Palestine Monetary Authority Instructions No. 5 of 2023 Regarding Market Discipline and Protection of Customer Rights

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Palestine Monetary Authority
PALESTINE MONETARY AUTHORITY

Instructions No. (5) of 2023
Regarding Market Discipline and Protection of Customer Rights

Based on the provisions of Law No. (9) of 2010 Concerning Banks, particularly Articles (2, 40, 43, 72) 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:

Customer:	A natural or legal person who obtains any product or service from the Bank.
Customer Rights:	A clear contractual framework that defines the relationship between the Bank and the Customer, enabling the Customer to obtain sufficient and transparent information regarding the services provided, and to improve the knowledge and skills necessary to manage the relationship with the Bank and make informed financial decisions.
Credit:	Facilities or financing granted by a commercial bank or an Islamic bank.
Over-indebtedness:	The Customer's expansion of credit to the point of inability to repay the debt as planned, or the inability of the Customer's expected cash flows to cover their liabilities regarding the debt.
Total Income:	The sum of the individual's or family's net monthly or annual income, including any other income documented with the Bank.
Data Confidentiality:	Maintaining all data obtained by the Bank, as well as financial operations and transactions.
Data Privacy:	Taking all necessary measures and safeguards to ensure that no data or information relating to the Customer is disclosed to any party or used for other purposes without the prior consent of the Customer or in accordance with the provisions of the law.
Printed Advertisement:	An advertisement published through newspapers, magazines, websites, social media, or any other similar method.
Partial Printed Advertisement:	An advertisement published through an advertising brochure or flyer.
Short Printed Advertisement:	An advertisement published through a billboard, web banner, or any other similar method.
Audio Advertisement:	A non-written advertisement published through radio, websites, telephone, or any other similar method.
Visual Advertisement:	An advertisement published through television stations, websites, display screens, or ATM screens at service provider branches, or by any other similar method.
Annual Borrowing Cost:	An annual percentage of the loan amount calculated based on the value and term of the amount received by the Customer, along with repayment amounts and dates, including all fees and commissions, excluding late payment penalties, taking into account the continuous reduction in the loan principal after each payment.
Program:	A program for calculating the Annual Borrowing Cost percentage.
Net Exposure:	The remaining net value of the credit due from the Customer on a specific date.

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Article (2)
Objective and Scope of Application

1. The provisions of these Instructions aim to enhance the protection of customer rights through the following:
   a. Regulating market rules to control it and maintain price stability. b. Consolidating principles of transparency, disclosure, and accountability in dealings with customers.
   c. Enabling customers to understand the products and services offered by banks and choose those that suit their needs.
   d. Limiting unfair practices and the risks of over-indebtedness. e. Enhancing trust in the banking sector and maintaining financial stability.
2. The provisions of these Instructions apply to all banks licensed by the Palestine Monetary Authority to conduct banking business in Palestine.

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Article (3)
Conditions for Granting Credit

1. The Bank must comply with the following when granting credit:
   a. Clarifying to the Customer the details, types, conditions, calculation mechanisms, and direct and indirect costs of credit. b. Determining interest rates/yields on credit, commissions, late payment penalties, insurance fees, and other charges.
   c. Pricing products and services based on mechanisms derived from market factors, competition, risks, and costs.
   d. Determining whether the interest/yield is variable or fixed, and explaining the calculation differences to the Customer, taking into account financing formulas in Islamic banks. e. Determining acceptable guarantees for granting credit, ensuring that required guarantees are proportional to the credit risk. f. Assisting the Customer in choosing the best suitable banking solutions in terms of conditions and prices. g. Verifying, when reviewing the application, that credit conditions are suitable for the Customer's ability to repay installments on specified dates. h. Ensuring that credit is implemented to finance the targeted activities specified in the credit application.
   i. Unifying the number of days in a year for the purpose of calculating interest payable and receivable.
   j. Not changing the method of calculating interest/yield on credit without obtaining the prior written or documented consent of the Customer and the Guarantor. k. Granting credit in the same currency as the Customer's income; if the currency differs, the Bank must warn the Customer about the possibility of exposure to exchange rate risks.
   l. Directing Customers to choose the appropriate product and service with the lower cost.
   m. Not exceeding interest rates on the current account overdraft for individuals and interest on overdrafts in current accounts by more than 2% above the approved interest rates for loans and current accounts in the Bank according to customer risks.
2. The Bank must provide a system and develop a methodology for classifying and evaluating credit risks (CRR), such that the system provides a risk profile for the borrower and classifications based on quantitative and qualitative assessment of risk factors, and necessary models must be built to apply control factors to derive the necessary risk classifications to determine different risk levels.

