Bradesco harmed competition in action against GuiaBolso, says the Finance Ministry's secretariat.

(Reuters)- The Ministry of Finance sees evidence that Bradesco attempted to use the Judiciary in bad faith, in an attempt to impose costs on the fintech GuiaBolso, in addition to harming its own clients, according to a statement released by a department of the ministry this Thursday.

The controversy is being processed in the 11th Civil Court of São Paulo, in a lawsuit initiated by Bradesco against GuiaBolso's access to customer data protected by banking secrecy, and which also demands that the fintech delete the data already collected.

The Secretariat for the Promotion of Productivity and Competition Advocacy (Seprac), of the Ministry of Finance, requests to be admitted as a third party in the process, opposing the bank's request.

In Bradesco's view, GuiaBolso should notify the bank in advance and require written authorization from customers to access their account data, an interpretation questioned in Seprac's opinion.

"Besides going against the speed necessary for dynamic economic relations, (the view) contradicts the significant use of electronically signed contracts between financial institutions and their clients, suggesting bad faith on the part of the author," the document points out.

Bradesco is challenging in court GuiaBolso's access to its clients' data, but according to the Treasury's opinion, the institution lacks the legitimacy to do so because the client himself assumes responsibility.

“The law, by granting the client the right to share their raw financial data, also indirectly assures them ownership of that data,” says an excerpt from the opinion. “Therefore, it is not up to the financial institution's adhesion contract to dictate the terms under which the client's personal data may be shared.”

The report indicates that Bradesco's procedure of requiring a second random password at the beginning of access to internet banking through GuiaBolso, instead of a token to confirm banking transactions as other financial institutions do, may have increased risks for its customers.

"The strategy adopted by Bradesco was to prioritize cost-cutting strategies for its rival, even when this implied a reduction in the security of the banking customer it was supposed to protect," says an excerpt from the document.

"It is clear that the action does not ensure customer safety, as the actions taken... have made the system vulnerable... because it is not proportional to the risk (of carrying out unauthorized operations) and because it has negative effects on competition in the credit segment, the measure is illegal."

The additional password also makes evident “the primacy of concern for the institution's own interests to the detriment of the client's well-being,” according to Seprac. “In other words, the financial institution offers the equivalent of a tied sale...: the client will only have access to security for sensitive operations (product 1) if they commit to acquiring the financial products of that institution (product 2).”

The personal finance platform GuiaBolso could grant around 1 billion reais in credit in 2019, as the greater availability of low-cost resources leverages its ability to offer personal loans with lower rates than those charged by large banks.

Contacted for comment, Bradesco did not immediately respond to the department's opinion.

If admitted to the Bradesco vs. GuiaBolso lawsuit, Seprac will be able to access the documents in the case file and submit its opinion to the court before a final decision is made. However, the opinion is not binding and does not obligate the court to follow the ministry's understanding.

By Iuri Dantas