Circular No. 20/2024/TT-NHNN on factoring and related services of credit institutions and foreign bank branches

CIRCULAR

Regulations on factoring and related services of credit institutions and foreign bank branches

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

Pursuant to the Law on Credit Institutions dated January 18, 2024;

Pursuant to Decree No. 102/2022/NĐ-CP dated December 12, 2022 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of the Department of Economic Credit and the Director of the Department of Foreign Exchange Management;

The Governor of the State Bank of Vietnam issues this Circular regulating factoring and related services of credit institutions and foreign bank branches.

PART I
GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular regulates factoring and related services related to factoring provided by credit institutions and foreign bank branches for customers.

Article 2. Applicability

1. Commercial banks, comprehensive finance companies, factoring finance companies, foreign bank branches.

2. Organizations and individuals who are residents and non-residents related to factoring and related services related to factoring.

Article 3. Explanation of Terms

In this Circular, the following terms are understood as follows:

1. Factoring entity is a commercial bank, comprehensive finance company, factoring finance company, and foreign bank branch permitted to conduct factoring activities and related services. In the case of joint factoring, the factoring entity includes foreign credit institutions (established abroad in accordance with foreign laws).

2. Entity providing other related services is a commercial bank, comprehensive finance company, factoring finance company, and foreign bank branch.

3. Customer of the factoring entity includes non-resident organizations and resident organizations and individuals in accordance with Vietnamese laws on foreign exchange management (hereinafter referred to as customers):

a) Customers are sellers in cases where the seller has a repayment commitment in factoring;

b) Customers are buyers in cases where the seller does not have a repayment commitment in factoring;

c) Customers are buyers in cases where buyer factoring is involved.

4. Other related services include services such as managing receivables, collecting debts on receivables in compliance with Vietnamese laws and trade practices regarding factoring.

5. Receivable amount is the amount of money that the seller is entitled to receive from the buyer according to the purchase and sale contract for goods and service provision.

6. Factoring amount is the amount of money that the factoring entity disburses to the seller to purchase the seller's receivables or advance payment on behalf of the buyer but not exceeding the value of the receivables.

7. Seller (including exporter) is the party selling goods, providing services, and having legitimate rights to receivables under the purchase and sale contract for goods and service provision.

8. Buyer (including importer) is the party purchasing goods, using services, and having the obligation to pay receivables under the purchase and sale contract for goods and service provision.

9. Seller factoring with repayment commitment is a form of credit provision through the factoring entity purchasing the seller's receivables. The seller is responsible for repaying the factoring amount to the factoring entity if the buyer fails to pay or pays insufficiently.

10. Seller factoring without repayment commitment is a form of credit provision through the factoring entity purchasing the seller's receivables. The factoring entity performs debt collection against the buyer. The seller is not responsible for repaying the factoring amount if the buyer fails to pay or pays insufficiently.

11. Buyer factoring is a form of credit provision through the factoring entity advancing payment to the seller on behalf of the buyer by purchasing receivables. The buyer is responsible for repaying the advanced amount to the factoring entity according to the agreement.

12. Purchase and sale contract for goods and service provision is an agreement between the seller and the buyer regarding the purchase and sale of goods and service provision in accordance with the law (except as stipulated in Clause 4, Article 7 of this Circular).

13. Factoring contract is an agreement between the factoring entity and the customer to establish, change, or terminate the rights and obligations of the parties.

14. Contract for providing other related services is an agreement between the entity providing other related services, the factoring entity, and other relevant parties (if any) to establish, change, or terminate the rights and obligations of the parties.

15. Purchase and sale documents for goods and service provision are documents related to the seller's request for payment from the buyer and papers related to the delivery of goods and service provision based on the purchase and sale contract for goods and service provision.

16. Domestic factoring is factoring based on a purchase and sale contract for goods and service provision, where both the seller and the buyer are residents.

17. International factoring is factoring based on a purchase and sale contract for goods and service provision between the exporter and the importer, where one party is a resident and the other is a non-resident.

18. Factoring debt is the factoring amount and factoring interest that have not been repaid.

19. Repayment of factoring debt is the act of the seller or buyer repaying the factoring entity the factoring amount and factoring interest according to the agreement.

20. Factoring term is the remaining period of the receivable and the repayment term of the factoring debt.

21. Repayment term of factoring debt is the period calculated from the day following the end date of the payment deadline for the receivable in the purchase and sale contract for goods and service provision to the end date of the factoring term, except when the parties agree that the customer may repay the debt before the payment deadline for the receivable.