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Article (4)
Changes in Credit Prices After Granting

1. The Bank must comply with the following:
   a. Planning levels of interest/yield increases on credit at a rate proportional to inflation rates in Palestine. b. Evaluating the risks of raising the yield/interest on credit granted to infrastructure projects and production projects that finance basic and vital goods, and assessing the impact of raising interest rates on increasing default rates on one hand and the rising cost of these goods on the end beneficiary on the other hand.
   c. Notifying the Customer at least three months before the date of change in interest/yield rates on credit and banking systems, in case of an increase or decrease.
   d. Not exceeding the value of the installment by 50% of the borrower's income under any circumstances, including interest rate increases. e. Explaining to borrowers how their variable interest rates are determined (including in case of price increases) when applying for credit, especially in the case of mortgage loans, and providing information about other products offered by the Bank that reduce costs, in the event that the borrower faces an increase in mortgage installment value, and facilitating the transition to another product or switching to another bank, and obtaining the borrower's consent for this. f. The Bank must exercise responsibility and ensure that the granted credit remains affordable for the borrower, especially individual borrowers.
2. Subject to the provisions of paragraph (1) of this Article, the Bank may agree with the Customer to restructure the debt in case of objection to an interest rate increase or if the installment value exceeds 50% of income, and agree on a new repayment schedule; in this case, the Bank may extend the loan term by a maximum of 24 months beyond the original loan term.
3. The Palestine Monetary Authority may request the Bank to set up a special reserve equal to the value of the margin difference if the interest margin exceeds 4% between received interest and paid interest; this reserve shall be allocated to face expected default risks resulting from customers' inability to repay due to high interest rates on credit.

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Article (5)
Contracts and Documents

The Bank must comply with the following:

1. Preparing credit-related contracts in Arabic, with clear and readable font; in case contracts are concluded in a foreign language, an Arabic translation must accompany the text, and Arabic shall be the basis for interpreting the provisions of those contracts.
2. Approval of all contract templates and documents by the Bank's Legal Department or Legal Advisor, and approval by the Shariah Supervisory Board in the Islamic Bank.
3. The contract must include the following:
   a. The credit value in numbers and words, and its purpose. b. The credit term, grace period (if any), and repayment schedule.
   c. The interest rate/yield and the Annual Borrowing Cost (percentage and amount), and any costs not included in this percentage.
   d. A separate statement of the principal amount from interest/yields, commissions, and expenses. e. The mechanism for calculating interest/yields on credit within the contract or a special annex to it. f. Determining the index adopted for calculating interest/yields, and determining the additional interest/yield margin the Bank wishes to charge. g. Clearly indicating in the contract the possibility of changing the installment value if the interest/yield is variable. h. Details of guarantees, sureties, and the conditions and provisions related to them, and the obligations that may arise for the Guarantor in case the Customer breaches their obligations to the Bank.
   i. Determining the number of installments, their value, due dates, and providing them to the Customer.
   j. Conditions for early repayment of credit and determining any additional expenses that may result from this. k. Penalties, late payment commissions, and any other expenses that may result from breaching the contract provisions.
   l. Controls and standards related to the confidentiality and privacy of the Customer's and Guarantor's data.
   m. Conditions for terminating the contract before its expiration date; in this case, the Customer must be notified and warned in writing to their approved address. n. Determining the legal procedures to be taken in case of death.
4. Granting the Customer the right to cancel and withdraw from the contract within a maximum of two working days from the date of signing the contract, in case they do not receive the credit and in case the Bank does not issue a commitment letter to any party within the framework of granting credit, without any expenses being incurred by the Customer as a result.
5. The Customer and Guarantor must sign the credit terms form attached to these Instructions.
6. The Customer or Guarantor must not sign any contracts, documents, checks, promissory notes, or guarantees without writing down all details related to them.
7. Granting the Customer and Guarantor sufficient time to review all contract clauses, answer all their inquiries, and ensure their understanding of all their rights and obligations before signing the contract.
8. Ensuring that the Customer and Guarantor sign all pages of the contracts and documents related to them and their amendments.
9. Providing the Customer and Guarantor with an original or certified copy of all contracts and documents signed by them, with proof of their receipt; the Bank must provide the Customer with a certified copy upon request again, regardless of whether there are pending court cases between the parties or not, and the delivery process to the Customer must be documented according to regulations.
10. Providing the Customer and Guarantor with a summary of credit data according to Annex No. (1), and their signature confirming receipt.
11. Not making any amendments to any clause of the contract signed with the Customer or Guarantor, including the scheduling or restructuring process, without obtaining the written consent of the Customer and Guarantor according to the actual situation.

