Vietnam: What does consumer credit mean?

According to Decree No. 39/2014/NĐ-CP of Vietnam’s Government: “Consumer credit means a form of credit provided to individuals for their consumption purpose through provision of loans, including amortized loans, consumer loans and issuance of credit cards.”

Besides, Decree No. 39/2014/NĐ-CP also defines terms used in operation of financial companies and financial leasing companies, specifically as follows:

- General financial company means a financial company which may perform activities prescribed in the Law on Credit Institutions and this Decree.

- Specialized financial companies include factoring financial companies, consumer credit financial companies and financial leasing companies as defined in this Decree and guided by the State Bank of Vietnam (below referred to as the State Bank).

- Factoring financial company means a specialized financial company mainly engaged in factoring activities under this Decree.

- Consumer credit financial company means a specialized financial company mainly engaged in consumer credit activities under this Decree.

- Financial leasing company means a specialized financial company mainly engaged in financial leasing under this Decree. Financial leasing debit balance must make up at least 70% of the total credit balance.

- Financial leasing means medium-term and long-term credit activities based on financial leasing contracts between the lessors and the lessees. The lessors commit to buying assets for financial leasing at the request of the lessees and hold the ownership over financially leased assets during the lease term. The lessees use the leased assets and pay rents therefor during the lease term under the financial leasing contracts.

- Assets for financial leasing (below referred to as leased assets) means machinery, equipment and other assets prescribed by the State Bank. The State Bank shall guide in detail types of leased assets in each period.

- Financial lessor (below referred to as lessor) means a financial leasing company or financial company.

- Financial lessee (below referred to as lessee) means an organization or individual that is operating in Vietnam and directly uses the leased assets for its/his/her operation.

- Rent means an amount payable by a lessee to a lessor as agreed upon in a financial leasing contract.

- Financial leasing contract means an irrevocable contract between a lessor and a lessee on financial leasing of one or some leased assets.

- Purchase and sub-lease in the form of financial leasing (below referred to as purchase and sub-lease) means that a financial lessor purchases machinery, equipment or other assets which are lawfully owned by a lessee and sub-leases such assets to the lessee in the form of financial leasing for continued use to serve their activities. In the purchase and sub-lease transactions, the lessee is also the supplier of assets for leasing.

View more details at Decree No. 39/2014/NĐ-CP of Vietnam’s Government, effective from June 25, 2014.

Le Hai

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