Following the passage of Mexico’s Law to Regulate Financial Technology Institutions (the “Fintech Law”) in March last year, the National Commission for the Protection and Defence of Financial Services Users (“CONDUSEF”) has published several secondary provisions (the “Provisions”) relating to transparency and best practices that will be applicable for participants in the Fintech sector in Mexico.
The Provisions, which will come into force 180 days after their 9 July 2019 publication date, aim to govern the way that Fintech institutions operate in Mexico by regulating sign-up agreements, terms and conditions for platform usage, transparency for commission and penalties for the Fintech institutions in violation.
The Provisions outline certain common requirements applicable to Sign-up Agreements for various Fintech services (including crowdfunding and electronic payments), as well as requirements specific to each type of Fintech service. The common requirements for Sign-up Agreements include the following:
- detailed description of the system’s operation, characteristics, terms and conditions, as well as the rights and obligations on both parties contained within the Sign-up Agreement;
- terms and conditions for the platform used by the corresponding Fintech institution;
- the amount and method of calculating commissions charged to the user;
- the term, as well as extension, termination and modification provisions;
- information regarding customer service options available to the user; and
- other ancillary information with respect to the user.
- be drafted in Spanish and avoid using technical and/or foreign language terms;
- comply with certain visual font specifications;
- be formatted to ensure ease of understanding for the user; and
- when referencing other documents, include the relevant text from those documents.
Additionally, all Sign-up Agreements must be accompanied by a cover sheet for each product subject to a contract with the user. A template and drafting guide can be found within the Provisions.
The Provisions contain specific requirements relating to the terms and conditions for platforms used by Fintech institutions. Those terms and conditions must contain the following:
- a detailed explanation of the uses and restrictions of the platform;
- outline of the liability to the user with respect to platform access passwords, as well as the procedure in the event of theft or loss of such passwords;
- hours of availability for operations and services offered by the platform; and
- continuity measures when there are technical faults in the platform.
Fintech institutions must alert CONDUSEF in the event of faults in the platforms, detailing the nature of the fault and a timeline for its repair.
If there are breaches of the Provisions by Fintech institutions, there are potential fines ranging from c. US$830 to c.US$660,000, depending on the nature and severity of the breach.
The Fintech sector in Mexico is ripe with opportunity, with much of the adult population ‘unbanked’. The authorities are working to properly regulate the Fintech sector to maximise its chances of success, ensure public trust in the variety of new products and services entering the market, and bring the unbanked population into the financial system.
Isabel Amézquita is a contributing author.