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Article (6)
Execution of Credit and Annual Cost

The Bank must comply with the following:

1. Executing credit electronically, and refraining from disbursing credit in cash to Customers.
2. Calculating the Annual Borrowing Cost percentage for a Consumer wishing to obtain a loan by entering the necessary data into the Program according to the Program's guidelines, Annex No. (4).
3. Providing the Customer with a printed copy of the Annual Borrowing Cost percentage result issued by the Program, when the Customer inquires about a loan at the Bank; the Annual Borrowing Cost percentage provided to the Customer is valid for only 8 working days from the date of printing the cost calculation document.
4. Providing the Customer with a printed copy of the Annual Borrowing Cost calculation after obtaining a loan and actually executing it at the Bank, upon the Customer's request.
5. Making the Program available to at least one employee at all branches and offices.
6. Providing the Annual Borrowing Cost percentage calculation service free of charge to all Customers.
7. Clarifying to the Customer the types of indices relied upon in pricing credit, and the differences between them.
8. Completing true data on the Program according to data extracted from the banking system.
9. Completing data on the Program in the designated places according to the Program usage guidelines attached to these Instructions.

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Article (7)
Procedures and Disclosures After Repayment

The Bank must comply with the following:

1. Providing the Customer with a free certificate of clearance for one time immediately upon full settlement of their obligations upon request; the Bank must provide the Customer with a certificate of clearance or obligation certificate once again or within three working days at the latest from the date of request.
2. Requesting in writing from the competent departments and authorities to lift the pledge indication on the Customer's and their guarantors' assets pledged to the Bank when the Customer requests and settles all obligations due to the Bank according to regulations.
3. Ensuring the provision of necessary data to the Palestine Monetary Authority to update the credit information database.

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Article (8)
Credit Reports

The Bank must grant Customers, upon their prior request, their credit reports extracted through the credit reporting system and stamped according to regulations, and object to their data through all its branches and offices, in compliance with the prevailing Instructions.

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Article (9)
Default and Late Payment Interest

The Bank must comply with the following:

1. Preparing work procedures for dealing with Customers and Guarantors in case of default, and determining conditions for scheduling, restructuring, judicial follow-ups, debt collection mechanisms, and write-offs.
2. Notifying the Customer of the commencement of legal procedures for execution on guarantees in case of default.
3. Not determining the value or percentages of judicial fees and expenses that the borrower will bear; this shall be decided by the court.
4. In case the Customer fails to fulfill their obligations, the Bank must notify both the Customer and the Guarantor in writing (physically or electronically) within a maximum period of (30) thirty days from the date of breach, and the notification must state that the Guarantor's accounts will be resorted to for settling outstanding balances and that this will be followed up legally.
5. In case of deferring the payment of any installment, this must be done based on a written request submitted by the Customer and with the Guarantor's consent, provided that the Customer is clarified about the additional costs that will result from this.
6. Calculating late payment interest only on the value of the due debt.