22. refers to the periods within the loan repayment period specified in the credit agreement during which the student must repay part or all of the loan amount at the end of each period. refers to the periods within the payment guarantee term agreed upon, at the end of each period, the seller or buyer must pay part or all of the payment guarantee debt to the payment guarantee entity.

23. Overdue Payment Guarantee Debt including:

a) Payment guarantee debt transferred to overdue status in accordance with Clause 2, Article 17 of this Circular;

b) Payment guarantee debt for which the customer cannot repay the debt ahead of schedule when the payment guarantee entity terminates the payment guarantee and recovers the debt ahead of schedule as stipulated in Clause 1, Article 19 of this Circular.

24. Capital usage plan is a collection of information on the use of the payment guarantee amount by the customer, including the following details:

a) The maximum value of receivables, the maximum payment guarantee amount, and the purpose of using the payment guarantee amount;

b) The source of repayment for the customer.

25. Financial Capacity refers to the capital, assets, and other lawful financial sources of the customer.

Chapter II
PAYMENT GUARANTEE

Article 4. Principles for Implementing Payment Guarantees

1. The payment guarantee entity shall implement payment guarantees based on compliance with the provisions of the Law on Credit Institutions, relevant laws, and the License issued by the State Bank of Vietnam (hereinafter referred to as the State Bank).

2. The payment guarantee entity shall implement foreign currency payment guarantees within the scope of its business operations and foreign exchange service provision in the domestic market and international markets in accordance with relevant legal provisions.

3. The payment guarantee entity shall comply with the provisions regarding situations where credit is not granted, restricted credit, and credit limits under the Law on Credit Institutions and the State Bank's regulations on limits and safety ratios for credit institutions' operations, including foreign bank branches.

4. Joint venture payment guarantees shall be implemented in accordance with this Circular, the State Bank's regulations on joint venture credit for customers, current regulations on foreign borrowing and repayment, and relevant legal provisions. In cases where a joint venture payment guarantee involves a foreign credit institution and the customer is a resident, the Vietnamese payment guarantee entity may participate only if the customer complies with foreign exchange management regulations for corporate foreign borrowing and repayment.

5. International payment guarantees shall be implemented in accordance with this Circular. In cases where foreign lending or debt recovery occurs in international payment guarantees, the payment guarantee entity shall comply with foreign exchange management regulations for foreign lending and debt recovery.

6. A foreign bank branch may provide payment guarantees for non-resident buyers or sellers in accordance with points c, d, đ of Clause 1 and point b of Clause 2, Article 11 of this Circular.

Article 5. Language Usage

1. Payment guarantee contracts may be drafted in Vietnamese or a foreign language, or simultaneously in both Vietnamese and a foreign language. The payment guarantee entity may agree with the customer to use a foreign language in payment guarantees involving foreign elements in accordance with the Civil Code.

2. For payment guarantee contracts and other documents in payment guarantee activities that use a foreign language, the payment guarantee entity must provide a Vietnamese translation (confirmed by a duly authorized representative of the payment guarantee entity or must be notarized) upon request of the competent authority.

Article 6. Internal Regulations

1. Based on the provisions of the Law on Credit Institutions, this Circular, and relevant laws, credit institutions and foreign bank branches shall issue internal regulations on factoring activities (including electronic factoring if applicable) that are consistent with their business characteristics.

2. Within ten days from the date of issuance or amendment of the internal regulations, the factoring unit shall submit one copy of the internal regulations on factoring to the State Bank of Vietnam (the Inspection and Supervision Agency or the State Bank of Vietnam branch in the province/city) in accordance with the law.

Article 7. Cases Not Eligible for Factoring

The factoring unit shall not factor receivables arising from any of the following cases:

1. Arising from contracts for the sale of goods or provision of services prohibited by law.

2. Arising from contracts for the sale of goods or provision of services where the remaining term of the receivable is one year or more from the date of the factoring request.

3. Arising from contracts for the sale of goods or provision of services with an agreement prohibiting the transfer of rights and obligations under the contract.

4. Arising from contracts for the provision of financial, banking, and insurance services as prescribed by the Prime Minister's regulations on the Economic Sectors of Vietnam.

5. Already factored or already used to secure other debt obligations (except when the amount of factoring does not exceed the value of the receivable after deducting the portion already factored and used to secure other debt obligations).

