SEOJK No. 47/SEOJK.05/2016 on Down Payment Amounts for Motor Vehicle Financing by Financing Companies

To:
Directors of Financing Companies

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 47/SEOJK.05/2016

ON

THE AMOUNT OF DOWN PAYMENT (DOWN PAYMENT)
FOR MOTOR VEHICLE FINANCING
FOR FINANCING COMPANIES

In accordance with the mandate of Article 17 paragraph (3) of Financial Services Authority Regulation Number 29/POJK.05/2014 concerning the Conduct of Business by Financing Companies (State Gazette of the Republic of Indonesia Year 2014 Number 364, Supplement to the State Gazette of the Republic of Indonesia Number 5638) and in order to encourage the growth of the financing industry, it is necessary to improve the regulations regarding the amount of down payment (down payment) for motor vehicle financing for financing companies in the Circular Letter of the Financial Services Authority as follows:

I. GENERAL PROVISIONS

In this Circular Letter of the Financial Services Authority, the following terms are defined:

1. Financing Company is a business entity that conducts financing activities for the procurement of goods and/or services.

2. Investment Financing is financing for the procurement of capital goods and/or services required for business/investment activities, rehabilitation, modernization, expansion, or relocation of business/investment premises, provided to the debtor for a period of more than 2 (two) years.

3. Multi-purpose Financing is financing for the procurement of goods and/or services required by the debtor for use/consumption and not for business (productive activity) purposes for an agreed period.

4. Installment Purchase is a financing activity in the form of procurement of goods and/or services purchased by the debtor from the provider of goods or services with installment payments.

5. Down Payment (Down Payment) for Motor Vehicle Financing is an advance payment or cash down payment whose funds come from the debtor (self-financing) in the context of procuring motor vehicles using the Installment Purchase method.

6. Debtor is a business entity or individual who receives financing for the procurement of goods and/or services from a Financing Company.

7. Quality of Problematic Financing Receivables (Non Performing Financing), hereinafter abbreviated as NPF, is financing receivables consisting of financing receivables with poor, doubtful, and bad quality for motor vehicle financing using the Installment Purchase method, after considering the provision for write-off of financing receivables.

8. Ratio of Problematic Financing Receivables (Non Performing Financing), hereinafter called the NPF Ratio, is the comparison between NPF and total financing receivables for motor vehicles using the Installment Purchase method.

9. Financial Health Level is the assessment result of the Financing Company's condition regarding capital risk, liquidity, assets, operations, and performance.

II. AMOUNT OF DOWN PAYMENT (DOWN PAYMENT) FOR MOTOR VEHICLE FINANCING FOR FINANCING COMPANIES

1. Financing Companies that have a Financial Health Level with a minimum healthy condition and have an NPF Ratio value lower than or equal to 1% (one percent) must apply the down payment (Down Payment) amount regulations for Motor Vehicle Financing to Debtors as follows:
   a. for two- or three-wheeled motor vehicles, at least 5% (five percent) of the selling price of the relevant vehicle; b. for four-or-more-wheeled motor vehicles used for Investment Financing (productive purpose), at least 5% (five percent) of the selling price of the relevant vehicle; or
   c. for four-or-more-wheeled motor vehicles used for Multi-purpose Financing (non-productive purpose), at least 5% (five percent) of the selling price of the relevant vehicle.

2. Financing Companies that have a Financial Health Level with a minimum healthy condition and have an NPF Ratio value higher than 1% (one percent) and lower than or equal to 3% (three percent) must apply the down payment (Down Payment) amount regulations for Motor Vehicle Financing to Debtors as follows:
   a. for two- or three-wheeled motor vehicles, at least 10% (ten percent) of the selling price of the relevant vehicle; b. for four-or-more-wheeled motor vehicles used for Investment Financing (productive purpose), at least 10% (ten percent) of the selling price of the relevant vehicle; or
   c. for four-or-more-wheeled motor vehicles used for Multi-purpose Financing (non-productive purpose), at least 10% (ten percent) of the selling price of the relevant vehicle.

3. Financing Companies that have a Financial Health Level with a minimum healthy condition and have an NPF Ratio value higher than 3% (three percent) and lower than or equal to 5% (five percent) must apply the down payment (Down Payment) amount regulations for Motor Vehicle Financing to Debtors as follows:
   a. for two- or three-wheeled motor vehicles, at least 15% (fifteen percent) of the selling price of the relevant vehicle; b. for four-or-more-wheeled motor vehicles used for Investment Financing (productive purpose), at least 15% (fifteen percent) of the selling price of the relevant vehicle; or
   c. for four-or-more-wheeled motor vehicles used for Multi-purpose Financing (non-productive purpose), at least 15% (fifteen percent) of the selling price of the relevant vehicle.