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Article (10)
Credit Scheduling and Irregular Credit

1. The Bank may structure or schedule credit based on the Customer's request.
2. The Bank must invite the Customer to structure or schedule credit if the installment value rises by more than 20% of the installment value for any reason.
3. The Bank must organize the restructuring or scheduling process in writing under a separate contract, which is considered an annex to the main contract.
4. The Bank is prohibited from raising the interest rate specified in the main contract in case of restructuring or scheduling credit.

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Article (11)
Early Repayment

1. The Bank must, when the Customer makes early repayment of their debt in full or in part, comply with the following:
   a. Not imposing any penalties on the Customer under any name if they pay any amount before the due date. b. Not making any changes to the contracting terms or raising the interest rate if the Customer makes partial or full repayment.
   c. Recollecting any interest/yields on credit installments paid early.
   d. Returning all interest/yields deducted in advance credited to the balance paid early to the Customer. e. Providing the Customer, upon request, with a statement reflecting all debit and credit transactions on their account, including the credit repayment schedule, paid and outstanding installments.
2. The Customer is exempt from the early repayment commission if they wish to repay the credit early due to rising interest rates, provided that the percentage increase in the interest rate exceeds 2% above the interest rate value on the date of signing the contract; the Bank must announce this to Customers.
3. The Bank is committed to collecting the early repayment commission according to the percentage specified in the Instructions issued by the Palestine Monetary Authority.

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Article (12)
Guarantees and Equivalent

The Bank must comply with the following:

1. Not collecting checks or promissory notes as a guarantee from the Customer for a value exceeding the value of the debt and interest.
2. Ensuring the determination of the value of checks and promissory notes collected as guarantees on the date of obtaining the credit.
3. Not collecting cash securities from the Customer without interest; the Bank may agree in writing with the Customer to reduce interest rates on credit if collecting cash securities with zero interest.
4. Ensuring that collected guarantees are real and registrable in case of Customer default.
5. Not exaggerating in collecting guarantees, as this has negative effects on market behavior and Customers' desire to obtain credit.
6. Obtaining realistic estimates to verify the true value of guarantees before granting, and maintaining their estimation periodically by more than one appraiser in case of default.
7. Ensuring the execution of mortgages on guarantees and pledged assets in accordance with the provisions of the law.

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Article (13)
Relationship with the Guarantor

1. The Bank must state the legal and economic consequences resulting from guaranteeing the Customer.
2. The Bank is prohibited from obtaining guarantees from more than two persons for granting credit to a single Customer, except for consolidated loans and financing or those granted to first-degree relatives.
3. Subject to paragraph (2) of this Article, the Bank is prohibited from obtaining guarantees from more than one person if there is movable or immovable tangible security, unless the value of the tangible guarantees is less than the value of the granted credit.
4. The Bank must collect the due installment(s) from the Guarantors in case the Customer defaults, equally, or proportionally; in all cases, the value of deductions must not exceed 50% of the total transferred income.
5. The Bank is prohibited from taking any action against Guarantors except after (30) thirty days from the date of notifying the Customer physically or electronically of their default, provided that a copy of the notification is sent to the Guarantors.
6. The Bank must exercise due diligence and inform both parties in the marital relationship of the consequences of the husband or wife guaranteeing in case of separation.
7. The Bank is prohibited from accepting the guarantee of a husband or wife in mortgage loans and housing loans unless the property or assets subject to mortgage are registered in the names of both spouses.

