Instructions No. 2 of 2022 Regarding the Protection of Customer Rights

Instructions No. 2 of 2022 Regarding the Protection of Customer Rights

Based on the provisions of Decision No. (132) of 2011 on the Licensing and Supervision of Specialized Lending Institutions, particularly Articles (21, 22, 35) thereof, In accordance with the powers delegated to us, And in pursuit of the public interest, We have issued the following Instructions:

Article (1)
Definitions

The words and phrases appearing in these Instructions shall have the meanings assigned to them below, unless the context indicates otherwise:

• Institution: Specialized Lending Institution.
• Customer: The person obtaining any service or product from the Institution.
• Responsible Lending: Providing lending and financing services to customers transparently and fairly, in accordance with their needs and repayment capacity.
• Over-indebtedness: The customer expanding borrowing to the point of being unable to repay the debt as planned, or the customer's future cash flows being unable to cover their debt obligations.
• Total Income: The sum of an individual's or family's monthly income, whether from a monthly salary, returns, profits, or any other properly documented additional income.
• Data Confidentiality: Maintaining all data obtained by the Institution, as well as financial operations and movements, and protecting them from unauthorized access and inspection.
• Data Privacy: Taking all necessary measures and precautions to ensure that no customer data or information is disclosed to any parties or used for other purposes without the customer's prior consent.

Article (2)
Objective and Scope of Application

1. The provisions of these Instructions aim to:
   a. Enhance the protection of customer rights by consolidating principles of transparency, disclosure, and accountability. b. Enable customers to compare products and services offered by institutions and choose those that suit their needs.
   c. Limit unfair practices and the risks of over-indebtedness.
   d. Enhance trust in the specialized lending sector.
2. The provisions of these Instructions apply to all specialized lending institutions licensed by the Palestine Monetary Authority.

Article (3)
Appropriate and Suitable Design of Products and Services

The Institution must comply with the following:

1. The credit policy must include the following aspects regarding the protection of customer rights:
   a. Mechanisms for pricing products, interest rates, returns on loans and financings, commissions, and late fees. b. Controls and standards for granting loans and financings to individuals and groups, including accepted collateral.
   c. Mechanisms for dealing with the customer and guarantor in case of default, including terms for rescheduling, structuring, judicial follow-up, debt collection, and write-offs.
   d. In accordance with Article (4), paragraph (3) of these Instructions, the average loan or financing size per product, the maximum maturity period, grace periods, and the maximum limits for the percentage of deduction from the customer's total income, whether as a borrower or guarantor, to repay their direct and indirect obligations, with a clear statement of the bases adopted by the Institution for calculating it.
2. Services and products must be suitable for the customer's needs and capabilities, taking into account all influencing factors as follows:
   a. The nature of products and services in accordance with their purpose. b. The loan or financing repayment period in accordance with the customer's repayment capacity and the purpose of the loan or financing.
   c. Clarification of all costs borne by the customer for obtaining the product or service transparently and fairly.
   d. Determination of collateral in accordance with the size and nature of the loan or financing.
3. Obtain prior approval from the Palestine Monetary Authority for any new product, service, or technology, or any modification thereto, provided that the request is accompanied by a report proving that the Institution has:
   a. Identified and evaluated all risks associated with the new product, service, or technology, or modifications thereto, including money laundering and terrorist financing risks. b. Identified all necessary controls and measures to manage and mitigate risks.
4. Measure customer satisfaction with the products and services provided periodically, through surveys and interviews, as well as through analyzing their data and churn rates, and use the evaluation results to develop its policies, procedures, and products and services.

Article (4)
Protecting Customers from Over-indebtedness Risks

The Institution must comply with the following:

1. Adopt work procedures and mechanisms that enhance customer protection and limit the risks of over-indebtedness.
2. Analyze loan and product data and customer segments to identify aspects with high risks of over-indebtedness.
3. Study the financial status and investigate credit information for the customer and guarantor, documenting it with necessary documents at the time of granting or renewal.
4. The repayment period must be compatible with the customer's ability and income sources, and compliance with the percentage of deduction from the total income of the customer or guarantor documented with the Institution for the purpose of repaying their direct and indirect obligations as a borrower or guarantor as follows:
   a. A maximum of 50% of the customer's total income to repay their direct and indirect obligations if the customer is a borrower only. b. In accordance with item (a) of this paragraph, a maximum of 75% of the customer's total income to repay their direct and indirect obligations if the customer is a borrower and guarantor for one or more loans.
   c. A maximum of 50% of the customer's total income to repay their indirect obligations if the customer is a guarantor for one or more loans.
5. Consider the date of deducting the monthly installment from the customer's account in accordance with their income sources, such as the salary receipt date.
6. Consider granting the loan or financing in the same currency as the customer's income. In case of currency difference, the Institution must adopt exchange rates issued by the Palestine Monetary Authority, and the customer must be informed about the possibility of exposure to exchange rate risks.
7. If the loan or financing contract is joint with other parties, the capacity and financial suitability of each party must be studied separately and independently, and borrowing for the benefit of another person or on their behalf is not permitted.