4. Financing Companies that do not meet the Financial Health Level with a minimum healthy condition and have an NPF Ratio value lower than or equal to 5% (five percent) must apply the down payment (Down Payment) amount regulations for Motor Vehicle Financing to Debtors as follows:
   a. for two- or three-wheeled motor vehicles, at least 15% (fifteen percent) of the selling price of the relevant vehicle; b. for four-or-more-wheeled motor vehicles used for Investment Financing (productive purpose), at least 15% (fifteen percent) of the selling price of the relevant vehicle; or
   c. for four-or-more-wheeled motor vehicles used for Multi-purpose Financing (non-productive purpose), at least 20% (twenty percent) of the selling price of the relevant vehicle.

5. Financing Companies that have an NPF Ratio value higher than 5% (five percent) must apply the down payment (Down Payment) amount regulations for Motor Vehicle Financing to Debtors as follows:
   a. for two- or three-wheeled motor vehicles, at least 20% (twenty percent) of the selling price of the relevant vehicle; b. for four-or-more-wheeled motor vehicles used for Investment Financing (productive purpose), at least 20% (twenty percent) of the selling price of the relevant vehicle; or
   c. for four-or-more-wheeled motor vehicles used for Multi-purpose Financing (non-productive purpose), at least 25% (twenty-five percent) of the selling price of the relevant vehicle.

6. Motor vehicle financing provided by Financing Companies to Debtors in the context of a motor vehicle ownership program (car ownership program) with other corporations is not required to apply the down payment (Down Payment) amount regulations for Motor Vehicle Financing to Debtors as regulated in items 1 through 5.

7. The motor vehicle ownership program (car ownership program) as referred to in item 6 must be stipulated in a cooperation agreement between the Financing Company and the other corporation, which can provide certainty of the collectibility of the financing receivables that have been provided.

8. The certainty of the collectibility of financing receivables that have been provided as referred to in item 7 can be in the form of:
   a. installment payments through a salary deduction mechanism from the employees of the relevant corporation; and b. guarantees on financing receivables.

9. The guarantee on financing receivables as referred to in item 8 letter b is in the form of:
   a. credit insurance or credit guarantees as referred to in Article 18 paragraph (2) letter a of Financial Services Authority Regulation Number 29/POJK.05/2014 concerning the Conduct of Business by Financing Companies; and/or b. guarantees on financing receivables from the relevant corporation.

III. IMPLEMENTATION PERIOD OF DOWN PAYMENT (DOWN PAYMENT) AMOUNT FOR MOTOR VEHICLE FINANCING

1. The application of the down payment (Down Payment) amount for Motor Vehicle Financing as referred to in Roman numeral II is calculated based on monthly reports as of June 30 and December 31.

2. The application of the down payment (Down Payment) amount for Motor Vehicle Financing as referred to in item 1 takes effect on August 1 or February 1 for the next 6 (six) months.

Example:
If based on the monthly report of the Financing Company as of June 30, 2017, the Financing Company has an NPF Ratio value higher than 5% (five percent), then the Financing Company applies the down payment (Down Payment) amount regulations for Motor Vehicle Financing as referred to in Roman numeral II item 5. The application of the down payment (Down Payment) amount for Motor Vehicle Financing takes effect starting from August 1, 2017, to January 31, 2018.

If based on the monthly report of the Financing Company as of December 31, 2017, the Financing Company has a Financial Health Level with a healthy criterion and an NPF Ratio value of 3.5% (three point five percent), then the Financing Company applies the down payment (Down Payment) amount regulations for Motor Vehicle Financing as referred to in Roman numeral II item 3. The application of the down payment (Down Payment) amount for Motor Vehicle Financing takes effect starting from February 1, 2018, to July 31, 2018.

If based on the monthly report of the Financing Company as of June 30, 2018, the Financing Company has a Financial Health Level with a very healthy criterion and an NPF Ratio value of 0.5% (zero point five percent), then the Financing Company applies the down payment (Down Payment) amount regulations for Motor Vehicle Financing as referred to in Roman numeral II item 1. The application of the down payment (Down Payment) amount for Motor Vehicle Financing takes effect starting from August 1, 2018, to January 31, 2019.