6. Overdue according to the contract for the sale of goods or provision of services.

7. In dispute over the performance of the contract for the sale of goods or provision of services.

Article 8. Methods of Factoring

1. Single factoring: For each factoring transaction, the factoring unit and the customer shall complete the factoring procedures and sign a factoring contract.

2. Limit factoring: The factoring unit shall determine and agree with the customer on a maximum factoring limit to be maintained over a specified period and the use of such limit. At least once a year, the factoring unit shall review and re-determine the limit and the duration of its maintenance.

3. Joint factoring: Two or more factoring units shall jointly undertake the factoring agreement for one or several receivables, with one factoring unit acting as the lead organizer for joint factoring.

Article 9. Currency for Factoring and Repayment

1. For seller factoring, the currency for factoring is the currency of the receivable or Vietnamese dong.

2. For buyer factoring:

a) The currency for factoring is Vietnamese dong, except as provided in point b of this clause;

b) The factoring unit may consider and decide to factor foreign currency receivables in compliance with the legal regulations on foreign exchange management and meet one of the following conditions:

(i) The buyer is a non-resident;

(ii) The buyer is a resident with sufficient foreign currency from production and business revenue to repay the factoring;

(iii) The buyer is a key importer of petroleum products authorized by the Ministry of Industry and Trade to import petroleum products annually and pay abroad for imported petroleum products.

3. The currency for repayment of factoring and factoring fees is the currency for factoring. If repayment of factoring and factoring fees is made in another currency, it shall be carried out in accordance with the agreement between the factoring unit and the customer in compliance with relevant legal regulations.

When the due date for repayment of foreign currency factoring arrives, if the customer can prove that the delay in payment of foreign currency from their production and business activities is due to objective reasons, leading to insufficient foreign currency for repayment of factoring, the customer may purchase foreign currency from a credit institution or foreign bank branch authorized to conduct foreign exchange transactions to repay the factoring.

If the customer requests to purchase foreign currency from the factoring unit, the factoring unit must sell foreign currency to the customer. If the customer purchases foreign currency from another credit institution or foreign bank branch, the credit institution or foreign bank branch selling the foreign currency must transfer the amount to the factoring unit. The customer must sell foreign currency to the credit institution or foreign bank branch that sold the foreign currency to the customer when there is foreign currency revenue from production and business activities upon request of that credit institution or foreign bank branch.

Article 10. Interest Rates and Factoring Fees

1. The interest rate and factoring fee shall be agreed upon by the factoring unit and the buyer or seller in compliance with legal regulations.

In the case of joint factoring, the parties involved in joint factoring shall agree on the factoring fee for each joint party in compliance with legal regulations.

2. When the due date for repayment of factoring debt arrives but the debt is not repaid or not fully repaid as agreed, the buyer or seller shall pay interest as follows:

a) Interest on the unfunded factoring amount at the agreed factoring interest rate corresponding to the factoring period that has not been repaid;

b) If the buyer or seller fails to pay the interest as stipulated in point a of this clause on time, they shall pay overdue interest at the rate agreed upon by the factoring unit and the buyer or seller, but not exceeding 10% per annum on the outstanding overdue interest balance corresponding to the overdue period;

c) If the factoring amount becomes overdue debt, the buyer or seller shall pay interest on the overdue factoring amount corresponding to the overdue period, with the interest rate not exceeding 150% of the in-limit factoring interest rate at the time of overdue conversion.

3. In the case of applying adjustable factoring interest rates, the factoring unit and the buyer or seller must agree on the principles and factors to determine the adjustable interest rate, and the time for adjusting the factoring interest rate. If the factors to determine the adjustable interest rate lead to multiple different factoring interest rates, the factoring unit shall apply the lowest factoring interest rate.

Article 11. Conditions for factoring for customers

The factoring unit considers and decides to provide factoring when the customer meets the following conditions:

1. For seller factoring:

a) In the case where the seller is a resident with a repayment commitment:

(i) Having full civil legal capacity and civil conduct capacity as prescribed by law;

(ii) Having a lawful purpose for using capital;

(iii) Having financial capability to repay debt;

(iv) Having a feasible capital usage plan;

b) In the case where the seller is a resident without a repayment commitment and the buyer is a resident, the buyer must meet the conditions set out in point a of Clause 1 of this Article;

c) In the case where the seller is a resident without a repayment commitment and the buyer is a non-resident, the buyer must meet the conditions set out in point a of Clause 1 of this Article and one of the following conditions:

