CMN approves resolution to expand business models involving credit fintechs

On July 24, 2024, the Brazilian National Monetary Council (“CMN”) published CMN Resolution No. 5,159, of July 24, 2024, amending CMN Resolution No. 5,050, of November 25, 2022.

CMN Resolution No. 5,050 – which was amended by the new resolution – regulates the operation of Direct Credit Companies (Sociedades de Crédito Direto) (“SCDs”) and Peer-to-Peer Loan Companies (Sociedades de Empréstimo entre Pessoas) (“SEPs”) and governs lending and financing transactions between individuals via electronic platform.

As of August 01, 2024, the so-called “credit fintechs” (fintechs de crédito) will face fewer operating restrictions in Brazil. Through CMN Resolution No. 5,159, the CMN approved provisions authorizing major changes in the operation of SCDs and SEPs.

The key points that have undergone change are as follows:

SCDs:

• CMN Resolution No. 5,159 establishes that SCDs can fund transactions involving lending, financing, and acquiring credit rights, provided that through the sale or transfer of these credits or credit rights, instruments representing them or, additionally, ‑ from the entry into force of the new resolution ‑ bank credit bills certificates (Certificados de Cédulas de Crédito Bancário) (“CCCBs”), backed by bank credit bills that have also been issued in their favor, of which they are custodians.
• As is known, in compliance with article 43 of Law No. 10,931, of August 02, 2004, CCCBs can group several banknotes, fractions of them, or an entire ballot for financial transactions that have been carried out by the financial institution itself.
• As custodians and representatives of CCCBs holders, SCDs are responsible for collecting CCBs backing CCCBs, and it is their exclusive responsibility to deliver CCBs (Cédulas de Crédito Bancário) and the collection proceeds upon submission of the corresponding certificate.
• SCDs will also have access to programs such as the Brazilian National Support Program for Micro and Small Enterprises (“PRONAMPE”) and the Guarantee Fund for Investments (“FGI”), which covers potential defaults.

SEPs:

• The CMN authorized SEPs, among other activities, to intermediate financing transactions directly to the supplier of goods or services – which is also eligible to act as creditor in these transactions. It is worth highlighting that, prior to this resolution, financing could only occur through a direct concession to final borrowers.
• In this regard, SEPs must comply with equal opportunities in relation to providing information about the potential debtor in order to define the financing offers for potential creditors.
• The purpose of these changes to the regulations is to enable SEPs to expand the possibilities of outlining business models.

Also, such changes are expected to reduce the operating costs of SEPs and SCDs and to further benefit small and medium-sized business chains through new opportunities for the credit market and towards financial inclusion.

Finally, we highlight that CMN Resolution No. 5,159 will enter into force on August 01, 2024.

Demarest’s Banking and Finance team is available to provide any further clarifications on the topic as may be necessary.