With the purpose of contributing to economic growth, financial equality, and a reduction of social disparity, on February 18, 2021, the Senate approved the draft decree amending and adding several provisions to the General Law of Negotiable Instruments and Credit Operations, the General Law of Auxiliary Credit Organizations and Activities, and the Law for the Protection and Defense of Users of Financial Services (the ‘‘Decree’’).
The primary objectives of the Decree are:
- To eradicate informal entities that participate in the payroll loan industry, same which do not have any kind of control, regulations, nor oversight mechanisms to carry out a credit activity offered to the general public; which has resulted in countless abuses against workers and beneficiaries, as well as distortions to the payroll loan market.
- To guarantee that the entities that offer “payroll loans with delegated collection” are financial entities subject to controls pursuant to the provisions of the Decree.
- To achieve higher levels of financial inclusion, similar to those of other Latin American countries such as Brazil and Colombia, by granting access to credit to sectors of the population that have not been benefited by general financial services (as per the National Financial Inclusion Survey, only 31% of the population has access to credit).
- To offer better financial products.
- To reduce collection risks and, thus, the cost of money.
- To strengthen the legal certainty and security by legally recognizing the existence of the three parties involved in the payroll loan market and the rules relating to their interaction (worker/debtor, employer/representative who carries out the payment and lender).
- To better identify the debtors’ payment capacity, thus avoiding possible over-indebtedness.
This initiative, in addition to being promoted by the Executive Power, the Legal Counsel of the President, the Ministry of Finance and Public Credit, and the Legislative Power, has a substantial and necessary contribution, as well as an active participation from the private sector, which, with the help of Gonzalez Calvillo, S.C., as legal advisor to some of the most important players in the payroll loan market, focused on strengthening the content of the Decree so that, through the “payroll loan with delegated collection,” legal certainty is generated for workers and beneficiaries, and greater access to financial products and services is given to the population. At the same time, the Decree is aligned with the “Program to Boost the Financial Sector” of the Federal Government.
Currently, the Decree, approved by the Senate, is awaiting discussion and, if applicable, approval by the Chamber of Representatives. It is expected that such discussion and approval may take place during the following session’s term.
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For over 30 years, Gonzalez Calvillo has been at the forefront of the legal market in Mexico as a full-service leading law firm due to its transactional core and expertise in a wide range of practice areas. The firm is recognized for its ability to build cross-disciplinary teams for the most complex legal challenges and long track record of successfully providing groundbreaking business and regulatory advice to high profile domestic and international companies. Often described as a pioneer of the Mexican legal services industry, the firm is known for its commitment to do things differently, bespoke solutions, and creating transformational legal changes that enable clients achieving their objectives.
