National Commission for the Protection and Defence of Users of Financial Services (Mexico)

Comisión Nacional para la Protección y Defensa de los Usuarios de Servicios Financieros (CONDUSEF)

Country

Location

Regulated area

Mexico

Mexico City

Banking

Useful pages on the regulator website

Key individuals

  • Oscar Rosado Jiménez, President
  • Elizabeth Ivonne Noriega Aguilar, Vice-President for Legal Affairs

Regulatory oversight

The CONDUSEF is a decentralised public agency that is part of the Secretaría de Hacienda y Crédito Público (SHCP) (Ministry of Finance and Public Credit) for administrative purposes; however, for legal purposes the CONDUSEF has its own assets and legal capacity. The CONDUSEF’s main purposes are to promote, advise, protect and defend the rights and interests of the general public who use financial products or services in Mexico, and to regulate and supervise financial firms when they are providing information to and dealing with the public.

The main regulatory framework of the CONDUSEF includes the Law for the Protection and Defence of Users of Financial Services and the Law for the Transparency and Regulation of Financial Services.

The regulatory scope of the CONDUSEF includes all financial institutions, among which are not only banking entities, but also non-bank banks, credit reporting agencies, securities firms, investment funds, stock exchanges, insurance and bonding institutions, retirement fund administrators (AFOREs), cooperative savings and loan companies, and financial technology institutions (fintech companies), among others, when they are dealing with the public.

Like other agencies of the Mexican financial system, the CONDUSEF has the authority to issue general provisions in order to establish solid regulation in matters of transparency, advertising and proper practices of the institutions it supervises, as well as to provide protection to users through mechanisms for reviewing and registering contracts, as well as handling complaints made by users of financial securities through administrative processes carried out by the Commission.

The CONDUSEF is also responsible for settling complaints made by users, carrying out and overseeing non-binding mediations and arbitration procedures between users and financial institutions, conducting arbitration procedures, providing guidance and advice to users, and issuing recommendations to federal and local authorities for the proper functioning of financial institutions in Mexico, among other activities.

The CONDUSEF is also in charge of financial education and culture in Mexico. It has different programmes through which the Mexican population can learn about financial services and banks and receive a basic financial education.

Reporting and disclosure obligations

The CONDUSEF has different systems and electronic registries through which financial institutions must deliver information periodically as their main obligation before this agency, in order for the general public to be able to access general information about the financial institutions regulated and supervised by the CONDUSEF.

The main reporting and disclosure obligations before the CONDUSEF must be done through the following platforms:

  • the System for the Registration of Financial Service Providers (SIPRES), which serves as a vehicle for the public to identify the financial institutions authorised and supervised by the CONDUSEF. Such institutions must upload, on a quarterly basis, their addresses, certain corporate acts, the names of their board members and certain notices issued by government authorities;
  • the Registry of Commissions (RECO), another system operated by the CONDUSEF through which financial institutions disclose the commissions or fees they charge for each of the services they offer; and
  • the Registry of Adhesion Contracts (RECA), which the CONDUSEF also operates and through which the following are available to the general public: adhesion contracts and standard form contracts for financial institutions’ products and services, as well as the obligations derived from them and their characteristics.

Monetary sanctions and recent behaviour

The CONDUSEF has the authority to impose administrative sanctions pursuant to its applicable legislation. The sanctions imposed by the CONDUSEF vary depending on the laws that regulate infractions committed by financial institutions, the illicit conduct performed, the damage caused, and the background of the sanctioned person or entity.

The monetary sanctions that the CONDUSEF can impose are established in, among others, the Law for the Protection and Defence of Users of Financial Services, the Law for Transparency and Regulation of Financial Services, the Credit Institution Law and the General Law of Credit Organisations and Auxiliary Activities. Diverse monetary sanctions may be imposed in the case of non-compliance with the applicable legislation and may range from 8,588 pesos to 343,995.00 pesos.

One problem for the CONDUSEF and individuals is that non-banking institutions are subject to the same monetary sanctions as institutions in the banking sector. Therefore, some participants in the sector consider the monetary sanctions to be disproportionate.

The sanctions imposed by the CONDUSEF are published on a public platform for the general public’s review, along with information about whether a financial institution has been sanctioned, the sector it operates in, which financial products it offers and the amount of monetary sanction imposed.

In December 2019, the CONDUSEF imposed about 80 monetary sanctions on financial institutions that failed to comply with the provisions of the Law for Transparency and Regulation of Financial Services. Among these fines, the largest was imposed on American Express Bank (Mexico) – an amount of US$7,894 – for using model contracts that did not comply with the requirements of the aforementioned Law. The monetary sanction was paid without challenge.

Non-monetary sanctioning powers and behaviour

While there are no non-monetary sanctions within the CONDUSEF’s legal framework, there are some non-monetary sanctions that may be imposed in a supplemental manner by the authority that regulates the financial institution in question. In addition, the CONDUSEF has the authority to act as arbitrator in arbitration proceedings between financial institutions and their users.

