The New Rules For Payment Institutions And Payment Arrangements In Brazil

The Brazilian Monetary Council (Conselho Monetário Nacional - CMN) and the Central Bank of Brazil (Banco Central do Brasil - Bacen) issued, respectively, Resolutions Nos. 4,282 and 4,283, and Circulars Nos. 3,680, 3,681, 3,682 and 3,683, all dated as of November 4, 2013, and published in the Official Gazette of the Union (Diário Oficial da União - DOU) on November 6, 20131, instituting the initial regulatory framework which regulates the authorization and operation of payment institutions and payment arrangements, comprising the Brazilian Payment System (Sistema de Pagamentos Brasileiro - SPB) in accordance with the principles established in Law No. 12,865, of October 9, 2013. The main issues contained in these rules are outlined herein.

1. Introduction

   CMN Res. 4,282/2013 establishes the guidelines to be observed in the regulation, monitoring and supervision of payment institutions and payment arrangements comprising the SPB.

   CMN Res. 4,283/2013 amends CMN Resolution No. 3.694, of March 26, 2009, which provides for the prevention of risks in contracting transactions and the performance of services by financial institutions and other entities authorized to operate by Bacen.

   Bacen Circular 3,680/2013 provides for the payment account used by payment institutions to record payment transactions of end users.

   Bacen Circular 3,681/2013 provides for the management of risks, the minimum equity requirements, and governance of payment institutions, preservation of value and liquidity of balances in payment accounts and other measures.

   Bacen Circular 3,682/2013 approves the regulations that govern the provision of payment service under the scope of payment arrangements integrating the SPB, establishes the criteria according to which payment arrangements will not comprise the SPB and provides other measures.

   Bacen Circular 3,683/2013 establishes the requirements and procedures for organization, authorization for operation, changes in control and corporate restructuring, cancellation of the authorization for operation, conditions for the exercise of management positions of the payment institutions and authorization for provision of payment services by financial institutions and other entities authorized to operate by Bacen.

2. Scope

   The new rules apply to payment institutions, as well as to financial institutions and other entities authorized to operate by Bacen, including credit card companies, that establish or participate in the payment arrangements, as determined by Bacen.

3. Definitions

   The terms and related terms listed below are defined as follows:

   payer means any individual or legal entity that authorizes the payment transaction; payee means any individual or legal entity that is the final recipient of the funds from a payment transaction; payment transaction means the act of paying, contributing, transferring or withdrawing funds, irrespective of any underlying obligation between the payer and the payee; end user of payment services means any individual or legal entity that uses a payment service, as payer or payee; closed payment arrangement means a payment arrangement in which the management of electronic currency or, cumulatively, account management, issuance and accreditation of payment institutions shall be made only by one payment institution, whose entity is the same as the institution of the arrangement; payment transaction authorization means a process for confirmation of classification of a payment transaction to the requirements previously set out in the arrangement's regulations, particularly with regard to risk management, for approval of the transaction; interoperability between arrangements means a mechanism that makes possible, by rules, compatible procedures and technologies, the flow of resources between different payment arrangements; interoperability between participants of the same arrangement means a mechanism that makes possible, by compatible rules, procedures and technologies, that the different participants in the same arrangement are related in a non-discriminatory manner; network service provider means an entity that provides network infrastructure for capturing and directing payment transactions; active end user means the individual or legal entity who has used in the past 90 days, the payment service disciplined by the arrangement. IV. Payment Institutions

   Payment institutions are classified in the following modalities, in accordance with the payment services they provide:

   issuer of electronic currency. It is a payment institution that manages payment accounts of end users of prepaid type and makes payment transactions available based on the electronic currency contributed in such account, with the possibility of registering its acceptance and converting such funds into physical or book-entry currency or vice-versa. In this context, electronic currency means the funds in Brazilian currency (Reais) stored in an electronic device or system that enable the end user to make a payment transaction; issuer of postpaid payment instrument. It is a payment institution that manages payment accounts of end users of postpaid type and makes payment transactions based on such account; and accrediting institution. It is a payment institution that, without managing payment accounts, accredits individual or legal entity receivers for acceptance of payment instruments issued by a payment institution or a financial institution participating in the same payment arrangement. A payment institution may be classified under more than one of the modalities referred to above.

5. Payment Accounts

   Payment accounts are used by payment institutions to record payment transactions of end users and must identity the end user holding such account. These accounts may be either prepaid2 or postpaid.3

   The prepaid payment account is intended for the execution of payment transactions in electronic currency made based on previously contributed Real-denominated funds. Payment institutions issuing electronic money shall ensure the end user the possibility of full redemption, at any time, of outstanding balances in prepaid payment accounts.4

   The postpaid payment account is intended for the execution of payment transactions that do not depend on the prior contribution of funds.

6. Payment Arrangements

   As for its purpose, a payment arrangement may be classified as a purchase or transfer, depending on whether the payment service governed by the arrangement is linked or not to the settlement of certain obligations. If it is linked, the payment arrangement is a purchase. If it is not linked, it is a transfer.

   With regard to the relationship of end users with the participating institution, a payment arrangement can be classified as: (i) prepaid payment account; (ii) postpaid payment account; (iii) demand deposit account; or (iv) any relationship, when the payment service can be performed from or for the client that does not possess it, at the remitting institution or at the recipient institution, respectively, an account that can be moved by means of a payment instrument disciplined by the arrangement.

   Regarding the territorial coverage, a payment arrangement can be classified as: (i) domestic (domestico), when the payment instrument governed by the arrangement can only be issued and used in the national territory; or (ii) border (transfronteiriço), when the payment instrument governed by the arrangement is issued in the country to be used in other countries or is issued outside the national territory to be used in the country.

   Border arrangements that regulate rules and procedures related to the provision in the national territory of at least one of the activities indicated herein are deemed to comprise the SPB: (a) to make available the service of providing or withdrawing resources held in payment account; (b) to perform...