Introduction to Banxico’s Public Consultation on Credit Cost Transparency
The Bank of Mexico (Banxico) has initiated a public consultation process to modify the general provisions that establish the methodology, formula, components, and assumptions of the Annual Cost of Credit (CAT) for financial services offered by regulated entities.
Purpose of the Modification
Banxico aims to enhance the utility of the CAT, enabling consumers to compare costs and make better-informed financial decisions. The CAT represents the Annual Cost of Credit, expressed as a percentage, that includes all costs and fees associated with credit products for comparison purposes.
Addressing Regulatory Concerns
Banxico intends to revise the regulations governing CAT components and assumptions, addressing various findings from authorization, supervision, and sanction processes. This adjustment will facilitate understanding and interpretation of the CAT indicator.
Proposed Modifications
- Simplifying CAT Calculation Methodology: Banxico proposes to simplify and change the CAT calculation method displayed in advertisements and included in credit card statement details. Additionally, a related calculation method for revolving credits available through means other than credit cards will be established.
- Insurance Premium Incorporation: Entities will be required to calculate the CAT based on insurance premium quotes provided by clients if those insurances meet specific criteria set by Banxico for the corresponding credit.
- Peer-to-Peer Lending Platforms Inclusion: Institutions offering peer-to-peer debt financing will be subject to CAT regulations.
- Consistent Commission Registration: Entities obligated to register commissions with Banxico must ensure that the amounts used for CAT calculation align with those registered at the bank.
- Precision and Definition Additions: Various clarifications and definitions will be added for better interpretation, along with adjustments to the presentation of CAT information to the public.
- Enforcing Compliance with Calculation Tools: Entities offering credit cost calculators or comparators to clients must ensure that the displayed calculations adhere to Banxico’s circular guidelines.
Public Consultation Period
Banxico will accept public comments on this proposed regulation modification project until December 22, 2025.
Key Questions and Answers
- What is the purpose of Banxico’s public consultation? The Bank of Mexico seeks input from the public to modify regulations governing the Annual Cost of Credit (CAT) calculation methodology, enhancing transparency and enabling better-informed financial decisions for consumers.
- What specific changes does Banxico propose? Proposed modifications include simplifying the CAT calculation methodology, incorporating insurance premiums into the calculation, including peer-to-peer lending platforms, ensuring consistent commission registration, adding clarifications and definitions, and enforcing compliance with calculation tools.
- When does the public consultation period end? Banxico will accept comments until December 22, 2025.
