Circular

To: Financial Institutions and Related Parties,

Greetings,

Subject: Update of the Debt Collection Regulations and Procedures for Individual Customers.

Based on the Central Bank's authorities under its system issued by Royal Decree No. 36/M dated 11/4/1447H, and other related systems, and given the debt collection regulations and procedures for individual customers repealed by Circular No. 39100008340 dated 26/7/1439H,

The attached updated debt collection regulations and procedures, as referenced above, include several changes, the most prominent of which are:

1. Clarifying the concept of "Total Disability" by introducing a definition in Article One regarding Definitions.
2. Updating provisions related to the restructuring of installments for distressed customers.
3. Amending provisions related to the exemption of financial institutions' customers due to death or total disability.
4. Establishing a standard for telephone communication with individual customers.
5. Regulating the mechanism by which financial institutions deduct due installment amounts from their customers' accounts.
6. Regulating the deduction mechanism for liabilities from co-borrowers in a financing contract, considering the agreed liability ratio for each customer.

For information and action as of its date,

Yours sincerely,
Yazeed bin Ahmed Al-Sheikh
Deputy Governor for Supervision

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Important Note:
To keep pace with updates and amendments regarding instructions issued by the Central Bank, the Central Bank emphasizes the constant reliance on copies published on its website:
www.sama.gov.sa

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Table of Contents

Page No.	Subject
2	Chapter One: General Provisions
4	Chapter Two: Communication Regulations with Customers and Guarantors
4	Chapter Three: Collection Procedures
5	Chapter Four: Collection Management Regulations
9	Chapter Five: Final Provisions

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Chapter One

General Provisions

Article One: Definitions

The following words and phrases –wherever used in these regulations and procedures– carry the meanings set forth opposite them, unless the context otherwise dictates:

Term	Definition
Central Bank	The Saudi Central Bank.
Regulations	Debt collection regulations and procedures.
Collection/Debt Collection	The act of financial institutions collecting amounts due from the customer –or their guarantor in case of distress– pursuant to financing contract provisions.
Financial Institutions	Banks, institutions, and private financing companies under the supervision and oversight of the Central Bank in accordance with prevailing systems.
Customer	A natural person who has obtained a financing product.
Guarantor	A natural person committed to fulfilling all or part of the customer's obligations.
Third Party	An external party that conducts or performs any debt collection procedures on behalf of financial institutions.
Change in Customer's Circumstances (Involuntary)	An event causing an involuntary change in the customer's financial circumstances that materially affects their ability to meet financial obligations, including but not limited to: partial disability (involuntary) or retirement (involuntary), job loss, loss of certain fixed allowances paid monthly by the employer, or salary reduction.
Change in Customer's Circumstances (Voluntary)	An event causing a change in the customer's financial circumstances based on their own will, including but not limited to: early retirement or resignation.
Distress/Default	The customer's failure or delay in paying a specified number of due installments or part thereof as agreed in the financing contract, in accordance with Article (Five), Paragraph (1) of these Regulations.
Total Disability	A health condition that prevents the customer from living normally and is accompanied by medical unfitness for work according to official reports issued or approved by the competent regulatory authority.
Complaint	Any expression of the customer's dissatisfaction with the provided service or product, whether justified or unjustified, in writing or verbally.
Authorized Communication	An official communication channel that can be verified and retrieved in paper or electronic form.
Customer's Consent	Prior consent from the customer through authorized communication channels.

Telephone Call	A call that the customer has answered and interacted with regarding the employee.
Communication	The exchange of information and data by any authorized communication means between financial institutions and the customer, whether verbal or non-verbal (e.g., sign language) for persons with disabilities.
Employees	Any natural person working for the benefit of financial institutions under their management or supervision in exchange for remuneration, including: all employees contracted directly with them or through a third party.
Day	A calendar day, including weekends and official holidays.

Article Two: Objectives

These regulations aim to ensure that financial institutions:

1. Improve collection efficiency by implementing effective procedures to reduce the ratio of distressed debts.
2. Observe professional conduct when dealing with customers.
3. Adhere to the minimum required procedures when communicating with customers or guarantors for restructuring potentially distressed debts or during collection.
4. Protect the privacy of customers and guarantors.

Article Three: Scope of Application

These regulations apply to financial institutions and third parties.

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Chapter Two

Communication Regulations with Customers and Guarantors

Article Four: Communication Regulations with Customers

Financial institutions must comply with systems, instructions, standards, and professional conduct when communicating with the customer, guarantor, or co-borrower, at a minimum:

1. Protect customer, financial, and personal information and privacy, and use such information only for specific professional and regulatory purposes with the customer's consent.
2. Conduct telephone calls with the customer or guarantor, and verify the recipient's identity at the start of the call.
3. Limit telephone call attempts with the customer or guarantor to a maximum of ten calls per thirty days for each financing product (if multiple), and enable the customer or guarantor to block calls from the originating number, with communication occurring during official working hours.
4. Document communication with customers or guarantors (incoming or outgoing), and retain records for no less than ten years from the communication date, while clarifying to the customer or guarantor at the start of a telephone call that it is being recorded.
5. Enable customers or guarantors to rate their satisfaction upon completion of a telephone call –whether for collection or complaint reception purposes– with such ratings documented automatically.
6. Activate direct communication channels with customers, enabling them to inquire or clarify regarding existing claims.
7. Not communicate with the customer or guarantor by using envelopes marked with words indicating they contain collection information or similar.
8. Not visit the customer or guarantor under any circumstances, whether at their residence or workplace.