Article (5)
Disclosure, Transparency, and Responsible Lending

The Institution must comply with the following:

1. Provide educational brochures for customers in all branches and on its website and social media platforms, containing detailed information about its services and products, interest rates and returns, specifying whether the interest rate is fixed or variable with illustrative examples, the total cost of the product or service, required collateral, risks associated with the service or product and how to avoid them, target categories and sectors, and any other conditions, updating them periodically and as needed.
2. Clarify the difference between types of loans and types of financings, and clarify what may result from each in case of early repayment.
3. The customer must sign a declaration of the correctness and accuracy of all information required from them, and the necessity to inform the Institution of any modification or change to their address, phone numbers, or any other important information.
4. Inform the guarantor and have them sign a document stating their awareness of the risks of guarantee and their obligations in case the customer delays repaying their obligations according to the loan or financing contract.
5. If the Institution rejects the customer's request for a loan or other service, it must inform them of the reasons for rejection through communication channels that ensure the protection of the customer's data and privacy, within a maximum of (5) working days from the date of rejection.

Article (6)
Loan or Financing Contracts and Documents

The Institution must comply with the following:

1. Arabic shall be the official language for all contracts concluded with the customer, and the font must be clear and readable. In case contracts are concluded in a foreign language, an Arabic translation must accompany the text, with Arabic being the basis for interpreting the provisions of those contracts.
2. The contract must include at least the following:
   a. The value of the loan or financing in numbers and words, and its purpose. b. The duration of the loan or financing, grace period (if any), and repayment schedule.
   c. The interest rate or return and the annual cost of borrowing or financing (percentage and amount), and any costs not included in this percentage.
   d. A statement of the mechanism for calculating interest or returns and commissions for the customer within the contract or a special annex, indicating the possibility of changing the installment value if the interest is variable. e. Collateral, guarantees, and the terms and conditions related to them, and the obligations that may result for the guarantor in case the customer fails to fulfill their obligations to the Institution. f. The number of installments, their value, due dates, and a separate statement of the principal amount from interest or returns and expenses. g. Terms and mechanism for early repayment of the loan or financing, specifying the commission and any additional expenses that may be due as a result. h. Late fees, commissions, and any other expenses that may result from violating the contract provisions.
   i. Controls and standards related to the confidentiality and privacy of the customer's and guarantor's data.
   j. It is not permissible to terminate the contract before its expiration date unless the customer violates the contract terms, and they must be notified in writing to the address approved by the Institution. k. The customer has the right to cancel the contract and withdraw from it if they do not receive the loan or financing within a maximum of two working days from the date of signing the contract, without any expenses being incurred by the customer as a result.
   l. The customer's acknowledgment of the correctness of the information and documents provided to the Institution.
   m. Procedures followed by the Institution in case of the customer's death.
3. All contract data must be written in clear handwriting, and the customer or guarantor is prohibited from signing any contracts, documents, checks, or collection papers without writing down all details regarding them.
4. All contract and document templates must be approved by the Institution's Legal Department or Legal Advisor.
5. Financing contracts approved by the Institution's Shariah Supervisor must be used for those providing Islamic services and products, in accordance with accounting and auditing standards and controls for Islamic financial institutions.
6. The customer and guarantor must be given sufficient time to review all contract terms, answer all their inquiries, and ensure their understanding of their rights and obligations before signing the contract.
7. The customer and guarantor (if any) must sign all pages of the contracts and documents related to them and their modifications.
8. Provide customers and the guarantor with an original or properly certified copy of the contracts and documents, with proof of their receipt. If the customer requests them again, whether or not there are pending court cases between the parties, they must be provided, and the delivery process to the customer must be documented properly.
9. No modification to any clause of the contract signed with the customer or guarantor is allowed without obtaining the written consent of the customer and guarantor according to the actual situation.
10. It is prohibited for the contract and its annexes to include any clauses obliging the customer to continue dealing with the Institution.

Article (7)
Procedures and Disclosures After Repayment

The Institution must comply with the following:

1. Provide the customer with a free certificate of clearance once after fully repaying their obligations.
2. Request in writing from the competent departments and authorities to remove the lien indication from the customer's funds and pledged guarantees from the Institution immediately after the customer fully repays their obligations to the Institution according to regulations.