(i) The buyer is a business established and operating abroad with Vietnamese enterprise capital invested in the form prescribed at point a, c of Clause 1 of Article 52 of the Investment Law or another investment form prescribed at point d of Clause 1 of Article 52 of the Investment Law;

(ii) Part or all of the receivable value is guaranteed for payment by a third party which is a credit institution, foreign bank branch, foreign credit institution, or insured by a third party, or secured by money from the customer and/or a third party at the factoring unit. In the case where the receivable is only partially guaranteed or insured, the maximum factoring amount equals the total value of the receivable that is guaranteed or insured;

d) In the case where the seller is a non-resident with a repayment commitment, the seller must meet the conditions set out in point a of Clause 1 of this Article and one of the following conditions:

(i) The seller is a business established and operating abroad with Vietnamese enterprise capital invested in the form prescribed at point a, c of Clause 1 of Article 52 of the Investment Law or another investment form prescribed at point d of Clause 1 of Article 52 of the Investment Law;

(ii) Meeting the condition set out in sub-item (ii) of point c of Clause 1 of this Article;

e) In the case where the seller is a non-resident without a repayment commitment, the buyer who is a resident must meet the conditions prescribed in point a of Clause 1 of this Article.

2. For buyer factoring:

a) The buyer who is a resident must meet the conditions prescribed in point a of Clause 1 of this Article;

b) The buyer who is a non-resident must meet the conditions set out in point c of Clause 1 of this Article.

Article 12. Documents for Requesting Factoring

1. When there is a need for factoring, the customer must submit to the factoring unit a request for factoring document, including:

a) Documents proving compliance with the factoring conditions as stipulated in Article 11 of this Circular and other documents guided by the factoring unit, at a minimum including:

(i) Original contract, purchase and sale documents, service provision documents; or copies of purchase and sale contracts, service provision documents, lists of purchase and sale documents, service provision documents in cases where the factoring unit and the customer agree on measures to ensure the accuracy, truthfulness, and completeness of the copies or lists compared to the originals; or

(ii) Information and data about the purchase and sale of goods, service provision in the form of electronic messages in accordance with the provisions of the Law on Electronic Transactions and related laws;

b) Information about related parties with the customer who is a resident according to the Law on Credit Institutions if the total outstanding credit amount of that customer at the factoring unit (including the amount of factoring being requested for credit) is equal to or greater than 0.1% of the latest equity of the factoring unit which is a commercial bank, foreign bank branch (for factoring units which are comprehensive finance companies, factoring finance companies, the ratio is 0.5%). In the case where the factoring unit has negative equity, the ratio is applied based on the registered capital or capital contribution (for foreign bank branches). Information about related parties with the customer who is a non-resident when the related party is being provided credit by the factoring unit. Information about related parties includes:

(i) Information about individual related parties, including: name, personal identification number for Vietnamese citizens; nationality, passport number, entry visa number or substitute document or document exempting from entry visa; date and place of issuance for non-residents; relationship with the customer;

(ii) Information about organizational related parties, including: name, business registration code, main address of the enterprise, business registration certificate number or equivalent legal document; information about the legal representative in accordance with sub-item (i) of point b of Clause 1 of this Article, relationship with the customer;

c) Other documents guided by the factoring unit.

2. The customer is responsible for providing truthful, accurate, complete, timely, and updated information, documents, and data as stipulated in Clause 1 of this Article to the factoring unit during the credit period and shall be liable for the provision of such information, documents, and data.

Article 13. Guarantees for Factoring Activities

1. The application of guarantee measures or the absence thereof is agreed upon between the factoring unit and the customer. The agreement on guarantee measures between the factoring unit and the customer must comply with the provisions of the Law on Secured Transactions and related laws.

2. The customer and guarantor must cooperate with the factoring unit to handle the security measures when there are grounds for handling according to the factoring contract, the agreement on security measures, and relevant laws.

Article 14. Requirements for factoring units

1. For factoring with the seller's commitment to refund, the factoring unit shall implement the following requirements:

a) Agree with the seller on sending a written document or data message equivalent to a written notice of factoring to the buyer and other related parties with obligations (if any). The minimum notice shall include the transfer of rights and obligations regarding the receivable between the seller and the factoring unit, and a request for the buyer and other related parties with obligations (if any) to make payments to the factoring unit;

b) If the seller does not provide the notice as stipulated in point a of this clause, the factoring unit may only perform factoring for the seller if the factoring unit and the seller agree on measures for the factoring unit to control the payments made by the buyer or other related parties with obligations (if any) to the seller.

