Circular on Debt Collection Regulations and Procedures for Individual Customers

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In the Name of Allah, the Most Gracious, the Most Merciful Saudi Central Bank (SAMA) Headquarters Customer Protection Department Ref No.: 391000083340 / H.W.
Date: 1439/07/26 (AH)
Attachments: 12

circular
Subject: Debt Collection Regulations and Procedures for Individual Customers

To: [Name/Title]
Peace, mercy, and blessings of Allah be upon you.

Based on the Financing Companies Monitoring System issued by Royal Decree No. M/51 dated 1433/08/13 AH, and the Banks Monitoring System issued by Royal Decree No. M/5 dated 1386/02/22 AH, which authorized the Bank to regulate the financing and banking sectors, and in accordance with the Bank's commitment to ensuring financial institutions treat customers fairly and equitably.

Attached are the Debt Collection Regulations and Procedures, previously sent to you for comments, in their final version after incorporating our received remarks. We request your review and implementation effective from the date hereof.

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

distribution scope:

• General Department for Banks Supervision
• General Department for Financing Companies Supervision
• Banks and financial institutions operating in the Kingdom
• Financing companies
• Center of Excellence

P.O. Box 2992, Riyadh 11169 | Tel: 4662704 - 4662705 | Fax: 4662746 - 4662747

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[Saudi Central Bank Logo]
Saudi Central Bank (SAMA)
Supervision Agency

debt collection regulations and procedures for individual customers April 2018

Note: These Regulations and Procedures are a unified and updated document consolidating several regulations previously issued by the Bank.

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debt collection regulations and procedures for individual customers

Contents

First: Introduction ................................................................................................. 2
Second: Definitions ............................................................................................... 3
Third: Related Systems and Regulations ..................................................................... 4
Fourth: Content of the Regulations ....................................................................................... 5
Fifth: General Provisions .......................................................................................... 10

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debt collection regulations and procedures for individual customers

First: Introduction

1. General Framework:
The general framework of these regulations is summarized in the following key points:

• Communication regulations with customers and guarantors for collection purposes.
• Collection procedures.
• Procedures for handling defaulting customers.

2. Objectives:
These regulations aim to organize the collection and communication mechanism with individual customers and guarantors in a manner that enables financing institutions to follow clear and specific procedures, thereby protecting the rights of all parties involved.

3. Scope:
These regulations apply to banks, financial institutions, and financing companies under the supervision of SAMA.

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debt collection regulations and procedures for individual customers

Second: Definitions

Term	Definition
SAMA (Saudi Central Bank)	Saudi Central Bank (SAMA).
Financing Institution	Banks, financial institutions, and financing companies under SAMA's supervision.
Customer	A natural person who has obtained a financing product from a financing institution.
Collection	The financing institution's act of collecting amounts due from the customer on their due dates.
Default/Non-Performance	The customer's failure to pay the agreed monthly installments for three consecutive months, or more than five non-consecutive months throughout the financing period.
Complaint	Any expression of dissatisfaction with the provided service, whether justified or not, in writing or verbally.
Third Party	An entity contracted to act on behalf of the financing institution in providing a service previously performed by the financing institution or a new service to be implemented, which may be a unit of the financing institution itself, an affiliated company, or an independent entity.
Employees	Any natural person working for the benefit of, and under the management or supervision of, a financing institution for remuneration, including all employees contracted directly or through a third party.
Documented Communication	A registered communication channel that can be verified and retrieved in written or electronic form.
Change in Customer's Circumstances (Mandatory)	An event leading to a mandatory change in the customer's circumstances, including but not limited to: partial or total disability, mandatory retirement, loss of employment, or loss of certain fixed allowances provided monthly by the employer.
Change in Customer's Circumstances (Voluntary)	An event leading to a voluntary change in the customer's circumstances, including but not limited to: voluntary retirement or job change.
Guarantor	Any natural or legal person who guarantees the customer's payment or commits to fulfilling the payment on behalf of the customer in case of inability, based on a written declaration.
Day	All days of the month, including weekends and holidays.

