Circular No. 43/2016/TT-NHNN Issuing Provisions on Consumer Loans of Financial Companies

CIRCULAR

Regulations 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 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. 156/2013/NĐ-CP dated November 11, 2013, of the Government stipulating the functions, tasks, powers, and organizational structure 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 regulating consumer loans of finance companies. của công ty tài chính.

Article 1. Scope of Regulation

1. This Circular stipulates consumer loans of finance companies for customers.

2. Consumer credit activities through the issuance of credit card services of finance companies shall be carried out in accordance with the regulations of the State Bank of Vietnam on banking card operations and relevant laws.

3. Other lending activities of finance companies outside consumer lending activities regulated in Clause 1 of this Article shall be carried out in accordance with the regulations of the State Bank of Vietnam on lending activities of credit institutions and foreign bank branches for customers.

Article 2. Applicability

1. Finance companies include comprehensive finance companies and consumer finance companies.

2. Borrowers (hereinafter referred to as customers).

3. Other organizations and individuals related to consumer loans of finance companies.

Article 3. Explanation of Terms

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

1. Consumer loan It refers to the act of finance companies lending in Vietnamese dong to individuals to meet their capital needs for purchasing and using goods and services for personal consumption purposes, with the total outstanding consumer loan balance for each customer at that finance company not exceeding VND 100,000,000 (one hundred million dong). The total outstanding balance limit prescribed in this clause does not apply to consumer loans for purchasing automobiles and using such automobiles as collateral for the same loan according to the provisions of the law.

2. Capital needs for purchasing and using goods and services stipulated in Clause 1 of this Article including:

a) Purchase of means of transportation, household items, and equipment;

c) House repair expenses.

3. Installment loan is a form of consumer loan of finance companies to customers, whereby the finance company and the customer agree to repay the principal and interest of the loan over multiple periods.

Other lending regulations related to consumer lending activities of finance companies not specified in this Circular shall be implemented in accordance with the regulations of the State Bank of Vietnam on lending activities serving daily life needs for customers.

Article 5. Principles of Consumer Lending

1. Consumer lending activities shall be carried out in accordance with agreements between finance companies and customers, in compliance with this Circular and relevant laws.

Article 6. Service Introduction Points

Finance companies conducting consumer lending may establish service introduction points at locations providing goods and services for consumption to introduce consumer loan products, collect customer information and loan needs to support consumer lending activities. Finance companies are not allowed to conduct other activities at service introduction points.

1. Finance companies conducting consumer lending may open service introduction points at places providing consumer goods and services to introduce consumer lending products, collect customer loan demand information to support consumer lending activities. Finance companies are not allowed to conduct other activities at service introduction points.

2. Finance companies must enter into contracts regarding the opening of service introduction points with suppliers of consumer goods and services where the finance companies open such points, clearly defining the responsibilities, rights, and obligations of the parties involved and the duration of the contract's effectiveness.

3. Finance companies are responsible for the operation of service introduction points, ensuring that information about consumer lending products provided to customers at these points is consistent, complete, and truthful.

Article 7. Internal regulations

1. Based on the provisions of the Law on Credit Institutions, this Circular, and relevant laws, finance companies shall issue internal regulations on consumer lending, managing borrowed money in line with the characteristics of the company's business operations (hereinafter referred to as internal regulations on consumer lending).

2. The internal regulations on consumer lending must be uniformly implemented throughout the system and must include the following specific contents:

b) Loan approval process, including specific maximum review and decision-making periods; delegation, authorization, and responsibilities of individuals and departments in reviewing, approving, deciding on loans, and other tasks within the loan processing procedure;

c) Monitoring and supervising the loan process, usage, and repayment by customers; delegation, authorization, and responsibilities of individuals and departments in monitoring and supervising the loan process, usage, and repayment by customers;

d) Implementation of loan security measures, asset evaluation for loan security, management, supervision, and tracking of secured assets in line with the security measures, characteristics of the secured assets, and customers;

e) Termination of lending, debt handling; reduction or exemption of loan interest and fees;

g) Rules and standards of conduct in consumer lending and measures to ensure full compliance with these rules and standards;

i) Information technology systems and databases supporting consumer lending; data collection, updating, verification, and customer information management, identifying incorrect information and preventing fraud to make lending decisions, control loans, and recover loan debts;

k) Identification of potential risks that may arise during the lending process; risk monitoring, evaluation, and control procedures; risk handling plans;

3. At least once a year, the financial company must review and assess its internal regulations on consumer lending to consider, amend, and supplement them to be consistent with relevant legal changes and the actual operations of the financial company.

a) For financial companies whose main office is located where there is a Banking Inspection and Supervision Department: submit to the Banking Inspection and Supervision Authority and the Banking Inspection and Supervision Department;

b) For financial companies whose main office is located where there is no Banking Inspection and Supervision Department: submit to the Banking Inspection and Supervision Authority and the State Bank branch in the province or city.

The finance company shall agree with customers on the application of the following consumer loan disbursement methods:

1. Single loan: Each time a loan is granted, the financial company and the customer must complete the loan procedures and sign a consumer loan agreement.

2. Line of credit loan: The financial company determines and agrees with the customer a maximum outstanding loan balance to be maintained for a certain period. Within the loan limit, the financial company grants loans individually. At least once a year, the financial company reviews and re-determines the maximum outstanding loan balance and the duration of maintaining this balance in line with the customer's financial capacity.

