CMN Resolution No. 4,656: Direct Credit Companies and Peer-to-Peer Loan Companies (Revista da Procuradoria-Geral do Banco Central)

Summary

• CMN Resolution No. 4,656 of April 26, 2018 provides for the direct credit company (SCD) and the peer-to-peer loan company (SEP) and regulates peer-to-peer loan and financing operations.p.1
• The SCD carries out loan, financing and credit rights acquisition operations exclusively through an electronic platform, using its own capital.p.2
• The SEP intermediates loans exclusively through an electronic platform, and funds must be transferred to debtors within five business days after creditors provide them.p.5
• Both institution types must keep a minimum of R$1,000,000 in paid-up corporate capital and net worth.p.7
• The SEP must disclose monthly the average default rate by risk rating for the last twelve months.p.6
• The Central Bank of Brazil has sixty days from receiving a notification to adopt the provisions on qualified capital participation.p.11

Key insights

1. The SCD cannot raise funds from the public except by issuing shares.p.2
2. Creditors of a SEP can include natural persons, financial institutions and investment funds offered exclusively to accredited investors.p.3
3. A peer-to-peer operation is complete only after five successive procedures, from the parties' expression of will to the transfer of funds from the SEP to debtors.p.4
4. Funds must be transferred to creditors within one business day after debtors pay each installment.p.5
5. The SEP is forbidden to lend with its own funds, to be jointly liable for operations or to guarantee them.p.5
6. The SEP must warn that peer-to-peer loan and financing operations are a high-risk investment not guaranteed by the Credit Guarantee Fund (FGC).p.6
7. Transfer of corporate control, mergers, splits and changes of corporate goal require authorization of the Central Bank of Brazil.p.10
8. The Central Bank of Brazil may reject license requests if the project is not viable economically or technically, or if the statements presented are false.p.11