CBB, banks develop code of conduct to govern consumer credit

Retail banks and financing firms offering consumer credit and other consumer products have adopted a code of conduct aimed at enhancing transparency and promoting a better understanding of consumer loans and other consumer products and services.

The Code of Best Practice on Consumer Credit and Charging, initiated by the CBB and developed in conjunction with the Bankers' Society of Bahrain, sets out minimum standards for retail banks and financing firms, both conventional and Islamic, to follow in their dealings with consumers. The provisions of the Code cover the full range of retail banking relationships between these financial institutions and their customers, from the sale of an appropriate product to ensuring dissemination of all relevant information.

"The development of the Code is a major step by the banking industry in Bahrain to maintain high standards of ethics and best practices aimed at fostering consumer confidence," said Mr. Khalid Hamad, Executive Director, Banking Supervision, at the CBB.

He was speaking today during a press conference at which the new Code of Best Practice was unveiled.

"Financial services have a great economic and social impact and, as a regulator of financial firms, the CBB is committed to protecting consumers, as mandated by the CBB Law. The new Code will serve as an important complement to the CBB's regulatory framework governing retail banking," said Mr. Hamad.

The Code applies to all CBB licensees offering to individual customers:

1)Loans, overdrafts, etc;
2)Any other type of financial product creating a creditor - debtor relationship (including Shari'a compliant credit facilities of all types); and
3)Any other financial service for which the CBB licensee charges a fee.

The Code requires related CBB licensees to provide clear and written information and documentation about the products and services they offer as well as all the terms and conditions, including interest/profit rates and a breakdown of all applicable charges, including administration/arrangement fees, pre-payment charges and default interest rates. The concerned institutions are also required to inform customers of any changes in terms and conditions applicable to any product/service.

The Code also requires retail banks and financing firms to establish a proper and formal mechanism, including a designated Customer Complaints Officer, to address and monitor consumer complaints. The Code sets out the proper procedures to be undertaken by CBB licensees in registering and addressing consumer complaints. Consumers may also, as a last resort, refer their complaints to the CBB Compliance Directorate (Tel: 17547107).

The Code's provisions also call for a more sympathetic approach towards customers facing genuine financial difficulties.

"The new Code has been necessitated by the developments taking place in the consumer credit market. These developments require greater public awareness about the role of banks and the products and services they offer,"

said Mr. Yousif Hassan Yousif, Director, Retail Banking Supervision, at the CBB.

He said the CBB has worked closely with the industry, through a joint committee, over the past five months to develop this Code, which obliges banks to enhance transparency and educate customers about their rights and responsibilities.

"I would like to thank the industry for its positive and constructive contribution to the development of this Code, which stands to benefit both the consumers and the market players," said Mr. Yousif.

Dr Farid Al Mulla, Chairman, Bankers' Society of Bahrain, said the Code should go a long way to improving transparency in the industry as well as bank-client relationships. It also clearly demonstrates the commitment of the CBB and the banks to enhancing banking standards in the country.

Copies of the Code, in Arabic and English, will be available to the public through all retail banks and financing firms offering consumer products.

The Code can also be accessed on the CBB website.

It will also be incorporated into the CBB Rulebook Volumes I and II, relating to regulations governing conventional retail and Islamic banks, respectively.

The CBB website will soon incorporate a new section, detailing fees charged by individual retail banks for various consumer financial products/services.

"The CBB is committed to promoting transparency in Bahrain's financial markets and ensuring a fair deal for consumers," said Mr. Yousif.