Unprecedented: Consumer laws enforced against a bank in Panama

AODECO image, on the facade of their headquarters in Plaza Córdoba in Panama City. The agency was created by a 2007 law but notwithstanding the broad scope of its charter the application of this country’s consumer protection and anti-monopoly laws has been sparing due to mostly political considerations.

For the first time here, a bank has been fined
for violating consumer protection laws

by Eric Jackson

At first glance, considering the history, it’s a big deal.

When you consider comparative legal systems, an administration about to change and that the decision came from a lower court, may it’s an outlier blip on the business scene.

The Eighth Circuit Civil Court, in a case brought in 2022 by the Consumer Protection and Defense of Competition Authority (ACODECO) has held that Panama’s consumer protection laws apply to banks.

The case arises from several credit card contract clauses imposed by one of Panama’s smaller banking industry players, St. Georges Bank. The most common of these throughout the local financial industry purport to allow the bank to change the contract with the credit card holder at any time, and to shut down an account without prior warning, without giving a reason and with no legal recourse for any damages incurred.

Also struck down were the bank’s claimed rights to record conversations with customers and to share customers’ financial data with third parties.

The court ruled that credit card terms are adhesion contracts and in this case included terms that violate the nation’s laws.

The de facto and generally unadmitted rule had been that banks are not subject to consumer protection laws, nor to broader public policies like those against monopolistic practices.

One who has been profiled and discriminated against by a bank here, or the SUNTRACS construction workers’ union that got its bank account frozen by one bank and found itself blacklisted by all banks in Panama might take heart.

Except that Panama’s has a Civil Code rather than a Common Law legal system, which means that rulings in prior cases are not binding parts of the law for similar issues that arise later, nor the building blocks of legal reasoning that the courts are likely to consider compelling. If legislators, or to a lesser extent regulatory agencies, see a trend and incorporate it into policies or laws that they write, history can still gather some force in Panamanian law.

Another complication of comparing consumer protection laws between legal systems is the evolution of the Common Law, wherein in England there was a dual legal system, with the law courts and the equity courts run by the church. Someone who has been or is about to be wronged without remedy at law might appeal to the church’s chancery courts, which could fashion equitable remedies. Things like injunctions and extraordinart writs are tools of equity. First in England and later in the United States, court systems and bodies of law tended to be merged, such that a court will have legal and equitable powers and a set of rules about when such sometimes at-odds principles are to be applied.

The consumer protection laws in a Common Law jurisdiction and a by contrast in a place with a Civil Code system may be substantively the same, but the two places’ histories and customs might lead to different outcomes in identical cases.

In any case, the trial court voided several credit card contract clauses and fined St. George’s Bank $10,000- ACODECO administrator Jorge Quintero Quirós was pretty jubilant about it:

We are not against banks or the financial products they offer, such as credit cards. We consider them to be necessary products, but banks must comply with consumer protection regulations.

It might just be an ephemeral case, as administrations and their policies are about to change. But consider, following the convictions of his sons for money laundering in a US federal district court in Brooklyn, who at their sentencing pleaded that their dad pressured them to do it, at least one bank here shut down the accounts of former president Ricardo Martinelli Berrocal.

Banks – and business sectors – that are all-powerful and answerable to nobody but themselves? Perhaps that would be a Mulino administration norm. But maybe not.


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