Article (8)
Default and Late Fees

The Institution must comply with the following:

1. Do not determine the value or percentages of judicial fees and expenses.
2. In case the customer fails to fulfill their obligations, the Institution must notify the customer and guarantors in writing or electronically within a maximum of (30) thirty days from the date of violation, and the notification must state that recourse will be made to the guarantors' accounts to settle the outstanding balances and follow up legally.
3. In case of deferring the payment of any installment, it must be based on a written request submitted by the customer and with the approval of the guarantors, provided that the customer is informed of the additional costs that will result from this.
4. Late interest must be calculated on the outstanding principal only.

Article (9)
Early Repayment

1. The Institution must comply with the following when the customer makes early repayment of their debt in full or in part:
   a. Do not impose any fines on the customer under any name if they pay any amount before the due date. b. Do not make any changes to the contracting terms or increase the interest rate if the customer makes partial or full repayment.
   c. Do not collect any interest or profits on loans and financings installments paid early.
   d. Provide the customer, upon request, with an account reflecting all posting and repayment transactions in their account, including the loan or financing repayment schedule, paid and outstanding installments.
2. The Institution may collect an early repayment commission not exceeding 1.5% of the balance to be repaid.

Article (10)
Guarantor Liability

1. In case the customer fails to pay one or more installments, the Institution must collect the due installments from the guarantors, distributing the outstanding balance equally among all guarantors if possible.
2. It is prohibited to take any action against guarantors until (30) thirty days have passed from the date of notifying the customer in writing or electronically of their default, provided that a copy of the notice is sent to the guarantors.

Article (11)
Rescheduling Irregular Loans and Financings

1. The Institution may reschedule the loan or financing based on the customer's request.
2. The Institution must organize the rescheduling process in writing pursuant to a separate contract, which is considered an annex to the main contract.
3. The Institution is prohibited from increasing the interest rate or return specified in the main contract in case of rescheduling the loan or financing.

Article (12)
Customer Life Insurance

1. The Institution must issue a life insurance policy for the customer obtaining a loan or financing with a repayment period of 48 months or more, with a coverage ratio of 100% of the value of the loan or financing, with the policy being forced in favor of the Institution.
2. The Institution is prohibited from charging the customer life insurance premiums up to the cost limit only without generating revenue. In case of refunding amounts related to insurance, the Institution must refund these amounts to the customer.
3. In cases where the customer bears the value of the policy coverage, the Institution must distribute the value over the entire loan or financing period in equal monthly installments.
4. In accordance with paragraph (1) of this Article and the insurance policy conditions, in case of the customer's death, the Institution is prohibited from collecting loan or financing installments from the heirs or guarantors, and must proceed with collecting the value of the insurance policy from the issuing insurance company to cover the outstanding debt balance of the deceased.

Article (13)
Responsible Pricing

The Institution must comply with the following when calculating the cost of lending or financing:

1. Provide a clear mechanism for pricing products and services based on market factors, competition, risks, and costs incurred by the Institution.
2. The total cost of lending must be clearly specified for customers, including the annual interest rate or return and other administrative expenses such as insurance fees and commissions.
3. Comply with advertised interest rates or returns and include them in contracts signed with the customer.
4. Do not change the method of calculating interest or returns without obtaining the prior written consent of the customer and guarantor.
5. It is prohibited for the Institution providing Islamic financing activities to collect commissions on Murabaha financing.
6. Interest or return on the loan or financing granted shall be calculated on the basis that the number of days in a year is 365 days.

Article (14)
Data Confidentiality

The Institution must comply with the following:

1. Adopt a policy and work procedures that ensure the maintenance of data confidentiality, whether stored by the Institution or by a third party.
2. The systems used by the Institution or the third party must have security and protection standards and controls that ensure their protection from unauthorized access to data.
3. Define access rights to data based on dual control controls.
4. All customer and guarantor data and information are considered confidential, and it is prohibited to use or share them with others contrary to the provisions of the law and instructions issued pursuant to it.
5. Obtain the prior consent of the customer or guarantor "access authorization" authorizing the Institution to exchange their credit information with the credit information system of the Palestine Monetary Authority.
6. Disclose to customers and guarantors from the beginning of the relationship the privacy and confidentiality of their data and information with the Institution, and provide a brief explanation of the Institution's standards and controls for maintaining the confidentiality of customer and guarantor data, and include this in approved contracts.
7. Employees of the Institution must sign a commitment to maintain data confidentiality, ensuring their commitment not to misuse or disclose such data or information throughout their employment period and even after leaving the Institution.
8. Adopt a deterrent penalty system in case of violation of the provisions of this Article.
9. Adopt clear and secure mechanisms and channels to respond to inquiries from customers and guarantors, ensuring that no information or data related to them is disclosed to any unauthorized party.

