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Saudi- Government working on new loan repayment system
(MENAFN- Arab News) The Ministry of Trade and Industry is working to develop an installment payment system to address finance companies' infractions against consumers. The ministry has emphasized since the beginning of the campaign two years ago the need for companies to correct their status in order to obtain a lending license from Saudi Arabian Monetary Agency (SAMA).
Issuance and renewal of licenses for companies in the sector has been halted as the ministry begins to apply the financing system and its regulations to modify the conditions of the financing sector and monitor business operations.
The new funding system will rely on international standards in the calculation of interest which are based on the application of the true APR method. In light of the application of the new finance system the bank accounts and activities of a number of offending finance companies were frozen after their licenses expired and they failed to correct their status within the two-year grace period.
According to reports 95 percent of the total turnover of finance companies has come under the umbrella of SAMA. However a large number of firms applied to SAMA before the deadline to correct their status and arrangements are currently under way to review their work with clients. Discussions are also in progress to determine how to hold offending companies accountable for failing to correct their status prior to the deadline.
SAMA is also working on its plan to conduct inspection tours of finance companies in the Kingdom early next year to check the validity of their licenses and apply sanctions against violators.
In November SAMA announced the mandatory application of the system to monitor and regulate finance companies. According to SAMA Gov. Fahad bin Abdullah Al-Mubarak the system will have positive effects in terms of protecting beneficiaries by increasing transparency as well as supporting the creation of a competitive environment.
Al-Mubarak urged citizens and residents who wish to obtain loans to deal only with licensed banks and finance companies. The mandatory system comes into effect after the expiration of the two-year period on 11/8/2014 granted to all finance companies and institutions to correct their status.
Issuance and renewal of licenses for companies in the sector has been halted as the ministry begins to apply the financing system and its regulations to modify the conditions of the financing sector and monitor business operations.
The new funding system will rely on international standards in the calculation of interest which are based on the application of the true APR method. In light of the application of the new finance system the bank accounts and activities of a number of offending finance companies were frozen after their licenses expired and they failed to correct their status within the two-year grace period.
According to reports 95 percent of the total turnover of finance companies has come under the umbrella of SAMA. However a large number of firms applied to SAMA before the deadline to correct their status and arrangements are currently under way to review their work with clients. Discussions are also in progress to determine how to hold offending companies accountable for failing to correct their status prior to the deadline.
SAMA is also working on its plan to conduct inspection tours of finance companies in the Kingdom early next year to check the validity of their licenses and apply sanctions against violators.
In November SAMA announced the mandatory application of the system to monitor and regulate finance companies. According to SAMA Gov. Fahad bin Abdullah Al-Mubarak the system will have positive effects in terms of protecting beneficiaries by increasing transparency as well as supporting the creation of a competitive environment.
Al-Mubarak urged citizens and residents who wish to obtain loans to deal only with licensed banks and finance companies. The mandatory system comes into effect after the expiration of the two-year period on 11/8/2014 granted to all finance companies and institutions to correct their status.
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