Regulatory Alerts2021-11-18
Circular Re. Instructions for the Purchase of Consumer Finance Debt for Individuals Between Finance Companies
The Saudi Central Bank issued instructions to regulate the purchase of individual consumer finance debt between finance companies, requiring the purchasing company to obtain customer consent, disclose all costs, and use the SARIE system for payments. The selling finance company is mandated to issue debt confirmation statements and release letters within one business day, while prohibiting the imposition of transfer fees other than early settlement or administrative charges. These regulations aim to protect customers by ensuring transparency in new financing terms and streamlining the debt transfer process.
Number: 43033200 Date: 1443/04/13 Attachments: None
Circular
Dear Sirs, Peace, mercy, and blessings of God be upon you,
Subject: Instructions for the purchase of consumer finance debt for individuals between finance companies.
Based on the powers delegated to the Saudi Central Bank under the System for Monitoring Finance Companies issued by Royal Decree No. (M/51) dated 13/8/1433H. And wishing to regulate the operations of purchasing consumer finance debt for individuals between finance companies;
You will find attached the Instructions for the purchase of consumer finance debt for individuals between finance companies.
For your information and action by the deadline of 1443/4/26H corresponding to 2021/12/1M.
Accept my regards,
Fahd bin Ibrahim Al-Shathri Deputy Governor for Supervision
Distribution Scope:
- Finance companies operating in the Kingdom.
Instructions for the Purchase of Consumer Finance Debt for Individuals Between Finance Companies
Rabi' al-Thani 1443H / November 2021M The Saudi Central Bank issued these Instructions based on the powers delegated to it under the System for Monitoring Finance Companies issued by Royal Decree No. (M/51) dated 13/08/1433H.
Table of Contents
| Chapter | Page Number |
|---|---|
| Chapter One: General Provisions | 3 |
| Chapter Two: Obligations of the Finance Company Wishing to Purchase the Debt | 3 |
| Chapter Three: Obligations of the Finance Company Selling the Debt | 4 |
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Chapter One: General Provisions
Article One: Without prejudice to the provisions of financing systems and their executive regulations, and related systems and instructions; these Instructions regulate the operations of purchasing consumer finance debt for individuals between finance companies.
Article Two: The finance company wishing to purchase the debt must hold a license from the Saudi Central Bank to conduct consumer finance activities.
Article Three: The finance company may purchase consumer finance debt for individuals without the need to obtain independent approval from the Saudi Central Bank for this purpose.
Article Four: The finance company must comply with related systems and instructions, especially those related to customer protection.
Chapter Two: Obligations of the Finance Company Wishing to Purchase the Debt
Article Five: The finance company wishing to purchase the debt must inform the customer of the fees and costs resulting from the purchase of consumer finance debt for individuals.
Article Six: The finance company wishing to purchase the debt must disclose to the customer the details and costs of the new financing before purchasing the debt, and obtain their documented consent thereto.
Article Seven: The finance company wishing to purchase the debt must prepare a special form for the request to purchase consumer finance debt, which must be completed with all necessary customer data, the date of submission of the request, and all relevant documents and information, including: (proof of the final total amount of the debt issued by the finance company selling the debt, the customer's declaration, and the necessary approvals from all parties to the request to purchase the debt, and clarification of the provisions of purchasing the debt and details of implementing the process and contracting requirements with the customer to grant financing, including updating data in credit records after customer approval) and any other details necessary for purchasing the debt.
Article Eight: The finance company wishing to purchase the debt must use the Saudi Fast Financial Transfers System "SARIE" to settle existing debts. The payment receipt issued via the "SARIE" system must include at least the following data:
- Customer name.
- National ID/Residence number.
- Debt amount.
- Purpose of transfer.
- Debt reference number.
Article Nine: The finance company wishing to purchase the debt must provide the customer with the reference number of the payment receipt to facilitate the completion of procedures with the finance company selling the debt.
Article Ten: The finance company wishing to purchase the debt is not allowed to charge the customer any costs or fees for transferring the debt, except for early settlement fees or administrative fees.
Article Eleven: The finance company wishing to purchase the debt is not allowed to enable the customer to dispose of the remaining amount of the financing - after purchasing the debt - except after receiving a release letter from the finance company selling the debt, and obtaining sufficient guarantees for granting financing and other regulatory and operational requirements - as applicable - with these details being clarified to the customer before conducting the debt purchase process according to the requirement mentioned in Article (7) of these Instructions.
Chapter Three: Obligations of the Finance Company Selling the Debt
Article Twelve: The finance company selling the debt is not allowed to refuse to issue a statement of existing obligations or a letter proving the debt upon the customer's request, and these statements and letters must be issued within a period not exceeding one business day from the date of receiving the request.
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Article Thirteen: The finance company selling the debt must facilitate the debt transfer process and implement it within a period not exceeding one business day from the date of completion of requirements, and no request to purchase debts shall be refused unless there are sufficient justifications clarified to the customer in writing.
Article Fourteen: The finance company selling the debt must notify the customer of the debt settlement within a period not exceeding one business day from the date of receiving the payment of the existing financing. The notification must also include all required data, including the IBAN and the name of the bank or financial institution to which the debt amount is to be transferred.
Article Fifteen: The finance company selling the debt must issue a release letter to the customer within a period not exceeding one business day from the date of receiving the payment of the existing financing, and record this in the customer's credit record with credit information companies. This exception applies to customers holding credit cards and/or monthly debit cards, for whom the release letter must be issued within a period not exceeding seven business days.
Article Sixteen: The finance company selling the debt is not allowed to compel the customer to pay any amounts to approve the sale of the debt, except in the case of outstanding amounts that the customer has not settled.
Article Seventeen: The finance company selling the debt must include the early settlement amounts mentioned in Article 84 of the Executive Regulations of the System for Monitoring Finance Companies in the debt confirmation letter.
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