| | |  Business News | December 2008 
Mexico Senate Approves Tougher Consumer Credit Rules
 Noel Randewich - Reuters
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 |  | In this time of world financial crisis, it's particularly important to create rules to protect financial customers from predatory practices. |  | | |
Mexico City - Mexico's Senate passed a bill on Thursday prohibiting banks from sending clients pre-approved credit cards, extending credit limits without clients' consent, and other practices that can get people into debt over their heads.
Banks in Mexico, mostly foreign-owned, are widely seen as charging excessively high interest rates and service fees.
"In this time of world financial crisis, it's particularly important to create rules to protect financial customers from predatory practices," the bill said.
Under the proposed law, banks authorizing new credit cards would have to ensure clients are able to put 30 percent of their income toward monthly payments.
Banks would also be banned from pre-approving credit cards or extending clients' credit limits without written consent. Other practices considered abusive would also be banned, and banks would be prohibited from calling clients at their homes to promote products.
Mexican banks are well capitalized and have avoided much of the world financial crisis. Focusing on growth in traditional businesses, the country's leading banks, like BBVA (BBVA.MC: Quote, Profile, Research, Stock Buzz), Citigroup (C.N: Quote, Profile, Research, Stock Buzz) and Santander (SAN.MC: Quote, Profile, Research, Stock Buzz), have not moved into risky markets like subprime lending.
But aggressive expansion in consumer credit in the last few years has led to a recent jump in defaults. Nearly 10 percent of consumer credit in October was nonperforming.
The law still needs to be approved by the lower house. Past legislation to curb bank fees and make them more transparent has passed with wide support.
The head of BBVA's Mexican unit, the country's largest bank, warned on Wednesday against excessive regulation. "We should avoid the temptation to control variables that ought to depend on the free market," Ignacio Deschamps told reporters.
(Additional reporting by Miguel Gutierrez; editing by Jan Paschal) |
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