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debt collection regulations and procedures for individual customers

Third: Related Systems and Regulations

• Banks Monitoring System.
• Financing Companies Monitoring System and its Executive Regulations.
• Real Estate Financing System and its Executive Regulations.
• Financial Leasing System and its Executive Regulations.
• Rules for applying the provisions of the Banks Monitoring System.
• Updated Consumer Financing Regulations.
• Rules for opening bank accounts and general operating rules in commercial banks in the Kingdom.
• Principles for protecting bank customers.
• Principles for protecting financing company customers.
• Instructions on delegating tasks to third parties.

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debt collection regulations and procedures for individual customers

Fourth: Content of the Regulations

1. Communication with Customers:
Financing institutions must exercise due care in communicating with customers before proceeding to the competent judicial authorities, subject to the following:

1.1 The documented communication channels permitted for financing institutions when communicating with customers or guarantors are limited to:

• Email.
• Registered mail.
• National address.
• SMS/text messages.
• Telephone calls.

2.1 The communication text must include at minimum the following:

• Name of the financing institution and the department responsible for collecting defaults.
• Contact number for the relevant department and/or third party.
• Working hours of the relevant department and/or third party.
• Employee name, financing institution and/or third party name in case of telephone communication.

3.1 Financing institutions must adhere to the following:

• The number of telephone contact attempts with the customer shall not exceed ten times every thirty days. Customers must also be provided the opportunity to call back the number from which they were contacted.

• All telephone calls with customers (incoming or outgoing) must be documented and records retained for at least ten years from the date of communication. The customer must also be informed at the beginning of the call that it is being recorded.

• Customers must be enabled to evaluate their satisfaction upon completion of the telephone call (outgoing or incoming), with such evaluation documented automatically.

• Establishing necessary standards to ensure employees professionally provide customers with accurate information regarding their current default status and the regulatory procedures the financing institution is entitled to take.

• Not providing customers with incorrect or non-compliant information regarding the consequences of non-payment.

• Not communicating with customers using envelopes marked on the outside with words indicating they contain information regarding debt collection for defaults or similar.

• Protecting customers' financial and personal information, maintaining their privacy, and using them only for specific professional and regulatory purposes with customer consent. No contact shall be made with anyone other than the customer or guarantor, and the identity of the call recipient must be verified during telephone communication.

4.1 In case the customer objects to the claimed amount, the financing institution must follow the following:

• Documenting this objection.

• Registering a complaint for the customer in accordance with SAMA's instructions on this matter.

• Providing the customer with the expected timeframe for resolving their complaint, which must not exceed the regulatory time limits for complaint resolution.

• Not contacting the customer to remind them of existing defaults until the complaint is resolved.

• In case the customer is dissatisfied with the complaint outcome and wishes to escalate it, the financing institution must provide the customer with the adopted mechanism and direct them to the appropriate authority.

• Developing a policy for analyzing complaints and objections, their patterns, causes, and sources of origin. The department responsible for handling complaints must document these reports and measure their effectiveness in addressing recurring complaint sources.

• Developing operational procedures with relevant departments, including service level agreements and escalation mechanisms, to ensure customer objections and complaints are resolved within the regulatory period. This mechanism must be documented technically and the departments' compliance with it measured.

5.1 The department responsible for collection and communication procedures and/or the third party must be subject to continuous review and audit by the internal audit department and compliance department of the financing institution, to ensure procedure integrity and compliance with these regulations and related systems/regulations.

2. Collection Procedures from Customer Accounts:
2.1 Banks and financial institutions are prohibited from doing the following:

• Deducting any amounts from customer accounts without a judicial ruling or order, or without prior customer consent, or if the financing contract covers it.

• Placing liens on customer accounts or balances, even temporarily, and not allowing them to benefit from available amounts without a judicial ruling or order.

• Deducting more than one monthly installment per financing product within a single salary deposit cycle, unless there is a judicial ruling/order or prior customer consent.

• Deducting the monthly installment on a date preceding the agreed due date, or reserving the installment value before the due date.

