Following in the footsteps of countries such as Chile (Act 20555); Mexico (Act on the transparency and regulation of financial services); Peru (Act 28587), on 26th December 2014 the Colombian Congress approved Act 1748/2014, establishing the obligation for financial institutions under the oversight of the Colombian financial supervisor, Superintendencia Financiera de Colombia, to inform their customers not just of the interest rate effectively paid or collected, but also, where the nature of the product or service permits, the Total Unified Value (valor total unificado or VTU) for all the items that the customer actually pays or receives on their loans and deposits. The new regulation also makes it mandatory for these institutions to provide customers with a VTU projection before they sign a contract, where appropriate to the product or service being arranged, so that they know in advance how much they will be effectively paying or earning on their money.

VTU will be the consolidated value of all the items linked to the financial product or service. This will include, amongst other aspects, interest payments, insurance premiums, charges, contributions, expenses, fees, taxes, etc.

The value must be expressed as an effective annual percentage for the expected term of the product, and as an absolute figure in Colombian pesos. It must be given the same publicity as the interest rate related to the product or service being offered.

Apart from this, the act also includes provisions regarding financial services provided by the Pension Fund Managers working under the individual savings regulations.

It is important to note that within no more than 90 days after the enactment of the law, the Colombian government will have to regulate the form and periodicity with which the entities under the supervisor’s oversight must present the information. At the moment there is much debate regarding the financial methodology by which customers and potential customers will be presented with the VTU. The entities will be forced to introduce significant changes not just in the financial methodology they use to report their products’ yields and costs, with the impact this will have on their IT systems, but also the way they market their offerings, since it is not advisable to overload potential consumers with information they do not really need, use or understand. It would be positive if all financial operators, and not just those within the remit of the financial supervisor, were obliged to provide the price of the products they offer in the manner established by this act. This would not only improve the probability of the impact that this legislation seeks actually materialising, but would also avoid regulatory arbitrage between unregulated and regulated operators.