Circular No. 18/2019/TT-NHNN amending and supplementing certain articles of Circular No. 43/2016/TT-NHNN dated December 30, 2016 of the Governor of the State Bank of Vietnam on consumer loans of finance companies.

CIRCULAR

Amending and supplementing certain provisions of Circular No. 43/2016/TT-NHNN dated December 30, 2016 of the Governor of the State Bank of Vietnam on consumer loans of finance companies

Pursuant to the Law on the State Bank of Vietnam dated June 16, 2010;

Pursuant to the Law on Credit Institutions dated June 16, 2010;

Pursuant to the Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions dated November 20, 2017;

Pursuant to Government Decree No. 16/2017/NĐ-CP dated February 17, 2017 on the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

Pursuant to Decree No. 39/2014/NĐ-CP dated May 7, 2014 of the Government on the activities of finance companies and financial leasing companies;

Pursuant to Decree No. 16/2019/NĐ-CP dated February 1, 2019 of the Government amending and supplementing certain provisions of decrees stipulating business conditions within the scope of management of the State Bank of Vietnam;

At the proposal of the Director of Banking Inspection and Supervision;

The Governor of the State Bank of Vietnam issues this Circular amending and supplementing certain provisions of Circular No. 43/2016/TT-NHNN dated December 30, 2016 of the Governor of the State Bank of Vietnam on consumer loans of finance companies.

Article 1. Amending and supplementing certain provisions of Circular No. 43/2016/TT-NHNN dated December 30, 2016 of the Governor of the State Bank of Vietnam on consumer loans of finance companies (hereinafter referred to as Circular No. 43/2016/TT-NHNN)

1. Point b Clause 2 Article 3 shall be amended and supplemented as follows:

“b) Educational expenses, medical examination and treatment expenses, travel, cultural, sports and physical training expenses;”

2. Clause 5 shall be added to Article 3 as follows:

“5. Direct disbursement to customers which refers to the finance company disbursing consumer loans directly to customers in cash or through the use of non-cash payment services according to the agreement in the consumer loan contract, ensuring monitoring of the purpose of the loan usage in accordance with the law.”

4. Clause 2 of Article 5 is amended and supplemented as follows:

Article 4. Application of Legal Provisions

1. For other provisions related to lending activities not specified in this Circular, finance companies shall implement in accordance with the regulations on lending activities serving daily needs as stipulated by the State Bank of Vietnam regarding lending activities of credit institutions and foreign bank branches for customers.

2. Direct disbursement to customers shall be implemented in accordance with the provisions of this Circular.”

4. Clause 2 Article 5 shall be amended and supplemented as follows:

“2. Finance companies must manage, supervise, and statistically separate consumer lending activities from other lending activities of the finance company, and separate direct disbursement consumer lending from other disbursement methods.”

5. Clause 4 Article 6 shall be amended and supplemented as follows:

“4. Finance companies must report to the State Bank as follows:

a) When there is a change in the manager or person responsible for service introduction points, the finance company must report to the State Bank branch in the province or city where the service introduction point is located as follows:

- Reporting method: reports are prepared in writing and sent to the State Bank branch in the province or city via one of the following methods: direct delivery, postal service, or electronic mail system of the State Bank branch in the province or city;

- Method of sending and receiving reports: reports must be prepared in writing and sent to the Banking Inspection and Supervision Authority and the State Bank branch in the province or city through one of the following methods: direct delivery, postal service, or via the electronic mail system of the State Bank;

- Data cut-off period: from the first day of the first month of the reporting quarter to the last day of the last month of the reporting quarter;

b) In cases of opening, closing, or planning to open or close service introduction points, the finance company must report to the Banking Inspection and Supervision Authority and the State Bank branch in the province or city where the service introduction point is opened, closed, planned to be opened, or closed as follows:

- Reporting method: reports are prepared in writing and sent to the Banking Inspection and Supervision Authority and the State Bank branch in the province or city via one of the following methods: direct delivery, postal service, or electronic mail system of the State Bank;

- Period for closing data: from the first day of the first month of the reported quarter to the last day of the last month of the reported quarter;

- Deadline for submitting reports: within five (5) working days of the first month of the quarter immediately following the reported quarter;

- Template for reporting to the Banking Inspection and Supervision Authority according to Appendix No. 02 issued together with this Circular; template for reporting to the State Bank branch in the province or city according to Appendix No. 03 issued together with this Circular.”