IV. PROCEDURE FOR CALCULATING THE AMOUNT OF DOWN PAYMENT (DOWN PAYMENT) FOR MOTOR VEHICLE FINANCING

1. The calculation of the down payment (Down Payment) amount for Motor Vehicle Financing as referred to in Roman numeral II is conducted against the selling price of the vehicle after deducting price discounts (discount) and other discounts.

Example:
Vehicle price: Rp10,000,000.00
Price discounts (discount) and other discounts given: Rp500,000.00 Selling price of vehicle: Rp10,000,000.00 – Rp500,000.00 = Rp9,500,000.00

For Financing Companies meeting the criteria as referred to in Roman numeral II item 3, the down payment (Down Payment) for Motor Vehicle Financing that must be charged and paid in cash at once is 15% x Rp9,500,000.00 = Rp1,425,000.00.

2. The calculation of the down payment (Down Payment) amount for Motor Vehicle Financing as referred to in Roman numeral II does not include the first installment, survey costs, commissions, insurance, guarantees, fiduciary transfers, notary fees, or other costs.

Example 1 (insurance costs, guarantees, or other costs paid in cash by the Debtor):
Vehicle price: Rp10,000,000.00
Price discounts (discount) and other discounts given: Rp500,000.00 Insurance costs, guarantees, or other costs paid by the Debtor in cash: Rp1,000,000.00 Selling price of vehicle: Rp10,000,000.00 – Rp500,000.00 = Rp9,500,000.00

For Financing Companies meeting the criteria as referred to in Roman numeral II item 3, the down payment (Down Payment) for Motor Vehicle Financing that must be charged and paid in cash at once is 15% x Rp9,500,000.00 = Rp1,425,000.00.

Thus, the costs paid by the Debtor in cash at once (insurance costs, guarantees, or other costs paid in cash by the Debtor) = down payment (Rp1,425,000.00) + insurance costs, guarantees, or other costs (Rp1,000,000.00) = Rp2,425,000.00. Total financing by the Financing Company to the Debtor = selling price of vehicle (Rp9,500,000.00) – down payment (Rp1,425,000.00) = Rp8,075,000.00.

Example 2 (insurance costs, guarantees, or other costs not paid in cash (installment) by the Debtor):
Vehicle price: Rp10,000,000.00
Price discounts (discount) and other discounts given: Rp500,000.00 Insurance costs, guarantees, or other costs: Rp1,000,000.00 Selling price of vehicle: Rp10,000,000.00 – Rp500,000.00 = Rp9,500,000.00

For Financing Companies meeting the criteria as referred to in Roman numeral II item 3, the down payment (Down Payment) for Motor Vehicle Financing that must be charged is 15% x Rp9,500,000.00 = Rp1,425,000.00.

Thus, the costs paid by the Debtor if insurance costs, guarantees, or other costs are not paid in cash by the Debtor or are paid in installments = down payment (Rp1,425,000.00).
Total financed by the Financing Company to the Debtor = insurance costs, guarantees, or other costs (Rp1,000,000.00) + vehicle financing price (Rp8,075,000.00) = Rp9,075,000.00.

3. Incentive costs provided by the Financing Company to third parties related to financing acquisition cannot be calculated in the calculation of the down payment (Down Payment) amount for Motor Vehicle Financing as referred to in Roman numeral II.

V. COMPLIANCE ENFORCEMENT AND SANCTIONS

Financing Companies that do not meet the down payment (Down Payment) amount regulations for Motor Vehicle Financing as referred to in this Circular Letter of the Financial Services Authority are subject to the regulations as referred to in Article 61 and Article 63 of Financial Services Authority Regulation Number 29/POJK.05/2014 concerning the Conduct of Business by Financing Companies.

VI. CLOSING

1. The provisions in this Circular Letter of the Financial Services Authority take effect on the date of establishment.

2. With the establishment of this Circular Letter of the Financial Services Authority, the Circular Letter of the Financial Services Authority Number 19/SEOJK.05/2015 concerning the Down Payment (Down Payment) Amount for Motor Vehicle Financing for Financing Companies is revoked and declared invalid.

Established in Jakarta on December 13, 2016

EXECUTIVE HEAD OF INSURANCE, PENSION FUND,
FINANCING INSTITUTION, AND OTHER FINANCIAL SERVICES INSTITUTIONS FINANCIAL SERVICES AUTHORITY,

signed,
FIRDAUS DJELANI

Copy matches the original
Legal Director 1
Legal Department

signed,
Yuliana