The Central Bank of Brazil (BC) has ruled that the card network is responsible for guaranteeing payment of transactions in case of failure.

BRASILIA - The Central Bank published new rules on Monday, the 10th, for so-called payment arrangements - which allow services such as money transfers, withdrawals and purchases.

The resolution clarifies that card networks – such as Visa, Mastercard, and Elo – are responsible, without exception, for ensuring payment for all transactions to the receiving user, including using their own funds if the protection mechanisms adopted are insufficient. The regulation is the result of Public Consultation 104.

The resolution takes effect immediately, but companies will have 180 days to submit a request to the Central Bank for authorization of changes, including all necessary adjustments. The arrangements remain valid until the changes are authorized.

According to the Central Bank, the regulation increases transparency regarding the implementation criteria and the sizing of the mechanisms for transferring and managing financial risks to which participants in the payment chain (such as banks and card issuers) are subject. The goal is to clarify the role of each institution if there is a failure in the payment flow.

"The regulation grants the arrangement's originator discretion in choosing the financial risk management mechanisms to be adopted by the payment arrangement, but does not exempt the originator from ultimate responsibility for settling all transactions, even in the event of insufficient mechanisms," the monetary authority added.

The new rule also ensures that the liability of participants in chargeback requests by the payer is limited to 180 days, starting from the authorization of the payment transaction. After this period, the liability rests with the card network, if the arrangement's rules allow it.

The card network is also responsible for prohibiting the requirement of collateral between participants, and the possibility of acquirers and sub-acquirers restricting or discriminating against issuers, a rule known as "honor all cards".

The flags also become solely responsible for monitoring and managing the risks of the participants in the arrangement.

According to the Central Bank, the resolution also strengthens the regulatory framework on issues such as interoperability between payment arrangements, information sharing, authorization, modification and cancellation processes for arrangements, the obligation of full participation of sub-acquirers in the centralized settlement and clearing system, and the transparency of fees paid by participants in the arrangement.

"Finally, it is worth highlighting that specific commands have been introduced to improve the management of fraud and scam risks, the prevention of money laundering and the financing of terrorism and the proliferation of weapons of mass destruction, as well as conduct in the relationship with the paying user, in order to align the control procedures within the scope of payment arrangements with those prescribed for the National Financial System," says the regulatory body.