Article 9. Interest Rates for Consumer Loans

1. The interest rate for consumer loans provided by finance companies shall be implemented in accordance with the State Bank's regulations on lending activities of credit institutions and foreign bank branches to customers.

2. The financial company issues regulations on the interest rate framework for consumer loans applicable uniformly throughout the system during each period, including the highest and lowest interest rates for each type of consumer loan product.

1. The consumer loan agreement must be in writing, containing at least the following contents:

a) Name, address, business registration number of the financial company; name, address, identification card number or citizen identification card number or passport number of the customer;

c) Purpose of using borrowed funds;

d) Loan method;

đ) Loan term; maintenance period for credit limit for cases of credit based on a limit;

e) Agreed consumer loan interest rate and the converted consumer loan interest rate expressed as a percentage per annum (one year being three hundred sixty-five days) calculated based on the actual outstanding loan balance and the time maintaining that actual outstanding loan balance; principles and factors determining the interest rate, the timing of determining the interest rate for cases applying adjustable loan interest rates; interest rate applied to overdue principal balances; interest rate applied to late payment interest; method of calculating loan interest; types and levels of fees applicable to the loan;

e) The agreed consumer loan interest rate and the converted consumer loan interest rate expressed as a percentage per annum (one year being three hundred sixty-five days) based on the actual outstanding loan balance and the period of maintaining that actual outstanding loan balance; principles and factors for determining the interest rate, the timing for determining the interest rate for cases applying adjustable interest rates; interest rate applied to overdue principal balances; interest rate applied to late payment interest; method for calculating loan interest; types and levels of fees applicable to the loan;

h) Repayment of principal and loan interest, and the order of recovering principal and loan interest; form of notification to the customer about the repayment schedule of principal and loan interest when there is an adjustment;

i) Provisions regarding early repayment, including conditions for early repayment, prepayment fee, and form of notification to the customer about the repayment plan of principal and interest for remaining principal balance in case the customer partially repays the consumer loan ahead of schedule;

i) Provisions on early repayment, including conditions for early repayment, prepayment fees, and the form of notification to the customer about the plan for repaying the remaining principal and interest for the outstanding principal balance in case the customer partially repays the consumer loan ahead of schedule;

k) Rescheduling of repayment terms; transferring overdue balances for principal balances that the customer cannot repay on time as agreed and not approved by the financial company for rescheduling of repayment terms; form and content of notification regarding the transfer of overdue balances. The notification content must include at least the overdue principal balance, the date of transferring the overdue balance, and the interest rate applied to the overdue principal balance;

m) The customer's responsibility to cooperate with the financial company and provide relevant documents related to the loan for the financial company to conduct due diligence and make loan decisions, monitor the use of borrowed funds and repayment by the customer;

n) Cases of terminating the loan; collecting the debt ahead of schedule; transferring overdue balances for principal balances that the customer cannot repay on time when the financial company terminates the loan and collects the debt ahead of schedule; form and content of notification regarding termination of the loan and collection of the debt ahead of schedule. The notification content must include at least the date of terminating the loan and collecting the debt ahead of schedule, the amount of principal balance collected ahead of schedule, the deadline for returning the principal balance collected ahead of schedule, the date of transferring the overdue balance, and the interest rate applied to the principal balance collected ahead of schedule;

o) Handling of loan debts; penalties for violations and compensation for damages; rights and responsibilities of the parties;

4.[15] The finance company must provide the customer with a draft of the consumer loan contract, accurately, fully, and truthfully explain the basic contents of the consumer loan contract, including the rights and obligations of the consumer loan borrower, measures to urge and recover debts, measures to handle cases where the customer does not fulfill obligations under the consumer loan contract, and have the customer confirm receipt of such information provided by the finance company as stipulated herein, so that the customer can review and decide before signing the consumer loan contract.

5. In cases of using standard contracts or general transaction terms in concluding consumer loan contracts, the finance company must perform:

3. The consumer loan agreements stipulated in clauses 1 and 2 of this Article shall be established in the form of specific loan contracts (for single loans) or line of credit contracts and specific loan contracts (for line of credit loans).

5. In cases where standard contracts or general terms and conditions are used in the conclusion of consumer loan contracts, the finance company must perform the following:

a) Publicly display the standard contract and general terms and conditions for consumer loans at its headquarters, service introduction points, and on its electronic information website;

b) Provide full information about the contract according to the model and general transaction conditions to the customer before signing the consumer loan agreement and obtain the customer's confirmation that they have been provided with full information by the financial company.

Article 11. Transitional Provisions

Financial companies may continue to implement existing consumer loan contracts signed before the effective date of this Circular, provided these contracts comply with the laws at the time of signing. Any amendments or supplements to these contracts can only be made if they conform to the provisions of this Circular and relevant laws.

Article 12. Effective Date

This Circular takes effect from March 15, 2017

Article 13. Implementation Organization

The Head of the Office, the Head of the Inspectorate, the banking supervision, the Heads of units under the State Bank of Vietnam, the Governors of the State Bank branches in provinces and centrally governed cities, the Chairmen of the Management Boards, the Chairmen of the Board of Members, and the General Directors (Directors) of finance companies are responsible for organizing the implementation of this Circular./.