Financial Crime World

Colombia Tightens Regulatory Grip on Fintech Sector

The Colombian financial technology (fintech) sector is undergoing significant changes as the country’s regulatory body, Superintendencia de Industria y Comercio (SIC), issues new guidelines to strengthen consumer protections and curb malpractices.

New Guidelines to Promote Transparency and Fair Practices

According to Circular Externa Nº 002 issued by SIC on October 10, 2023, fintech companies are now required to provide comprehensive written information to consumers. This includes critical aspects such as:

  • Interest rates: Fintech firms must disclose interest rates clearly and transparently.
  • Payment schedules: Companies must provide detailed payment schedules to avoid confusion or hidden charges.
  • Installment details: Consumers have the right to know the installment details, including the amount and repayment terms.

Benefits of the New Guidelines

The new guidelines aim to promote transparency in contractual dealings, fostering responsible lending practices. By requiring fintech firms to disclose credit assignments, guarantees, and early payment terms, consumers can make informed decisions about their financial obligations.

Consumer Protection Measures

In addition to promoting transparency, the new guidelines also introduce measures to protect consumers from coercive tactics:

  • No threats or intimidation: Fintech companies are prohibited from making threats or using intimidation towards consumers and third parties.
  • Attorney General’s Office intervention: In case of coercive tactics, the Attorney General’s Office may intervene to ensure consumer rights are protected.

Reimbursement of Excess Charges

The new guidelines also require reimbursement of excess charges, signifying a resolute stance by the authorities in curbing malpractices. This measure aims to protect consumers from unfair practices and promote fair competition in the fintech sector.

Recent Fines and Regulatory Scrutiny

Recent fines totaling nearly 600 million Colombian pesos have been levied against companies found guilty of imposing excessive interest rates and failing to furnish complete and adequate information to consumers. This move reflects the regulatory body’s commitment to protecting consumer rights and ensuring fair practices in the fintech sector.

Conclusion

In an era of heightened regulatory scrutiny, legal counsel plays a pivotal role in navigating the complexities of the fintech sector. As the industry continues to evolve, it is essential for companies to stay informed and compliant with changing regulations.