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Article (14)
Life Insurance for the Customer/Natural Person

1. The Bank must issue a life insurance policy for the Customer obtaining credit for a period exceeding 48 months, with a coverage ratio of 100% of the net exposure value, and the policy must be endorsed in favor of the Bank.
2. The Bank must warn the Customer about the risks of inaccurate or improper disclosure of health status and its impact on the commitment to fulfill the insurance policy.
3. The Bank is prohibited from charging the Customer life insurance premiums except up to the cost only without generating revenue; in case of returning amounts related to insurance, the Bank must return these amounts to the Customer.
4. In cases where the Customer bears the value of the policy coverage, the Bank must distribute the value over the credit period in equal monthly installments.
5. Subject to the provisions of paragraph (1) of this Article and the insurance policy conditions, the Bank must settle the credit through the insurance company in case of the borrowing Customer's death; the Bank is prohibited from collecting credit installments from heirs or Guarantors in this case, except in case the insurance company rejects the coverage.

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Article (15)
New Products

The Bank must comply with obtaining prior approval from the Palestine Monetary Authority for any new programs, products, services, or technologies. It must also notify the Palestine Monetary Authority in case of modification to products, services, and technologies previously approved, including new programs attached to existing products or services at the Bank, provided that the request is accompanied by a report proving that the Bank has done the following:

1. Identifying and evaluating all risks associated with the new product, service, or technology, or modifications to any of them, including money laundering and terrorist financing risks.
2. Identifying all controls and measures for managing and reducing risks.
3. Obtaining approval from the Islamic Bank's Shariah Supervisory Board for new products and their implementation mechanisms.

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Article (16)
Protecting Customers from Over-indebtedness Risks

The Bank must comply with the following:

1. Adopting work procedures and mechanisms that enhance customer protection and limit over-indebtedness risks.
2. Analyzing Customer data and evaluating their risks, identifying high-risk Customers, and limiting excessive borrowing risks.
3. Studying the financial status and investigating credit information of the Customer and Guarantor, and documenting it with necessary documents at the time of granting or renewal.
4. Ensuring that the repayment period is suitable for the Customer's repayment ability according to their income sources, and adhering to deduction ratios from the total income of the Customer or Guarantor documented with the Bank for the purpose of settling their obligations as a borrower or guarantor as follows:
   a. 35% maximum of the Customer's total income if the Customer is a borrower only and in a currency different from their income currency. b. 40% maximum of the Customer's total income if the Customer is a borrower only and in the same currency as their income.
   c. 50% maximum of the Customer's total income if the Customer is a borrower and guarantor or more.
   d. Contrary to the provisions of clauses (a, b, c) of this paragraph and paragraph (1/d) of Article (4) of these Instructions, the Bank may exceed the mentioned ratios by a margin not exceeding an additional 20% if the net remaining salary after deducting the installment and direct and indirect obligations is more than (800) eight hundred US dollars.
5. Considering the due date of the monthly installment on the Customer's account in a manner consistent with their income sources.
6. In case the credit contract is joint with other parties, the capacity and financial suitability of each party must be studied separately and independently, and borrowing on behalf of another person or for them is not permitted unless there is a power of attorney.

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Article (17)
Disclosure and Transparency

The Bank must comply with the following:

1. Advertising interest rates/yields payable and receivable, fees, and approved commissions in the Bank clearly and readably in all branches and offices and on the website.
2. Publishing interest rates and their percentages on credit and deposits monthly, and stating interest rates against the programs provided.
3. Explicitly disclosing the value of the collected commission in all contracts, documents, and service and product application forms.
4. Clarifying the difference between types of credit, and all rights and obligations arising from them, including early repayment.
5. Not providing partial or biased disclosure to attract the Customer, avoiding presenting only the positive aspects of the product and/or service, and delaying disclosure of the full characteristics of the product.
6. The Customer signs a commitment to the correctness and accuracy of all required information, and the necessity of informing the Bank of any modification or change to their address, phone numbers, or any other important information.
7. In case the Bank rejects the Customer's request for credit or any other service, they must inform them of the reasons for rejection.

