailed information clearly explaining the part of the payment comprising interest; the part applied to principal, and the balance of principal owing after payment of the installment.

The Institutions are compelled to inform and show clients upon request the basis for the statistical data and form of calculation of the average interest rates applying to their borrowing and lending transactions. For transactions documented in other currencies (regardless of their form), Institutions must comply with their duty to notify their clients in advance of the various legal and contractual conditions regulating the same.

Institutions must introduce Client Services Units into their organizational structures by September 30, 2002, to deal with:

1. Receiving, channeling and processing claims of clients and users;

2. Receiving and processing claims for alleged undue charges or money not paid out by automatic teller machines; and

3. Designing and implementing channels and information media to deal with conditions, characteristics and forms of the various transactions, services rendered and claim procedures.

The creation of Client Services Units must be notified to the Superintendency within fifteen (15) consecutive days of the start of their installation and development of their activities, together with details of the persons in charge, operating policies and procedures, infrastructure and distribution of their organization, functions and responsibilities. Institutions must notify the Superintendency of any substantial changes to the aforementioned within fifteen (15) days of the change.

Once the Client Services Unit is functional, Institutions must inform their clients of the procedures for making complaints and/or requesting information on operations and services, and may use printed, visual, audiovisual, virtual or other means of advertisement.

Institutions must advise their clients and the general public of the proper and effective procedure for them to make the claims and clarifications deemed relevant for the defense of their rights. The Client Service Unit is required to respond to claims and requests for information. To guarantee a timely response, claims must be resolved within a fixed period set by the Institution itself but not exceeding twenty (20) bank business days from the date the claim is made. If the complexity of the matter warrants an extension, the interested party must be advised in writing before the lapse of the original period and given an explanation of the reasons justifying the extension.

Pursuant to Article 44 of the Decree-Law, Institutions must, within a period of ten (10) bank business days, provide the Office of the Public Defender, the Office of the Attorney General and the Institute for the Defense and Education of the Consumer and User (INDECU) with any information and documentation that such agencies may require concerning user claims or complaints.

Both Institutions and users are made responsible for proving their respective statements of fact. Interested parties must provide documentary evidence for the grounds of their claim. Additionally, Institutions seeking to be released from an obligation must provide proof of the payment or fact upon which they rely to extinguish such alleged obligation.

Should they be required to reimburse cash amounts, Institutions must make payment on the same day that the order is made to pay the relevant claim. Failure to make payment at such time will render the debt due and payable and attract late payment interest. Additionally, the amount to be reimbursed by the Institutions shall accrue interest over the term of the claim. The exercise of the right to make a claim will not, under any circumstances, cause the suspension or supervening extinguishment of the commercial relationship between the Institutions, their clients and the general public.

Finally, it should be noted that the breach of the Rules would give rise to the application of the administrative penalties established in the Decree-Law.