On April 26, 2018, the National Monetary Council, approved Resolution No. 4.656/2018, which regulates two types of fintech: the direct credit companies (“SCD”) and the peer-to-peer loan companies (“SEP”) through digital platform, and also provides the requirements and procedures to authorize their operation, to transfer of corporate control, to execute corporate restructuring and to cancel the operating authorizations for these institutions.

Resolution No. 4.656/2018 intends to increase the competition in the credit market and encourage the incorporation on new institutions, with legal safety, and create conditions to reduce the cost related to credit.

According to the Resolution No. 4.656/2018, the SCD is a financial institution, whose purpose is the execute loan, financing and acquisition operations over credit rights, solely through  digital platform (electronic system that connects creditors and debtors through the internet or application), with the use of financial resources that have solely originated from equity capital.

On the other hand, the SEP is a financial institution, whose purpose is the execution of peer-to-peer loan and financial transaction, solely through  digital platform.

The Resolution No. 4.656/2018 establishes procedures for the institutions to comply with when executing these transactions: (i) the potential creditors and debtors, express consent, to access the digital platform and to hire the loan and financing transactions; (ii) provision of resources to the SEP by the creditors; (iii) the issuance or execution, with the debtors, of the credit representative instrument; issuance or execution, with the creditors, of the instrument linked to the credit representative instrument; and (iv) the transfer of debtors’ resources by the SEP.

The SEP must monitor its transactions and provide information to the creditors and debtors related to these transactions.

Another important provision of Resolution No. 4.656/2018 sets forth that the SEP clients and users must be informed on the nature and the complexity of the hired transactions, as well as the services offered, in accurate and brief language, in order to allow the full comprehension and intelligibility of the financial resources flow and the risk incurred. In accordance with Resolution No. 4.656/2018 SEP shall inform, at least, the potential creditors about the causes that influence on the return rate.

The SCD as well as the SEP, must be incorporated as a corporation, and they shall obtain a prior Central Bank authorization in order to execute their services.

The Digital Law Department of Kestener, Granja & Vieira Advogados is available to provide any further information required on this subject.

Fabio Alonso Vieira

Phone: +55 11 3149-6111

fabio.vieira@kgvlaw.com.br

This article is intended exclusively to provide information and does not contain any opinion, recommendation or legal advice from KGV Advogados in relation to the matters herein addressed. Copyrights are reserved to Kestener, Granja & Vieira Advogados.