2. For factoring without the seller's commitment to refund and buyer factoring: The factoring unit may only proceed if the seller agrees in writing or through a data message equivalent to a written document on transferring rights and legitimate interests related to the receivable to the factoring unit; and the buyer commits to fully assume responsibility for repayment to the factoring unit.

Article 15. Appraisal and decision on factoring

1. For seller factoring, the factoring unit shall carry out:

a) In cases where the seller has a refund commitment to the factoring unit, the factoring unit must appraise the seller's ability to meet the factoring conditions as stipulated in point a, d of Clause 1, Article 11 of this Circular;

b) In cases where the seller does not have a refund commitment to the factoring unit, the factoring unit must appraise the buyer's ability to meet the factoring conditions as stipulated in points b, c, đ of Clause 1, Article 11 of this Circular.

2. For buyer factoring, the factoring unit must appraise the buyer's ability to meet the factoring conditions as stipulated in Clause 2, Article 11 of this Circular.

3. The factoring unit must organize the review of factoring based on the principle of defining responsibilities between the appraisal stage and the decision-making stage for factoring. During the appraisal process, the factoring unit may use its internal credit rating system, combined with information from the National Credit Information Center and other information channels.

Article 16. Factoring Contract

1. The factoring contract must be established in writing in accordance with the provisions of this Circular and other relevant laws, and if it is in the form of an electronic data message, it shall comply with the provisions of the law on electronic transactions, including at least the following contents:

a) Information about the parties involved in the factoring relationship;

b) Maximum value of the receivable, maximum amount of factoring, factoring limit for limit-based factoring;

c) Purpose of using the factoring amount;

d) Currency of factoring, currency for repaying factoring debt, paying fees;

đ) Method of factoring;

e) Factoring period, repayment period for factoring debt, maintenance period for factoring limit (for limit-based factoring method);

g) Factoring interest (including the interest rate applicable to overdue factoring amounts), factoring fee;

h) Repayment of factoring debt, order of recovery of the factoring amount, unpaid factoring interest, prepayment of factoring debt;

i) Transfer of overdue debt for factoring debt;

k) Debt handling;

l) Obligation to notify the buyer or other related parties with obligations (if any);

m) Rights and obligations of the parties, wherein, the seller commits not to use the receivable to secure other debt obligations or for other lending purposes without the consent of the factoring unit;

n) Dispute resolution;

o) Effectiveness of the factoring contract;

p) Other contents that do not contravene the law;

2. Amendments, supplements, and termination of the factoring contract shall be agreed upon by the parties in compliance with the provisions of this Circular and relevant laws.

Article 17. Determination of the Payment Guarantee Period, Repayment Term, and Overdue Debt Transfer

1. The payment guarantee period and repayment term shall be determined based on the remaining payment period of the receivable under the purchase and sale contract for goods and service supply contracts, and the repayment period of the payment guarantee. The payment guarantee period shall be agreed upon between the payment guarantor unit and the customer in the payment guarantee contract but must not exceed one year.

2. The payment guarantor unit shall transfer overdue debt for the portion of the payment guarantee debt that the customer fails to repay on time as agreed. The payment guarantor unit must notify the customer about the overdue debt transfer, with the notification content including at least the overdue payment guarantee debt, the date of overdue debt transfer, and the interest rate applied to the overdue payment guarantee debt. The overdue payment guarantee debt calculation period starts from the end date of the payment guarantee period.

3. For overdue payment guarantee debts, the payment guarantor unit shall collect the payment guarantee amount first, then collect interest.

Article 18. Disbursement Method

1. The payment guarantor unit shall disburse funds into the seller's designated account.

2. The payment guarantor unit must open and use a settlement account at a service provider organization in Vietnam to carry out disbursements, recover payment guarantee debts, and international payment guarantee fees according to the following principles:

a) The settlement account specified in this clause is a dedicated settlement account for payment guarantee purposes ensuring compliance with foreign exchange management regulations for lending and foreign debt recovery activities of credit institutions and foreign bank branches. The payment guarantor unit may not use this account to transfer or receive money from transactions not arising from payment guarantee activities;

b) Each international payment guarantee can only be executed through one service provider organization via the account. The payment guarantor unit may use one account specified in this clause for one or multiple international payment guarantees;

c) In cases where the currency for repaying the payment guarantee debt or paying the payment guarantee fee differs from the currency of the payment guarantee, the payment guarantor unit may open and use another dedicated settlement account if it ensures compliance with the principles set forth in points a and b of this clause;

d) The payment guarantor unit has the responsibility to clearly record and request customers to clearly record the purpose of fund transfers related to payment guarantees so that the service provider organization through the account can provide information for reporting according to the State Bank of Vietnam's regulations.