Chapter Three

Collection Procedures

Article Five: Communication Mechanism with Customers

When communicating with customers or guarantors for collection purposes, financial institutions must comply with disclosure and transparency, and adhere to the following:

1. Limit authorized communication means to the following:

   • 1.1 Email.
   • 1.2 Registered mail (National Address).
   • 1.3 SMS.
   • 1.4 Telephone calls.
   • 1.5 Financial institutions' application or website.
   • 1.6 Judicial notification.

2. Provide the customer with necessary communication-related data, including:

   • 1.2 Name of the financial institution and the collection department, or the third party and the name of the financial institution on whose behalf communication is made.
   • 1.2 Contact number for the relevant department or third party.
   • 1.3 Working hours of the relevant department or third party.
   • 1.4 Employee name in case of telephone calls.

3. Designate Arabic as the primary language for communication, with an exception for non-Arabic speakers while fully complying with these regulations.

4. If communication is written, all phrases and numbers used must be easy to understand in clear, legible font, including top or bottom margins.

Article Six: Complaint Resolution

If the customer or guarantor objects to the claimed amount, financial institutions must follow:

1. Automatically document the customer's complaint to enable them to review it.
2. Register the complaint for the customer or guarantor based on instructions issued by the Central Bank regarding this matter.
3. Provide the customer or guarantor with the expected timeframe for complaint resolution, ensuring it does not exceed the timeframes specified by the Central Bank.
4. Not communicate with the customer or guarantor to remind them of outstanding debts until the complaint is resolved.
5. Present the complaint resolution results to the customer or guarantor, supported by documents substantiating the resolution decision.
6. If the customer or guarantor is dissatisfied with the complaint result and wishes to escalate it, financial institutions must provide the customer with the adopted mechanism and direct them to the appropriate authority.

Chapter Four

Collection Management Regulations

Article Seven: Mechanism for Determining the Deduction Date from Customer Accounts

Financial institutions must:

1. Determine the deduction date to align with the salary deposit date for salaried customers, or as agreed between the customer and financial institutions specified in the contract or repayment schedule. Changes to the salary deposit date, whether permanent or temporary (e.g., alignment with weekends or holiday periods), must be considered.
2. Adhere to deducting the installment on the agreed date; if the agreed date is exceeded for a reason not attributable to financial institutions and without obtaining the customer's consent for deduction on that date, financial institutions are obligated to add an equivalent period at the end of the financing term without charging any additional cost, time, or fees, and notify the customer through authorized communication means.

Article Eight: Regulations on Deducting Installments from Customer Accounts

Financial institutions are prohibited from:

1. Deducting any amounts from customer accounts without a court order or ruling, without obtaining the customer's consent, or when the financing contract does not permit deduction for banks and institutions, or without a dedicated automatic deduction agreement for financing companies. 1,2. Placing a hold on customer accounts or balances –even temporarily– and not enabling them to utilize the available amounts in the accounts without a court order or ruling, without prejudice to regulatory provisions and related regulations. 1,3. Deducting more than one installment per financing product within a single salary deposit cycle; unless there is a court order or ruling, or when the financing contract permits customer consent. 1,4. Deducting the installment on a date preceding the agreed due date, or holding the installment value before the due date. 1,5. Holding or deducting end-of-service benefits for Saudi customers; unless there is a court order or ruling, or customer consent. 1,6. Imposing late fees or collection charges on the due amount, limited to a single installment value per financing period.
2. Financial institutions must adhere to deduction limits from the accounts of co-borrowers –for secured financing contracts– with each customer individually according to the executed financing contract.

Article Nine: Management of Potential Distress Cases

For the purpose of applying these regulations, financial institutions must consider potential distress as follows:

1. Regarding customer distress in paying monthly installments:
   • When it is established that the customer failed to pay installments in full or partially for (3) three consecutive months, or delayed payment of (5) five separate installments for (7) seven working days or more; per installment from its due date throughout the contract period, but within (5) years of the real estate financing contract term.
2. Distress in installment financing contracts (non-monthly installments):
   • When it is established that the customer failed to pay the due installment (quarterly, semi-annually, annually) for (60) sixty working days, or delayed payment of four separate installments for (20) twenty working days from the agreed due date in the financing contract, or more than five separate months throughout the financing period, but within (5) years of the real estate financing contract term.
3. Financial institutions must provide proactive solutions when indicators of potential distress appear in the customer's credit status, including at a minimum:
   • 2,1. Offering a new debt restructuring option to the customer if their circumstances change (involuntarily) without granting new financing and without any change in financing cost, with financial institutions executing the restructuring –if requested by the customer– within a period not exceeding (20) working days from providing necessary documents, and delaying the deduction of installment amounts until restructuring procedures are completed.
   • 2,2. Restructuring the customer's debt if the cause of distress does not allow financing institutions to achieve collection within specified regulatory deduction ratios, without granting new financing and without additional fees.
4. Financial institutions may offer a new debt restructuring option to the customer if their circumstances change (voluntarily), with permissible changes in financing cost and without additional fees, to be executed –if requested by the customer– within a period not exceeding (20) working days from providing necessary documents.

