The Governor of the State Bank of Vietnam (SBV) issued Circular No.43/2016/TT-NHNN on December 30, 2016 to promulgating regulations on lending for consumption by finance companies. The Circular will take effect from March 15, 2017.
The Circular including 13 Articles stipulates regulations on lending for consumption in line with operational features of finance companies, protecting consumers’ rights, ensuring sustainable development of lending for consumption purposes. For other regulations on lending concerning with consumption loans of finance companies that are not stipulated in this Circular, finance companies are required to comply with SBV’s regulations on lending activities of credit institutions and foreign bank branches to their customers.
The Circular stipulates the definition of consumption loans; accordingly, lending for consumption is an activity that finance companies provide loans in VND to their customers as individuals in order to meet the demand for purchasing, using goods and services for the purpose of consumption of those customers or customers’ family, at the same time, the total consumption loan to a customer by finance companies does not exceed VND 100 million; this total loan outstanding is not applied to consumption lending for the purpose of buying cars which are utilized as collateral of that loan in accordance with laws. Capital demands for purchasing and using goods and services include: purchasing of means of transport and home appliances; fees for studying, medical treatment, culture and sport; costs for housing repair (Items 1, 2 of Article 3).
The Circular stipulates that finance companies are allowed to open service introducing agents at the places of providing goods and services in order to introduce consumption loans, collect information and capital demands of customers; finance companies are not allowed to conduct other operations at the service introducing agents.
The Circular stipulates that finance companies are required to promulgate internal regulations on consumption loans in order to guide in collecting, updating and checking statistics, managing customers’ information, identifying inaccurate information and preventing fraud to make decision of providing loans, monitor loans and collect debts; measures of collecting debts; principles and code of conduct when providing consumption loans and measures of ensuring the compliance with those principles and standards; team and measures of receiving and resolving comments and complaints from customers; procedures, authorization and responsibility for opening and terminating service introducing agents; standards of morality, rights and obligations of staff at the introducing agents, procedures of operating, checking and preventing from fraud and moral risks of staff at the introducing agents (Article 7).
The Circular stipulates that finance companies promulgate regulations on maximum and minimum lending interest rates for each consumption loan and shall have to send that substance to the SBV for supervision (Article 9).
The Circular stipulates contracts of lending for consumption include substances concerning with forms of notifying customers of schedule of paying principal and interest rate of consumption loans when adjusted; measures of reminding or recovering debts in accordance with laws; measures of handling with the cases when customers fail to pay their debts on time; conditions and fees of paying debts before due, forms of notifying customers of schedule of paying principal and interest rates of remaining loans in case that customers pay a part of their debts before due (Item 1 Article 10).
The Circular stipulates finance companies are required to provide customers draft contract of consumption loans for considering and making their decision before signing; finance companies are required to explain substances of consumption loan contract accurately and faithfully when customers require for explanation (Item 4 Article 10); to publicize contract in form and general conditions of consumption loans at their head offices and service introducing agents; at the same time, to post those substances on websites of finance companies, to provide customers all information concerning with contract in form and general conditions before signing consumption loan contract and get confirmation of being provided all relevant information from customers (Item 5 Article 10).
The issuance of Circular No.43/2016/TT-NHNN aims at completing legal documents to protect rights of customers and creating legal framework for managing consumption loans of finance companies, ensuring the sustainable development of lending activities for consumption.
Translated by Le Hang