Circular No. 43 sets framework for consumer lending by finance companies.
The Governor of the State Bank of Vietnam has issued Circular No. 43, containing provisions on consumer loans from finance companies and to take effect from March 15.
The definition of a consumer loan is clearly stated in the Circular as one made to private customers in Vietnam dong to provide capital for the purchase of consumer goods.
Total consumer loans to one customer must not exceed VND100 million ($4,400). Loans are to be used for purchasing motor vehicles, furniture, and household equipment or to pay for study costs, medical treatment, tourism, culture, physical culture and sports activities, and housing repairs.
The definition does not include consumer loans for purchasing motor cars when the vehicle is used as collateral.
The Circular also provides that finance companies open specific service counters for such loans.
In addition, finance companies must issue internal regulations on consumer lending, collect, update, and check data, implement customer information management, identify false information, and prevent fraud when deciding on loans or conducting loan control and debt recovery.
Ethical standards and the rights and obligations of employees are to be controlled carefully to avoid fraud and malfeasance.
Finance companies must also issue regulations on maximum and minimum lending rates for each consumer loan product and send such regulations to the central bank for supervision.
Consumer loan contracts must include the repayment schedule, the interest rate, remedies available if the customer does not make repayments on time, early repayment charges, and other conditions on the loan.
The target of Circular No. 43 is to finalize legislation to protect consumer interests, creating a legal basis for consumer lending activities by finance companies and ensuring that consumer lending by finance companies is sustainable, safe and effective.