Article (15)
Dealing with Customers and Guarantors Fairly and Respectfully

The Institution must comply with the following:

1. Adopt a code of conduct that includes organizational and institutional values, professional and ethical behavior standards in dealing with the customer and guarantor, and clear and specific mechanisms for monitoring their application and compliance, disseminating them to employees, and having them sign to acknowledge, understand, and commit to what is contained therein.
2. The code of conduct must include professional behavior standards and behaviors prohibited from being practiced with the customer and guarantor, and ensure the absence of discrimination in customer selection based on race, gender, age, disability, political affiliation, sectarian affiliation, or religion.
3. Customer selection must be based on risk analysis and the target categories and segments for products and services.
4. Exercise due diligence to ensure employees' compliance with dealing with customers and guarantors fairly and respectfully, by preparing a customer satisfaction evaluation survey, using a mystery shopper, studying and analyzing customer complaints, and taking improvement and development measures, among other things.
5. Adopt specific procedures for dealing with customers who are unable to read and write or who suffer from any physical challenges.
6. Provide necessary guidance for choosing the loan or financing, or service in accordance with their needs, enabling them to understand the basic related risks and helping them make decisions that suit their needs and capabilities.
7. Raise customer awareness by publishing brochures explaining the responsibilities of the customer and guarantor, the necessity of providing their information completely and accurately, ensuring their understanding of the contract texts being signed, and their right to inquire about any unclear clause.
8. Provide the customer with statements related to their debt, which must include all necessary details and data, at a minimum as follows:
   a. The value of the loan or financing principal. b. The percentage and value of interest or returns.
   c. Expenses and any other costs.
   d. The installment schedule and paid payments. e. The value and number of due installments and due interest or returns. f. The outstanding balance of the loan or financing.
9. Employees of the Institution, specifically those responsible for collection follow-up, are prohibited from doing the following:
   a. Conveying incorrect information to the customer or guarantor (in writing, verbally, or by any other means) regarding the consequences of default. b. Writing on postal correspondence and other communications sent to the customer or guarantor that appears to relate to debt collection or any other financial matters.

Article (16)
Handling Customer Complaints

The Institution must comply with the following:

1. Adopt special work procedures for handling customer complaints, provided that they include the following:
   a. Mechanism for handling complaints. b. Contact point from the Institution.
   c. Procedure to be taken to handle the complaint.
   d. The time period for handling the complaint and responding to it, provided that it does not exceed (10) working days from the date of submitting the complaint. The Institution may extend the response period to the complaint by (5) additional working days, provided that an official letter is sent to the complainant to inform them of this, provided that the time period for handling any complaint and responding to it does not exceed (30) working days from the date of receiving the complaint. e. Informing the complainant of the Institution's procedures and the results of the complaint study and the final outcome, pursuant to a written letter. f. Informing the complainant that they have the right, if they are not satisfied with the Institution's response, to submit a complaint to the Palestine Monetary Authority or resort to the judiciary, and the Institution is prohibited from forcing the complainant to waive their right to complain, whether with the Institution, the Palestine Monetary Authority, or the judiciary. g. Keeping records of all complaints and measures taken to facilitate easy reference.
2. Assign the tasks of handling and following up on customer complaints within the Institution to the Customer Protection Officer.
3. Provide suitable channels for receiving complaints and advertising them to customers, such as (telephone, fax, email, website, Institution's social media sites), including a complaint box in all branches, and adhering to the "Complaint Box" and providing a complaint form specifying the complaint submission procedures according to Annex No. (1).
4. Respond to all items mentioned in the complaint in detail.
5. Designate an employee in each branch and assign them responsibility for receiving complaints submitted to branches, or by designating a special email address for complaints, which must be recorded in a special register, assigned a serial number, and sent to the Customer Protection Officer.
6. Inform the complainant of the receipt of the complaint using the method by which the complaint was submitted.
7. If the complaint is pending before the judiciary, the Institution may apologize for not answering the complainant.
8. Do not take any punitive measures against the complainant.
9. Conduct a comprehensive analysis of complaints periodically, analyzing complaint trends and topics. If they recur on a specific subject, necessary corrective and preventive measures must be taken to address the root cause of the complaint to avoid its occurrence in the future.
10. Submit quarterly reports to the Board of Directors regarding measures taken in the field of customer protection, with an analysis of complaints and inquiries submitted to the Institution and how they were handled, with the aim of improving services and operations.
11. Provide the Palestine Monetary Authority with a periodic quarterly report, via the email "CRMC@pma.ps" within a maximum of (10) working days from the end of each quarter, including all complaints and measures taken regarding their handling according to Annex No. (2).

