The Central Bank obliges “installment companies” to clarify short-term financing fees

The Central Bank has obligated companies that provide installment and short-term financing services to clarify to their clients all fees imposed, as a percentage and value, of the total financing amount, especially late payment fees. It has also obligated them to inform borrowers of the consequences of late payment on the agreed dates.

The Central Bank detailed in a system it issued, and “Emirates Today” obtained a copy of it, that “finance companies with limited licenses and agents must disclose to borrowers the total fees paid by borrowers to obtain short-term credit. The total amount or value of the fees must also be disclosed, as a total amount and value, and as a percentage of the value of the credit.”

The Central Bank added: “Finance companies with limited licenses and agents must also provide clear examples of how fees are calculated and applied, especially with regard to any late payment fees.”

The Central Bank stated in its system: “Finance companies with limited licenses and agents must inform borrowers of the consequences of late payment and urge them to settle quickly. Any fees applied in the event of late payment must be clearly specified to borrowers and be reasonable.”

The Central Bank also required the borrower to sign the credit documents and provide him with a copy signed by the limited-license finance company or the agent and the borrower.

He continued: “Finance companies with limited licenses and agents must clearly disclose the provisions available to assist in cases of hardship for borrowers facing financial difficulties, including appropriate debt management solutions, and the relevant policy in granting debtors a grace period.”

The Central Bank stressed in its system that limited-license financing companies and agents must establish appropriate collection policies and procedures, and specify the actions to be taken against borrowers who fail to pay on time. Borrowers must be clearly informed of the details related to this policy and procedures. Collection policies, procedures and related controls must also meet the requirements of the Consumer Protection System and Standards issued by the Central Bank.