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Analysis and Comparison of Collecting Rules Applicable to Financial and Commercial Entities

Analysis and Comparison of Collecting Rules Applicable to Financial and Commercial Entities.

July 2018 / Finance and Banking.  


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    1. Rules Issued by Condusef Applicable to Financial Entities

     

    On October 7, 2014 the General Provisions applicable to Financial Entities on matters related to Collection Firms were published in the Federal Official Gazette. Thus, financial entities shall be subject to new regulations in regard to collection practices carried out by firms managing their credit portfolio.

     

    As a result of the Financial Reform, the National Commission for the Protection and Defense of Users of Financial Services (CONDUSEF, for its abbreviation in Spanish), currently owns new tools to monitor enforcement of sound collection practices by banks, multiple purpose financial companies, regulated and non-regulated, the “sociedades financieras populares” (microfinance entities, incorporated as stock companies with variable capital, authorized by the CNBV), savings and loans cooperatives, community financial companies, among others.

     

    Therefore, it is necessary that both collection firms using financial entities and their own collection personnel meet with the following conditions or acts:

     

    • Fully identifying themselves;
    • Respectfully addressing debtor;
    • Communicating or attending from 7 am to 22 hours;
    • Documenting, in written, the debtor, joint and several obligor or guarantor, payment agreement;
    • Using available phone numbers that facilitate their identification by debtor;
    • Not using names or corporate names similar to those of public institutions;
    • Not threatening, offending or intimidating debtor, his/her relatives, coworkers or any other person unrelated to debt;
    • Not making collection management to third parties, including personal references and beneficiaries, with exception of joint and several obligors or guarantors;
    • Not delivering documents seemingly legal or pretending to be a representative of any jurisdictional entity or authority;
    • Not establishing special records, different from those already existing, black lists, banners or advertisements that make public the refusal to pay by Debtors;
    • Not receiving by any means and directly any payment by debtor;
    • Not carrying out collection management, negotiating or restructuring with minors or elderly individuals, unless these latter refer to Debtors, and
    • Not carrying out collection management, negotiating or restructuring credits, loans or financing, in a domicile, telephone or e-mail different from that provided by the Financial Entity or Debtor, joint and several obligors or guarantors;

     

    Financial entities noncomplying with the provisions set forth may be sanctioned if collections firms contracted enforce collection procedures different from sound collection practices.   Fines to be applied shall range from 13 thousand 458 pesos to 134 thousand 580 pesos.

     

     

    profeco

     

    1. Rules Issued by Profeco Applicable to Financial Entities

     

    Profeco made known general provisions in regard to collection matters as referred to by Article 17 Bis 4 of the Transparency and Financial Order Act, in Official Federal Gazette dated September the 1st, 2015 aimed at establishing the specific obligations of commercial entities that regularly grant credits, loans or financing to the general public, related to collection firms as well as the procedure to notify claims and their disciplinary penalties.

     

    In case the commercial entity transfers collection rights and as a consequence thereon transfers documentation to a third party, same shall be notified to debtor.

     

    Therefore, commercial entities shall update every three months data from collection firms and assure, on a permanent basis, that their activities are adjusted to the regulation applicable to their operation.

     

    Also, commercial entities shall keep updated information related to the number of claims filed against collection firms as well as information allowing clients to follow up their claims and to know their status.

     

    Commercial entities shall make sure that collection firms, when carrying out by themselves collection activities or negotiating or restructuring credits to clients, comply with the regulations applicable to their operation.

     

    In case of visits or phone calls to the debtor´s domicile aimed at collecting, negotiating or restructuring, these can only be carried out once there is credible certainty that there is no debt, and in any case prior payment date.

     

    Such visits or phone calls shall be respectful and only from Mondays through Fridays and during business days, understanding by business days those that are not of mandatory rest in the terms set forth by the Federal Labor Law and within the schedule from 07:00 and 22:00, according to time zones of the place the client is in.

     

    Profeco sets forth that once debt is paid, debtor shall receive an account settlement or a certificate of no debt issued by the commercial entity and deregister from the Credit Bureau.

     

    Likewise, commercial entities shall be responsible for collection firms when collecting, negotiating or restructuring not to address to people different from clients, joint and several obligor or guarantor, specially minors, people disabled and senior individuals, unless this latter is the client.

     

    Commercial entities shall be responsible for not making use of offensive language, vulgar or high-sounding words, harass, frighten, intimidate or threaten to establish communication with clients, their guarantors, joint and several obligors, relatives, friends or co-workers.

     

    Collection firms shall not use banners, advertisements or any other printed means openly to the public, or in the outside of domicile or job of debtor, evidencing the client´s debt; use documents pretending to be legal, boasting as representatives of a legal entity or other authority or using formats or stationery that simulated claims.

     

    Pursuant to Article 44 of the Federal Law for the Protection of Consumers, Profeco shall sanction, with fines from 200 to two thousand days of salary, commercial entities infringing any provision of the Transparency and Financial Order Act which behavior does not fall sanctioning another authority or when infringing general provisions the Attorney´s Office may issue under the terms set forth by this Law.

     

    1. Conclusion

     

    Therefore, regulations on collection matters issued by both Condusef and Profeco are very similar. Financial and commercial entities virtually have the same obligations on these matters, as in both cases they limit to collection schedules as well as the use of intimidation or threats or collection management through relatives, friends or references that are not joint and several obligors of such debt, among other obligations.

     

    The only difference observed in regard to collection management refers to the case of commercial entities supervised by Profeco which shall only be carried out from Mondays through Fridays during business days, understanding by business days those that are not of mandatory rest under the terms set forth by the Federal Labor Law and within the schedule from 07:00 and 22:00, according to time zones of the place the client is in. On the contrary, in the case of financial entities, the limit to manage collection is only from 07:00 and 22:00, and there is no prohibition or limitation for weekends or days of mandatory rest. Therefore, collection management shall be carried out any week day, solely within the aforementioned schedule.

     

    1. Contact information

     

    To obtain further information on this matter, please contact any of the following members of BGBG:

     

    Miguel Gallardo Guerra

    mgallardo@bgbg.mx

    Samuel Uziel Rivero Prado

    surivero@bgbg.mx

     

    www.bgbg.mx