Article Ten: Management of Distress Cases

Financial institutions must:

1. Before proceeding to competent authorities –comply with communicating with customers and guarantors for collection purposes, and exercise due care when managing the settlement and collection of distressed debts, including but not limited to:
   • 1,1. Establish necessary standards to ensure employees meet required professionalism, and provide customers with accurate and comprehensive information about their current status, organized collection procedures, and regulatory measures that may be taken in case of distress or non-payment.
   • 1,2. Develop internal working procedures among relevant departments, including service level agreements and escalation mechanisms to ensure customer objections and complaints are resolved within the period specified in related Central Bank instructions, with documentation of this mechanism and measurement of departmental compliance.
   • 1,3. Establish a written policy to organize collection procedures from customers or guarantors, approved by the Board of Directors or Manager as appropriate –and reviewed– at a minimum:
     • a. Solutions that can be offered to the customer based on their credit capacity, including but not limited to: mutual debt settlement, or debt restructuring and installment deferral, while avoiding financing solutions that increase the customer's financial burden, such as granting additional financing.
     • b. Procedures through which financing institutions ensure providing the customer with all clear and comprehensive information to help them understand collection procedures and distress consequences, as well as proposed solutions and their benefits when multiple solutions are offered.
     • c. Analysis of complaints and objections and their associated burdens, handling their causes and sources, and the role of the complaint-handling department in documenting these reports and measuring their effectiveness in addressing recurring complaint sources.
     • d. Periodic review of the policy and verification of its alignment with best practices, regulatory provisions, rules, and instructions, and updating it as needed –or at least every two years.
     • e. Ensuring that employees of financial institutions and third parties involved in collection duties are informed about the policy and provide evidence of having read it.

Article Eleven: Management of Total Disability or Death Cases

Financial institutions must exempt the customer and their guarantor from the amounts claimed under the financing contract or secured financing contract –according to each's liability ratio– without conditioning the exemption on insurance provider approval or any third party, and must complete procedures within thirty days from receiving the death certificate or total disability report, refunding any excess deducted from the date of death or total disability, and transferring ownership of the financed asset to the customer –according to co-borrower ownership ratio in the contract– or releasing the mortgage, or their heirs –as appropriate– unless both parties agree to include any of the following exceptions:

1,1. Financing contracts executed before 1/10/2018 CE. 1,2. Total disability or death cases resulting from:

• a. Customer's self-inflicted injury, or suicide attempt.
• b. Natural disasters.
• c. Court rulings issued by Kingdom courts.
• d. Consumption of alcohol, drugs, or non-regulated medications.
• e. Participation or training in hazardous sports, or competitions; for example: (participation in camel racing or car racing).
• w. What results from or arises due to nuclear weapons or nuclear radiation, or radioactive contamination from any fuel or radioactive waste resulting from nuclear fuel combustion, war, invasion, hostile acts, quasi-belligerent acts, sabotage and terrorism committed by a person or persons acting individually, on behalf of, or in connection with any terrorist organization.

2. Financial institutions are prohibited from delaying customer exemption procedures, and must immediately begin requesting relevant documents consisting of the death certificate or medical report issued by a competent authority confirming total disability, and exercise due care to process and complete the exemption within the timeframe specified in these regulations.

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Chapter Five

Final Provisions

1. Financial institutions must comply with these regulations and bear responsibility for any violations committed by their employees or third parties.
2. These regulations constitute a minimum for what financial institutions must do to exercise due care during all collection stages, and they must continuously develop their internal procedures in line with the nature and size of their operations, according to best local and international standards; without conflicting with these regulations, systems, and other instructions.
3. The department responsible for managing collection operations must be subject to review and audit by the internal audit and compliance departments of financial institutions annually; to ensure procedure integrity and alignment with these regulations, systems, and other related instructions.
4. Financial institutions are responsible for evaluating and studying the customer's credit and financial status, ensuring their ability to meet obligations throughout the contract period, while estimating and considering changes that may occur in their circumstances according to instructions issued by the Central Bank.
5. These regulations constitute an update to preceding rules or instructions issued on this matter, and replace the provisions of the first issuance of debt collection regulations and procedures for individual customers. Financial institutions and third parties must update their policies, procedures, contracts, and agreements to align with them.
6. These regulations take effect from the date of their publication via the Central Bank's website.

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Distribution Scope:

• Banks and institutions operating in the Kingdom
• Financing companies operating in the Kingdom

P.O. Box 2992 Riyadh 11169, Kingdom of Saudi Arabia Tel: +966 11 463 3000
Saudi Arabia, Riyadh P.O. Box 2992 Tel: +966 11 463 3000