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General Superintendence opens Administrative Proceedings to analyze alleged exclusivity in consigned loans

Anticompetitive conduct

Six investigated banks were notified to present their defenses
published: Jul 10, 2015 04:15 PM last modified: May 03, 2016 06:05 PM

The General Superintendence of the Administrative Council for Economic Defense – Cade opened six Administrative Proceedings to analyze alleged exclusivity in consigned credit in contracts signed with public bodies by Itaú Unibanco S/A, Caixa Econômica Federal, Santander S/A (Brazil), Bradesco S/A, Banco do Estado do Rio Grande do Sul S/A – Barinsul and Banco de Brasília – BRB (Administrative Proceedings no.  08700.005770/2015-58, 08700.005766/2015-90, 08700.005781/2015-38, 08700.005761/2015-67, 08700.005759/2015-98, 08700.005755/2015-18). The decision was published in the Official Gazette on 8 June 2015.

Consigned loans are those offered directly to individuals through the consignment of payroll deduction in monthly installments. When exclusivity clauses exist, the client can only take out the loan from the bank which has the exclusivity agreement with the paying public agency. The Administrative Proceedings aim at analyzing whether this requirement has the potential to harm competition and final customers, who are unable to contract with other financial institutions offering better conditions, such as more attractive interest rates and payment deadlines.

The investigation started in 2012, after the judgment of a Cease and Desist Agreement (TCC in its acronym in Portuguese) signed between Cade and Banco do Brasil – BB, by means of which the bank agreed to end exclusivity requirements in contracts with public agencies for concession of loans consigned to civil servants payrolls. During the negotiation for the TCC signature, the BB claimed that other banks would have been practicing the same illegal conduct. Thus, the Reporting Commissioner of the case at the time recommended the assessment of the facts.

After the initial analysis, evidence of exclusivity clauses were found in consigned loans contracts signed with public agencies by the six banks. The General Superintendence opened Administrative Proceedings to assess the alleged infringements to the economic order by the financial institutions individually. Even in the cases in which the clause has been subsequently revoked, Cade will analyze the anticompetitive conduct taking into consideration during the time the mechanism was valid.

The banks were notified and will have 30 days to present their defenses and to specify and justify the proofs they intend to produce.

The investigations of exclusivity in consigned loans against HSBC, Banco do Estado do Espírito Santo – Banestes, Banco do Estado de Sergipe – Banese, and Banco do Estado do Pará – Banpará were filed by lack of evidence of irregularities regarding those financial institutions.