3. When commercial banks and foreign bank branches act as payment guarantors and execute international payment guarantees, they are not required to open a dedicated settlement account at a service provider organization in Vietnam to transfer funds for disbursements and recover payment guarantee debts from non-residents as stipulated in Clause 2 of this Article, and they have the responsibility to monitor transactions related to payment guarantee activities in accordance with legal provisions on accounting and bookkeeping for credit institutions and foreign bank branches.

4. The service provider organization in Vietnam where the payment guarantor unit opens a dedicated settlement account to carry out disbursements and recover payment guarantee debts as stipulated in Clauses 2 and 3 of this Article has the responsibility to verify and reconcile documents presented by the payment guarantor unit in accordance with legal provisions and has the responsibility to report on the situation of recovering foreign debts through international payment guarantees according to the State Bank of Vietnam's guidelines.

Article 19. Termination of Factoring, Debt Settlement, Waiver, Reduction of Interest and Fees on Factoring

1. The factoring entity has the right to terminate factoring, recover debt ahead of schedule according to the agreed content when discovering that the seller or buyer provides false information, violates provisions in the factoring contract, or agreement on security measures. When implementing the termination of factoring and early debt recovery according to the agreement in the factoring contract, the factoring entity must notify the seller or buyer about the termination of factoring and early debt recovery. The notification content must minimally include the termination date of factoring, the factoring debt recovered ahead of schedule, the deadline for repaying the factoring debt recovered ahead of schedule, the overdue date and interest rate applied to the factoring debt recovered ahead of schedule, and the return of receivables to the seller or buyer.

2. In cases where the seller or buyer cannot repay the due debt, the factoring entity has the right to apply debt recovery measures according to the factoring contract, security measure agreements, and relevant laws. If after applying debt recovery measures, the seller or buyer still fails to fully fulfill their obligation to repay the debt to the factoring entity, the seller or buyer shall be responsible for continuing to fully repay the factoring debt and fees (if any) to the factoring entity.

3. In cases where the seller, buyer, or guarantor is decided by the court to initiate bankruptcy proceedings or declared bankrupt, the factoring entity's debt recovery from customers and guarantors shall be carried out according to the provisions of the law on bankruptcy.

4. The factoring entity has the right to decide on waiver, reduction of interest and fees for the seller or buyer according to internal regulations of the factoring entity.

Article 20. Penalty for Violation and Compensation for Damage

The factoring entity and customer may agree on penalty for violation and compensation for damage according to the provisions of the law in cases where the factoring entity or customer does not properly implement the contents in the factoring contract.

Article 21. Classification, Provisioning for Risk and Utilization of Provisions to Handle Credit Risks

The factoring entity implements classification, provisioning, and utilization of provisions to handle risks in factoring activities according to the provisions of the law on asset classification, provisioning levels, risk provisioning methods, and the use of provisions to handle risks in the operations of credit organizations and foreign bank branches.

In cases where there is no commitment to repayment from the seller to the factoring entity, the factoring entity performs classification and provisioning for the buyer.

Article 22. Electronic Factoring Activities

1. The factoring entity and customer may choose to perform factoring through the use of electronic means (hereinafter referred to as electronic factoring). The implementation of electronic factoring must comply with the provisions of this Circular, anti-money laundering laws, e-commerce regulations, personal data protection regulations, online service provision safety and security regulations in the banking industry, and other relevant laws.

2. When performing customer identification and verification through electronic means for new customers establishing a relationship with the factoring entity (except in cases where customers send information and data via the SWIFT system or use electronic signatures as prescribed by law), the factoring entity shall carry out as follows:

a) For resident customers: The factoring entity shall perform customer identification and verification according to the State Bank's regulations on opening and using payment accounts at service providers.

b) For non-resident customers: The factoring entity shall perform customer identification and verification based on self-assessment of risk levels to select, decide on appropriate transaction authentication methods, forms, and technologies to ensure safety and bear the resulting risks.

