Reforms to Mexico’s Credit Card Legal Regulatory System

July 12, 2009
Reforms to Mexico’s Credit Card Legal Regulatory System

On June 25, 2009 a decree was published in the Official Journal of the Federation amending Mexico’s Law of CreditInstitutions, Law for Transparency and Order in Financial Services and Law for the Protection and Defense of FinancialServices Users. The purpose of the reforms is to regulate in a more specific manner form adhesion contracts entered into byfinancial institutions, with respect to their active and passive transactions carried out with clients. This includes the drafting ofclauses in such agreements, the obligatory registration of such agreements before the authorities, account statements, executionand termination of the agreements by clients, and the facility of entering into transactions with other financial institutions.Principally, the reforms are focused on consumer credit transactions, which is to say credits, loans or revolving financingassociated with a credit card, expressly granting authority to Mexico’s Central Bank (Banco de México) to regulate interest ratesand commissions. Now only one maximum ordinary interest rate may be agreed to and, as the case may be, one maximum lateinterest charge may apply to credit card agreements. The reforms also establish rules through which financial entities may issueand deliver credit cards to clients and impose the obligation on them to provide expressly in their client account statements allinformation required to pay outstanding debts, including the term needed if the customer is only paying the minimum amount.The Banco de México is also authorized to determine minimum payment amounts to be collected by financial institutions. Inaddition, the amendments prohibit lenders from collecting commissions for overdrafts or attempted overdrafts. Further, clientsare now authorized to terminate or cancel their credit cards at any time. The law establishes tough penalties for financialinstitutions that do not comply with such. The reforms regulate in a more stringent manner the granting and use of credit cards,establishing guidelines for banks granting loans through credit cards as now being regulated and subject to limits on thecollection of interest and excessive commissions.

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