In some cases, the CONDUSEF may act as an arbitrator and review claims made between a financial institution and its users. The CONDUSEF then acknowledges parties’ allegations and receives any additional evidence. Once the CONDUSEF has reviewed the information, it may issue an award. In the event that an award is made in favour of the user, the CONDUSEF has the power to adopt all necessary measures to ensure that the award is fully enforced and that the financial service required is re-established for the user, or that the user receives full compensation from the financial institution if the financial service is not re-established. If the financial institution does not comply with the award, the CONDUSEF has the capacity to impose monetary sanctions and even use the assistance of the judicial authorities to require the financial institution to comply with the award.

The above-mentioned arbitration procedure cannot hear claims derived from changes in interest rates agreed between a financial institution and a user when these are the result of the activity of the international markets.

Recent and upcoming developments

The current administration, government agencies and especially the supervisory agencies of the financial institutions in Mexico have undergone several changes that complicate their proper operation. Among these are direct changes, such as agencies’ reduced budgets, and thus staff reductions, as well as indirect changes, such as a decrease in the salary cap for government employees in Mexico, among others.

The reduced budget that the CONDUSEF faced in 2019, according to the Federal Expenditure Budget Project for 2019, was an amount close to 580 million pesos. This represents a real cut that equals 8.8% less compared to the budget approved for 2018.

This budget cut means that the CONDUSEF has to carry out the same activities with a smaller budget. It also must resolve the same number of disputes and complaints at the same time as having fewer funds and fewer experienced agents to carry out such activities.

The CONDUSEF’s staff reduction has been ongoing since 2019. By the end of 2018, there were about 730 approved positions, in 2019, 187 positions, while in 2020, only 154 positions were approved.

This staff reduction leaves the CONDUSEF in a serious predicament, as it has to carry out the same activities with a much-reduced staff. An example of this is seen in the delay of the CONDUSEF in attending to complaints and in its resolution of controversies between financial institutions and users.

At the end of last year, the government approved a constitutional reform that prohibits public officials from earning more than the Mexican President earns: that is, 108,000 pesos per month. This constitutional reform has caused great upheaval in the country, because senior public officials who were paid more than the President are now paid much less than they once were.

Challenges

Unfortunately, a large part of the Mexican population lacks a financial education, and therefore one of the current challenges for the CONDUSEF is to educate people and create financial awareness on a larger scale. The majority of the Mexican population do not know how to use credit properly, do not have a money-saving culture and do not know what services each banking product offers.

The CONDUSEF is working alongside financial institutions to improve the country’s financial culture. It seeks to keep people updated on new financial services offered in the market, as well as to clarify any doubts about what services each product offers and make certain comparisons between products.

In addition, the CONDUSEF aims to see financial education reach all sectors of the country’s population, and to ensure that the same level of financial education exists in both cities and rural areas so that underprivileged communities in Mexico are not left unprotected.

Another great challenge for the CONDUSEF is improving the time it takes to attend to and respond to complaints. This is a complicated challenge due to the above-mentioned budget and staff cuts. Nevertheless, the CONDUSEF sees this as an area of opportunity, and is seeking to be more efficient in resolving complaints in order to reduce response times and, if necessary, resolve disputes.

Interacting with the regulator

In addition to the systems described above such as the SIPRS, RECO and RECA, where financial institutions are obliged to provide and publish reports and disclose information to the general public, the CONDUSEF has other electronic platforms that enable users to file complaints.

Through the Electronic Complaint Portal, users can file complaints against banks and non-bank banks, among other financial institutions, from a remote location without having to go to a CONDUSEF branch office. Complaints can be filed on the Portal regarding credit, debit and payroll card products, as well as expenses that are not recognised. All notifications regarding procedures that have been initiated are received through the Portal.

Complaints can also be submitted directly to any sub-delegation of the CONDUSEF. When a complaint has been filed, the user will be informed of the date and time of the conciliation hearing with the financial institution in question.

For companies that fall into non-compliance and become aware of this, there is a self-correction programme. Through this programme, the financial institution in question asks the CONDUSEF to authorise a programme through which it will correct the irregularity in its operations. Once the programme is authorised, the applicable sanctions, fines, or both, are suspended, and if the programme is correctly complied with, the sanctions applicable will not have any legal impact.

Notes for foreign investors

There are no restrictions in the laws for foreign investors applicable to CONDUSEF regulation, since its legal framework is mainly aimed and directed at regulating and supervising financial activities and conducts rather than entities themselves.

Other regulators it works closely with

On a regular basis, the regulator works closely with the following authorities in Mexico:

  • Secretaría de Hacienda y Crédito Público (SHCP): Ministry of Finance and Public Credit;
  • Banco de México: Bank of Mexico;
  • Comisión Nacional Bancaria y de Valores (CNBV): National Banking and Securities Commission;
  • Comisión Nacional de Seguros y Fianzas (CNSF): National Commission of Insurance and Bonding; and
  • Procuraduría Federal del Consumidor (PROFECO): Consumer Protection Agency.

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