3. The factoring entity independently decides on the methods, forms, and technologies for implementing electronic factoring throughout the entire process or at specific stages, bears any resulting risks (if any), and must meet the following minimum requirements:

a) The methods, forms, and technologies selected by the factoring entity must comply with the security, safety, and confidentiality standards set by the State Bank;

b) Apply electronic transaction authentication methods to confirm the customer's acceptance with the factoring entity when conducting electronic transactions during the implementation of electronic factoring according to relevant laws;

c) Fully and detailedly store and preserve customer identification documents, information, and data during the implementation of electronic factoring. Information and data must be stored securely and confidentially, backed up, ensuring the completeness and integrity of the data to serve customer verification during the implementation of electronic factoring; resolving disputes, complaints, and providing information upon request from competent authorities. The storage period for electronic factoring information and data shall comply with the provisions of the law on anti-money laundering and the Law on E-commerce;

d) The factoring entity must conduct inspections and evaluations of the security and confidentiality of the methods, forms, and technologies, and temporarily suspend service provision for upgrades, corrections, and improvements if there are signs of insecurity.

d) Assign specific responsibilities to each individual and department for building, establishing, and operating the information system serving the credit approval process in electronic factoring activities. In case of risk occurrence, the factoring entity must have mechanisms to identify the responsible individuals and departments and promptly address arising issues and risks to ensure efficiency and safety during the implementation of electronic factoring.

4. The information system implementing electronic factoring must comply with regulations on ensuring information system security level 3 or higher as stipulated by the Government's regulations on information system security levels and the State Bank's regulations on information system security in banking operations.

Article 23. Rights and Obligations of the Factoring Entity

1. The factoring entity has the following rights:

a) To receive lawful rights and interests related to receivables according to agreements;

b) To hire other factoring entities or service providers related to factoring to perform services associated with factoring;

c) To request customers and related parties to provide relevant information, documents, and data for factoring assessment;

d) To request customers and related parties to provide relevant information, documents, and data concerning guarantee measures when such measures are applied;

đ) To monitor debt recovery, collect factoring fees, adjust factoring fees, and adjust interest rates and late payment interest;

e) To refuse to implement factoring if the sales contract or service provision agreement is invalid or there is evidence proving that presented documents and materials are forged;

g) To require the seller or buyer to repay factoring debts according to agreements;

h) To inspect and supervise the repayment of the seller or buyer;

i) Other rights agreed upon by the parties in accordance with the law;

2. The factoring entity has the following obligations:

a) To provide relevant information, documents, and data concerning the authority to decide on factoring to state agencies requesting such information;

b) To store factoring files in accordance with the law and internal regulations of the factoring entity;

c) Other obligations agreed upon by the parties in accordance with the law;

Article 24. Rights and Obligations of Customers

1. Customers have the following rights:

a) To purchase foreign currency from credit institutions and foreign bank branches permitted when fulfilling obligations under commitments to repay factoring debts;

b) Other rights agreed upon by the parties in accordance with the law;

2. Customers have the following obligations:

a) To provide complete, accurate, and truthful information, documents, and data related to receivables; to ensure that receivables are not used to secure other debt obligations and are free from disputes; to be legally responsible for the accuracy, truthfulness, completeness, and validity of provided information, documents, data, files, and vouchers;

b) To transfer lawful rights and interests related to receivables according to agreements;

c) To fully and timely fulfill committed obligations and responsibilities under the factoring contract;

d) To use funds for legitimate purposes and repay debts according to the agreed terms;

đ) To cooperate with the factoring entity and related parties during the implementation of guarantee measures (if applicable);

e) To notify the buyer and other related parties with obligations (if applicable) about the factoring;

g) Other obligations agreed upon by the parties in accordance with the law;

Chapter III
OTHER SERVICES RELATED TO FACTORING

Article 25. Principles for Implementing Other Services Related to Factoring

1. The provision of other services related to factoring shall be carried out in accordance with the agreement stipulated in the Contract on Provision of Other Services Related to Factoring between the service provider and the relevant parties, in compliance with applicable laws and commercial practices regarding factoring, without contravening the fundamental principles of Vietnamese law.

2. The provision of other services related to factoring by the service provider must comply with the provisions of the Law on Credit Institutions, relevant legal regulations, and the License issued by the State Bank.

Article 26. Other Services Related to Factoring

1. The service provider may provide other services related to factoring to the factoring entity and customers in accordance with the Law on Credit Institutions and Clause 4, Article 3 of this Circular. 2. The fee for providing other services related to factoring shall be agreed upon by the service provider and the relevant parties in compliance with legal provisions.