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Article (18)
Financial Awareness

The Bank must comply with the following:

1. Providing awareness brochures to Customers in all branches and offices, on their website, and on their social media platforms, containing detailed information about their services and products, interest rates/yields, specifying whether the interest rate/yield rate is fixed or variable with illustrative examples, total cost of the product or service, required guarantees, 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. Publishing booklets explaining the responsibilities of the Customer and Guarantor, the necessity of providing their information completely and accurately, ensuring their understanding of the contract texts they sign, their right to inquire about any unclear clause, and giving them sufficient time to absorb and understand information related to the service/product.
3. Warning the Guarantor and having them sign a document confirming their awareness of the risks of guaranteeing and their obligations in case the Customer delays settling their obligations according to the credit contract.

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Article (19)
Protection Against Fraud

The Bank must protect its customers, their savings, and other financial assets within the scope of their dealings with the Bank, by putting in place efficient and effective control and protection systems to limit fraud and embezzlement and prevent their recurrence in the future, and continuous follow-up to ensure the efficiency of the systems used to keep pace with changes in fraudulent methods, in accordance with the law and prevailing legislation.

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Article (20)
Data Confidentiality and Privacy

The Bank must put in place supervisory systems, mechanisms, and policies that ensure the protection of the confidentiality and privacy of Customer data from unauthorized access and viewing. The Bank must also maintain the confidentiality of Customer data and accounts, and they shall not be viewed or disclosed except in accordance with prevailing legislation.

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Article (21)
Competition

1. The Bank must comply with providing sufficient information to the Customer to make comparisons between the banking and financial services and products provided by the Bank and those provided by other banks.
2. The Bank is prohibited from including in the account opening contract, credit contract, or any other contracts and their annexes any clauses that obligate the Customer to continue dealing with the Bank, or impose obstacles that prevent the Customer from easily transferring their dealings to another bank.

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Article (22)
Outsourcing

The Bank must, when wishing to contract with a third party to provide outsourcing services on behalf of the Bank, include in the contract signed with the third party a commitment to maintain the confidentiality and privacy of the Bank's data, and any data or information obtained as a result of carrying out outsourcing operations on behalf of the Bank.

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Article (23)
Conflict of Interest

The Bank must adopt a policy and work procedures to limit conflicts of interest in the Bank. It must also continuously evaluate the extent of compliance with them and their sufficiency in limiting conflicts of interest, and submit periodic reports on the results to the Bank's Board of Directors or whoever is authorized by them.

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Article (24)
Work Behaviors and Ethics

1. Adopting a code of conduct containing organizational and institutional values, professional and ethical behavior standards in dealing with the Customer and Guarantor, and clear and specific mechanisms for controlling their application and compliance, and disseminating them to employees and having them sign acknowledging their awareness, understanding, and commitment to comply with what is stated therein.
2. Providing necessary guidance to Customers to choose credit or services that suit their needs, enabling them to understand the basic risks involved, and helping them make decisions that suit their needs and capabilities.
3. Providing 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 credit principal. b. The percentage and value of interest/yields.
   c. Expenses, commissions, and any other costs.
   d. The schedule of installments and paid payments. e. The value and number of due installments and interest/yields due. f. The outstanding balance of the credit.
4. Ensuring that the employee dealing directly with Customers possesses the following:
   a. Honesty in performing duties, working efficiently and effectively, professionally, and providing prospective and current Customers with correct information. b. Possessing sufficient knowledge of products and services as required to help and warn Customers.
   c. Professionalism and functional independence, and not performing any work or entering into any companies with Customers.
   d. Holding the necessary academic and practical qualifications to provide advice and execute transactions.

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Article (25)
Dealing with the Customer and Guarantor with Fairness and Respect

The Bank must comply with the following:

1. Including in the Code of Conduct mentioned in Article (22) of these Instructions professional behavior standards and behaviors prohibited from being practiced with the Customer and Guarantor.
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