• Placing liens on or deducting end-of-service benefits for Saudi customers, unless there is a judicial ruling/order.

2.2 Financing institutions must determine the deduction date to align with the monthly salary deposit date, specified in the repayment schedule or subsequently agreed upon with the customer through one of the documented communication channels.

3.2 Financing institutions must adhere to deducting the monthly installment on the agreed deduction date. In case of proven failure to do so, the financing institution is obligated to extend a corresponding period at the end of the financing term without calculating any extension costs or additional fees, with customer notification through documented communication channels.

4.2 Banks and financial institutions must, upon customer request, restructure the debt in case of proven mandatory change in customer circumstances, without granting new financing, without additional fees, and without changing the cost of funds. Banks must execute the restructuring within thirty days from the date the customer provides necessary documents, except for financing contracts secured by the underlying asset.

5.2 Banks and financial institutions must, upon customer request, restructure the debt in case of proven voluntary change in customer circumstances, with the option to change the cost of funds and without additional fees. The restructuring must be executed within thirty days from the date the customer provides necessary documents, except for financing contracts granted with underlying asset security.

3. Procedures for Handling Defaulting Customers:
3.1 Financing institutions are entitled to begin taking regulatory actions against defaulting customers with competent judicial authorities, provided that customers are notified when the customer defaults for more than three consecutive months or five non-consecutive months throughout the financing period, with the last communication attempt made via the national address.

2.3 Upon issuance of a judicial ruling or order against the defaulting customer, financing institutions must comply with the decision issued by judicial authorities, unless both parties (financing institution and customer) agree otherwise (including but not limited to debt settlement between the parties, or debt restructuring).

3.3 Financing institutions must consider customers' circumstances regarding executive judicial rulings in their favor when customers provide necessary guarantees, committing to offer the option of debt restructuring with the possibility of changing the cost of funds and without additional fees.

Fifth: General Provisions

5.1 For contracts concluded from October 1, 2018:
5.1.1 Unless both parties agree to include any of the following exceptions, financing institutions must exempt customers from amounts claimed under the financing contract in case of death or total disability within a maximum period of thirty days from receiving relevant documents, and refund any excess deducted from the date of death or total disability. This excludes commercial financing contracts and cases of death or disability resulting from:

• Customer's intentional self-injury, or attempted suicide (whether sane or mentally impaired) at that time.
• Natural disasters.
• Court decisions, or rulings by the competent judicial authority under prevailing systems in the Kingdom of Saudi Arabia.
• Consumption of alcohol, drugs, or non-compliant medications.
• Participation or training in any sport, or hazardous competitions such as horse racing or car racing.
• Death or injury arising from the nature of work.
• Anything resulting from or arising due to nuclear weapons, nuclear radiation, or radioactive contamination from any fuel or nuclear waste resulting from nuclear fuel combustion, war, invasion, acts of foreign aggression, 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.

5.2.1 Financing institutions are not entitled to impose late payment fees or collection charges exceeding the due amount, with an upper limit of one installment value for the entire financing period.

5.2 Financing institutions must ensure the customer understands potential risks in case of non-compliance with financing product terms and conditions.

5.3 Financing institutions must, before granting any financing product, evaluate the customer's credit status and ensure their ability to fulfill obligations throughout the contract period, considering the customer's capacity to pay the final installment if included in the financing contract, and changes that may occur in their credit status (e.g., voluntary/mandatory retirement age / non-fixed allowances).

5.4 These regulations are considered a minimum standard for what financing institutions must do to care for customers, and financing institutions must continuously develop their internal procedures in proportion to the nature and size of their operations, aligning with best local and international standards, without conflicting with these regulations and related instructions.

5.5 These regulations are considered an update to preceding bylaws and/or instructions on this matter, and are binding for financing institutions and/or third parties as stipulated. All financing institutions must update their policies and procedures, and those of the third party, to align with these regulations. Financing institutions and/or third parties are not exempt from liability if they fail to comply therewith.

5.6 Subject to Paragraph (1) of Section (Fifth) of these regulations, they apply to all existing and future contracts.

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