6. Point a Clause 2 Article 7 shall be amended and supplemented as follows:

“a) Lending conditions; capital requirements that cannot be lent; lending methods; disbursement methods (including direct disbursement to customers); lending interest rates and calculation methods; loan application documents and customer documents submitted to the finance company consistent with the characteristics of the loan, type of loan, and customer category; debt collection; conditions, procedures, and formalities for restructuring repayment terms; overdue debt transfer;”

7. Point đ Clause 2 Article 7 shall be amended and supplemented as follows:

“đ) Measures to urge and recover debts suitable for the characteristics of the customer, in accordance with the law, and do not include threats against the customer, including a maximum of five (five) reminders per day, reminder forms, and times agreed upon in the consumer loan contract but must be within the time frame from seven (seven) o'clock to twenty-one (twenty-one) o'clock; no reminders, demands, or sending information about debt recovery to organizations or individuals who have no obligation to repay the finance company, except when required by competent state authorities in accordance with the law; protecting customer information in accordance with the law;”

8. Point h Clause 2 Article 7 shall be amended and supplemented as follows:

“h) Dedicated department, form of acceptance, processing, resolution period, and response time for complaints, retention period for comments, reflections, and complaints from customers and relevant organizations and individuals concerning the finance company's consumer lending activities;”

9. Point m shall be added after point l Clause 2 Article 7 as follows:

“m) Specific measures to control direct disbursements to customers, ensuring that customers use the borrowed funds for the purposes stated in the consumer loan contract.”

10. Clause 4 Article 7 shall be amended and supplemented as follows:

“4. Finance companies must send their internal regulations on consumer lending directly or through postal service to the State Bank as follows:

a) Send to the Banking Inspection and Supervision Agency within ten (ten) working days from the date of issuance or amendment;

b) Send to the State Bank branch in the province or city where the finance company's headquarters, branches, representative offices, or service introduction points are located upon request.”

11. Article 8a shall be added after Article 8 as follows:

"Article 8a. Direct Disbursement to Customers

1. The direct disbursement to customers in cash must comply with the State Bank's regulations on the method of disbursing loan capital for credit institutions and foreign bank branches to customers, as stipulated in Clauses 3, 4, 5, and 6 of this Article and Article 7 of this Circular.

2. The direct disbursement to customers through the use of non-cash payment services shall be decided by the finance company based on information, documents, and payment vouchers provided by the customer, ensuring compliance with Clauses 3, 4, 5, 6, 7, and 8 of this Article, Article 7 of this Circular, and the laws on non-cash payments.

3. A finance company may only directly disburse to customers who have no bad debts according to the credit relationship report retrieved from the National Credit Information Center at the time closest to the date of signing the consumer loan contract.

4. The total outstanding consumer loans directly disbursed to customers at a finance company relative to the total consumer credit outstanding of that finance company at the end of the working day immediately preceding the date of signing the direct disbursement consumer loan contract must comply with the maximum ratio as follows:

a) From January 1, 2021 to December 31, 2021: 70%;

b) From January 1, 2022 to December 31, 2022: 60%;

c) From January 1, 2023 to December 31, 2023: 50%;

d) From January 1, 2024: 30%.

5. The total outstanding consumer loans directly disbursed to customers and the total consumer credit outstanding of the finance company as stipulated in Clause 4 of this Article include the amount of consumer loans directly disbursed to customers under contracts signed up to the date specified in Clause 4 of this Article but not yet disbursed.

6. The total outstanding consumer loans directly disbursed to customers at a finance company as stipulated in Clauses 4 and 5 of this Article only includes customers with a total outstanding consumer loan balance directly disbursed (including the amount of consumer loans directly disbursed to customers under contracts signed up to the date specified in Clause 4 of this Article but not yet disbursed) exceeding VND 20,000,000 (twenty million dong) at that finance company.

7. Finance companies must notify customers of the legal and internal regulations regarding the direct disbursement method through the use of non-cash payment services; notify customers and credit institutions, foreign bank branches related to the direct disbursement to customers through the use of non-cash payment services about the transaction hours within the day.

8. Customers provide information, documents, and payment vouchers as required by the finance company for the purpose of considering the decision on the direct disbursement method through the use of non-cash payment services. Customers bear legal responsibility for the accuracy and truthfulness of the information, documents, and vouchers provided to the finance company.

12. Clause 3 of Article 9 is amended and supplemented as follows:

"3. Within 10 (ten) working days from the date of issuance or amendment of the consumer loan interest rate framework, the finance company must directly send or deliver via postal service to the Banking Inspection and Supervision Authority and the State Bank branch in the province or city where the main office, branch, representative office, or service introduction point of the finance company is located, a report on the consumer loan interest rate framework according to Appendix No. 04 issued together with this Circular."

13. Point l of Clause 1 of Article 10 is amended and supplemented as follows:

"l) Measures to urge and recover debts in accordance with the provisions of Point đ of Clause 2 of Article 7 of this Circular and relevant laws; measures to handle cases where customers fail to fulfill their obligations under the consumer loan contract;"

14. Clause 4 of Article 10 is amended and supplemented as follows:

"4. The finance company must provide customers with a draft of the consumer loan contract, accurately, fully, and honestly explain the basic contents of the consumer loan contract, including the rights and obligations of the consumer borrower, debt collection measures, and measures to handle cases where customers fail to fulfill their obligations under the consumer loan contract, and obtain the customer's confirmation that they have been provided with the information as required by this clause, for the customer to review and decide before signing the consumer loan contract."