Article 27. Contract for Provision of Other Services Related to Factoring

1. The Contract for Provision of Other Services Related to Factoring shall be drafted in Vietnamese or a foreign language, or simultaneously in both Vietnamese and a foreign language. The service provider may agree with the factoring entity and other relevant parties (if any) on the use of a foreign language in cases where the provision of other services related to factoring involves foreign elements, in accordance with the Civil Code.

For contracts for provision of other services related to factoring and other documents in the provision of such services that use a foreign language, the service provider must provide a Vietnamese translation (certified by a duly authorized representative of the service provider or notarized) if requested by the competent authority.

2. The Contract for Provision of Other Services Related to Factoring must include at least the following contents:

a) Name and address of the factoring entity, the service provider, and other relevant parties (if any);

b) Information related to the sales contract, service contract, and other relevant information necessary for the implementation of factoring and the provision of other services related to factoring;

c) Scope and content of the provision of other services related to factoring;

d) Fee for the provision of other services related to factoring;

e) Dispute resolution.

đ) Rights and obligations of the parties;

3. In addition to the contents specified in Clause 2 of this Article, the Contract for Provision of Other Services Related to Factoring may include other contents agreed upon by the parties in compliance with the provisions of this Circular and relevant legal regulations.

Article 28. Rights and Obligations of the Service Provider for Other Services Related to Factoring

The service provider for other services related to factoring shall exercise rights and fulfill obligations in accordance with the agreements of the parties and in compliance with legal provisions.

The service provider related to factoring performs the rights and obligations according to the agreement of the parties in accordance with the provisions of the law.

Chapter IV
REPORTING AND IMPLEMENTATION ORGANIZATION

Article 29. Accounting entries, reporting information, and record keeping

1. The factoring unit shall conduct accounting entries for factoring activities in accordance with current laws on accounting systems.

2. The factoring unit shall report on the implementation of factoring activities in accordance with the reporting and statistical system regulations of the State Bank of Vietnam.

3. The factoring unit shall store factoring records in accordance with the Law on Credit Institutions, with the retention period for factoring records to be implemented in accordance with the law on record keeping.

Article 30. Responsibilities of Units under the State Bank

1. Responsibilities of the Department of Credit for Economic Sectors:

a) Monitor and compile the situation of factoring implementation by the factoring unit;

b) Be responsible for handling issues arising related to factoring activities and other services related to factoring;

c) Develop inspection plans and carry out inspection work (excluding foreign exchange management regulations) for factoring activities and other services related to factoring in accordance with their functions and responsibilities.

2. The Foreign Exchange Management Department shall be responsible for:

a) Monitoring, compiling, and inspecting the implementation of factoring for non-residents;

b) Handling issues arising related to the implementation of factoring for non-residents, proposing amendments, supplements, and replacements to foreign exchange management regulations concerning factoring activities;

c) Developing inspection plans and carrying out inspections of foreign exchange management regulations concerning the implementation of factoring and other services related to factoring for non-residents in accordance with regulations on inspecting compliance with monetary and banking laws.

3. The Financial and Accounting Department shall be responsible for guiding credit institutions and foreign bank branches to implement accounting systems for transactions related to factoring and other services related to factoring in accordance with this Circular.

4. Banking Inspection and Supervision Authorities shall be responsible for leading and coordinating with relevant units to inspect, audit, and supervise factoring activities and other services related to factoring of banks and handle violations that arise within their authority.

5. Branches of the State Bank of Vietnam in provinces and centrally-administered cities shall be responsible for supervising, inspecting, and auditing factoring units' compliance with this Circular within their authority.

Chapter V
IMPLEMENTING PROVISIONS

Article 31. Transitional Provisions

1. For factoring contracts signed before the effective date of this Circular and in compliance with the law at the time of signing, the factoring unit and customers may continue to implement these contracts until their expiration.

2. Amendments, supplements, and extensions of factoring contracts as stipulated in Clause 1 of this Article can only be carried out if the amended, supplemented, or extended content complies with the provisions of this Circular and relevant laws.

Article 32. Effective Date

1. This Circular takes effect from July 1, 2024.

2. This Circular abolishes Circular No. 02/2017/TT-NHNN dated May 17, 2017, issued by the Governor of the State Bank of Vietnam regarding the operation of factoring by credit institutions and foreign bank branches.

Article 33. Implementation Organization

Heads of the Credit Policy Department, Heads of the Foreign Exchange Management Department, Heads of units under the State Bank of Vietnam, Governors of State Bank of Vietnam branches in provinces and centrally-administered cities, credit institutions, and foreign bank branches are responsible for implementing this Circular./.