Article (17)
Handling Complaints Submitted by Customers to the Palestine Monetary Authority

The Institution must comply with the following:

1. Respond to the letter from the Palestine Monetary Authority addressed to the Institution regarding the complaint within a maximum of (5) working days, with the response being an official letter and a detailed response to all aspects of the complaint, supported by supporting documents and evidence.
2. The Institution may request an additional period to respond to the complaint, provided that the additional period does not exceed (5) working days.
3. The Palestine Monetary Authority may request any additional documents after the Institution's response as it deems appropriate.
4. If the Palestine Monetary Authority's decision is in favor of the complainant, it may take the following measures:
   a. Request the Institution to take corrective measures to handle the complaint and provide the Palestine Monetary Authority with proof thereof. b. Request the Institution to take corrective measures regarding the subject of the complaint for all customers if it is determined that the violation is general, including modifying the policy and procedures related thereto.
   c. Take legal measures, including imposing penalties according to the law and instructions.

Article (18)
Final Provisions

1. The Institution must develop its policies and work procedures to be consistent with the provisions of these Instructions, and develop supervisory tools to ensure their application.
2. The Institution must train all employees working in the field of lending and financing on the requirements of these Instructions, including theoretical and practical aspects. The annual evaluation process and the Institution's incentive and reward system must include standards for measuring employees' compliance with its provisions and the policies and procedures derived therefrom.
3. The Institution must prepare a customer guide based on the provisions of these Instructions and provide a free copy in all branches of the Institution and deliver it to customers at the beginning of their relationship. It must also be published on the Institution's website.

Article (19)
Penalties

Anyone who violates the provisions of these Instructions shall be punished in accordance with the provisions of Decision No. (132) of 2011 on the Licensing and Supervision of Specialized Lending Institutions and its amendments.

Article (20)
Rectification of Status

The Institution must rectify its status according to the provisions of these Instructions within a maximum of (3) three months from the date of entry into force of these Instructions.

Article (21)
Repeal

1. Instructions No. (1) of 2016 regarding the handling of public complaints are repealed.
2. Instructions No. (2) of 2016 regarding Responsible Lending are repealed, insofar as they concern specialized lending institutions.
3. Everything inconsistent with the provisions of these Instructions is repealed.

Article (22)
Execution and Entry into Force

All competent authorities must execute the provisions of these Instructions, each according to their jurisdiction, and they shall apply from the date of their issuance.

Issued in Ramallah on 2022/3/23 AD

Dr. Firas Malham
Governor
[Signature]

Annex No. (1)
Complaint Submission Form

Complainant Data:

• Full Name: ....................................................................................................
• Phone Number: ........................................................................................................
• Mobile Number: ......................................................................................................
• Fax Number: ........................................................................................................
• Email Address: .................................................................................................

To the Complained Against Institution: .................................................................................................
Complaint Details:
[Blank Space]

• Attachments:
• Date of Complaint Submission:
• Complainant Signature:
• Complaint Submission Instructions:
  1. The complaint must be submitted by the complainant personally or by their legal representative using the approved complaint submission form of the lending institution.
  2. The complaint must be responded to within 10 working days from the date of its submission for study.
  3. Provide the complainant with a stamped copy of the complaint.
  4. The complainant must disclose their name, title, and complaint properly, specifying their contact method.
  5. In case the complained against institution does not respond or the complainant is not satisfied with the response, the complainant must submit a written complaint to the Palestine Monetary Authority through the public reception halls in Ramallah and Gaza cities by filling out a special form or via fax or email, attaching the response of the complained against institution.

Annex No. (2): Quarterly Report and Complaint Classification

First: Quarterly Report Template Regarding Customer Complaints Received by the Institution:

Serial Number	Complainant Name	Phone/Fax Number	Complaint Subject	Date of Complaint Submission	Date of Response to Complainant	Specialized Lending Institution's Handling Mechanism and Result	Notes

Second: Classification of Complaints Submitted up to the Date of the Current Report:

Classification	Number	Percentage	Number of Complaints Where a Violation by the Institution of the Palestine Monetary Authority Instructions Was Proven	Percentage of Complaints Where a Violation by the Institution of the Palestine Monetary Authority Instructions Was Proven
Interest Rates, Commissions, and Fees
Professional Conduct
Contracts
Collateral and Guarantees
Advertising and Promotion
Prize Campaigns
Other Determined Matters
Total