15. Add Article 10a and Article 10b after Article 10 as follows:

"Article 10a. Responsibilities of the finance company

1. Adhere to the provisions of this Circular and relevant laws.

2. Publicly display at the main office, branches, service introduction points, and post on the company's website the following contents:

a) The framework for consumer loan interest rates, types of fees, and interest calculation methods;

b) Forms for receiving customer feedback, complaints related to the company's consumer lending activities.

3. Publish contact information of the finance company, a list (name, address) of service introduction points, key information about consumer lending (which must minimally include the basic rights and obligations of consumer borrowers as prescribed by law), and frequently asked questions in consumer lending on the finance company's website.

4. Specify the responsibilities of managers and supervisors of service introduction points in reporting and providing information and documents upon request of the State Bank branch in the province or city where the service introduction point is located.

5. Apply methods to receive feedback, complaints, and appeals from customers and related organizations and individuals regarding the finance company's consumer lending activities in accordance with the law, ensuring the authenticity of the complaints provided by customers and related organizations and individuals to the finance company, which must minimally include the following two methods:

a) Direct form through individuals or specialized departments at the main office, branches, and service introduction points of the financial company;

b) Indirect methods through written documents, electronic means, telephone hotlines (with recording, operating at least from 7 (seven) o'clock to 21 (twenty-one) o'clock) and other indirect methods in accordance with the law.

6. Resolve and respond to complaints from customers, organizations, and individuals related to the amount of loan, interest rate, collection measures, and debt recovery methods stipulated in the consumer loan contract within forty-eight (48) hours (excluding Saturdays, Sundays, and holidays) from the date of receiving the complaint; resolve complaints regarding demands for payment from individuals and organizations that are not obligated to pay debts, and incorrect information about debt obligations at the National Credit Information Center within seven (7) working days from the date of receiving other types of complaints.

7. Regularly review and improve the quality of recruitment procedures, employee evaluation, minimize ethical risks; organize training and enhance business skills, service quality, customer advisory skills, legal compliance awareness, internal regulations, and professional ethics for employees.

8. Continuously monitor, inspect, and control the compliance with legal provisions, procedures, and internal regulations concerning consumer lending activities for relevant individuals, departments, and units at the headquarters, branches, representative offices, and service introduction points of financial companies, ensuring adherence to legal provisions, procedures, and internal regulations. Timely identify any actions indicating violations of the law in consumer lending activities, report and warn within the financial company's system to take preventive measures, limit risks, and illegal actions.

9. Handle or cooperate with competent authorities to handle cases of law violations, procedures, and internal regulations in consumer lending activities, protect the legitimate rights of customers; publicly announce the handling of these violations within the organization.

10. In cases where a financial company sells debts to a third party permitted to purchase debts under the law, the debt sale contract must include a commitment from the third party to comply with the provisions agreed upon with the customer in the consumer loan contract (including collection and debt recovery measures) in accordance with this Circular and relevant laws.

Article 10b. Responsibilities of units under the State Bank

1. The Banking Inspection and Supervision Authority is responsible for:

a) Inspect and supervise finance companies in their implementation of the provisions of this Circular;

b) Examine and handle according to their authority or recommend the competent authority to handle violations of the law, ensuring that finance companies comply with the provisions of this Circular and related laws;

c) Receive reports as prescribed in point b, Clause 4, Article 6, Clause 4, Article 7, and Clause 3, Article 9 of this Circular.

2. The State Bank branch of the province/city has the responsibility:

a) Inspect, supervise, or cooperate with the State Bank branch in another province or city to inspect and supervise the activities of branches, representative offices, and service introduction points of financial companies in their respective areas in accordance with the law;

b) Consider handling within their authority or recommend the competent authority to handle violations of the law, ensuring that financial companies, branches, representative offices, and service introduction points of financial companies in their respective areas comply with this Circular and relevant laws;

c) Receive reports as prescribed in Clause 4, Article 6, Clause 4, Article 7, and Clause 3, Article 9 of this Circular;

d) Cooperate with competent authorities to gather information, issue warnings to financial companies, branches, representative offices, and service introduction points of financial companies in their respective areas to take preventive measures, limit risks, and illegal actions, ensuring the rights of customers and financial companies.

16. Supplement Appendix No. 01, 02, 03, and 04 attached to this Circular.

Article 2. Implementation

The Director of the Office, the Inspector General of Banking Supervision, Heads of Units under the State Bank of Vietnam, Governors of the State Bank Branches in provinces and centrally-administered cities, Chairmen of the Board of Directors, Chairmen of the Board of Members, and General Managers (Directors) of financial companies are responsible for implementing this Circular.

Article 3. Effectiveness

This Circular takes effect from January 1, 2020.