Name
Global FinTech Guide
Country _ Name
Uruguay
SectionTitle
Loan services / factoring / loan broking / finetrading
Body
FinTechs belonging to this category act as a loan creditor (even short and very short-term loans), are broking loans or receivables or conduct factoring of loans, which were given to private or business customers. In this business area you also find “peer-to-peer” (P2P) services, in which FinTechs enable a multitude of users to give loans (and brokered by the FinTech-platform) to other users or companies.

Finetrading is hereby a financial service of FinTechs, where they buy due receivables and grant the debtor an extension of payment time. 

As an ancillary service some FinTechs offer alternative credit assessment services to check the solvency of a borrower.

Introduction

Attitude of the country towards loan-giving-, factoring-, brokerage-, finetrading- and ancillary services

There are no reservations. 

Legal affairs  

Obligations and requirements to provide loan-giving-, factoring-, brokerage-, finetrading, and ancillary services described above

This activity may be encompassed under a specific license called Peer to Peer Lending Platform Administrators (“Empresas Administradoras de Plataformas para préstamos entre personas”) (hereinafter, the “P2P Platform Administrators”). The P2P Platform Administrator is defined as the entity that administrates a web application or other electronic platform designed for peer to peer money loans. Such entities only mediate (“mediación“) between the loan offerors and the loan offerees.

In order to obtain a license, a P2P Platform Administrator must file the following information:

Corporate information (as commercial  name, address, taxpayer number, website among others) notarized copy of the by-laws, information regarding the legal representatives, information of its shareholders and senior personnel; information regarding the person or legal entity who has the effective control over the P2P Platform Administrator, affidavit with signature certified by a notary public stating the legitimate origin of the capital, AML Manual describing the integral system for the prevention of money laundering and financing of terrorism, and a detailed description of the activity to be developed, structure of the organization and a description of its information technology structure as well as of the procedures established to perform its services, templates of the agreements to be entered with its clients, a description of the services to outsource that are essential for the operation of the company, attaching the model contracts to be signed and the constitution of a guarantee before the CBU (deposit).

Please note that there is no registration fee.

We estimate that the total process to complete the registration before the CBU is approximately between six (6) to nine (9) months, though the timing will depend on the complexity of the structure, information and documentation submitted, etc. There is no statutory term.

Additional comments regarding the legal situation for loan-giving-, factoring-, brokerage, finetrading-, and ancillary services or what FinTech’s must be aware of in this business area

Under current Uruguayan regulations, any natural person or legal entity, may provide financing to local or foreign companies without being necessary to comply with any particular authorization, licensing or registration procedure, provided that in that case the person providing such financing is not deemed to be carrying out financial intermediation (i.e., banking activity), nor intervenes in the sale of goods and services, by granting credit through credit cards, purchase orders, or other similar methods (i.e., consumer lending companies activity). .

As noted above, it is important that the non-banks providing financing are not deemed to be
carrying out financial intermediation activities as such situation will trigger the requirement of obtaining authorizations and licensing. Such a situation, as we will explain, depends on the source of funding. The current legal and regulatory framework governing “Financial Intermediation” activities in Uruguay is provided mainly by Decree Law No. 15.322 (hereinafter referred as to, “Banking Act”). The Banking Act defines “Financial Intermediation” as: “The carrying out, in a professional and customary way, of intermediation activities or mediation between the offer and demand of securities, money or precious metals”. 

Please note that such financial intermediation activity ruled by the Banking Act implies that an activity consisting of “credit intermediation”, both in the asset and in the liability side of the credit relationship, will need to be performed on a professional and customary basis. Each time investors engage in financial intermediation to raise funds from the public, they are gaining access to the public’s savings and their activities are therefore a matter of public interest. Consequently, the deposit taking will be considered as a fund raising from the public and therefore constitutes “credit intermediation”. These services shall only be done by authorized entities, provided these activities are to be performed in Uruguay in a regular and permanent manner.

Furthermore, recently CBU’s Charter (Law No. 16.696) has been amended, and according to the CBU and some scholars, the “financial intermediation” concept has changed with it. The CBU argues that, based on the new wording of section 34 of the Charter, funding may be only done by specific third parties (listed below), otherwise it shall be deemed that “financial intermediation” activities are being performed and therefore trigger the need of obtaining authorization and licensing. Said third parties are:

    i) natural persons who are directors or shareholders of an Uruguayan company;
    ii) national or foreign financial intermediation institutions;
    iii) international credit or development promotion agencies;
    iv) foreign pension funds or investment funds subject to a regulatory authority, in which the credit or credits granted to the Uruguayan company, do not exceed one percent of the fund's investments to be determined by the SFS’s regulations of the CBU;
    iv) any other legal entity with a financial purpose, financial trust or affected equity of a similar nature, which -meeting the requirements of paragraph (d) above- would be authorized by the SFS of the CBU to fund the Uruguayan Company.

Regarding in general the activity of lending funds (which would include in general the activities mentioned in the question) there are no special requirements or procedures that need to take place in order for non-banks to be authorized to provide financing. As mentioned above, under current Uruguayan regulations, any natural person or legal entity, may provide financing to local or foreign companies without being necessary to comply with any particular authorization, licensing or registration procedure, provided that in that case the person providing such financing is not deemed to be carrying out financial intermediation. To such effects we refer to our comments included in our answers to question e) Legal issues 4. above, which refer to the source of funds. Provided that the source of funding is from any of the categories mentioned, not licensing or registration would apply. 

On the other hand, regarding these type of activities (including in particular, finetrading where they buy due receivables and grant the debtor an extension of payment time), it should be analyzed on a case-by-case bas
is if the purchase of such receivables does not amount to investing in a type of security and therefore that no public offering regulations are triggered which will require the issuer and security to be issued before the CBU.

Economic conditions

Market size for loan-giving-, factoring-, brokerage-, finetrading- and ancillary services and biggest companies in this business area

Some companies like Prezzta and TuTasa were present in this market. However, after the CBU issued the P2P Platform Administrator regulation the activity was in general discontinued (due to the regulations being too burdensome).

Additional comments regarding the economic situation for loan-giving-, factoring-, brokerage-, finetrading- and ancillary services or what FinTech’s must be aware of in this business area

 N/A  

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