This is one of the contents mentioned in the Draft Circular on consumer lending by finance companies (referred to as the Draft Circular). The Draft Circular stipulates cases where comprehensive finance companies and consumer credit finance companies are not allowed to provide consumer loans to customers in certain situations.
Article table of contents
Consumer lending is understood as a financial company's provision of loans in Vietnamese Dong to consumer loan customers for the purpose of paying for goods and services used for the personal consumption of the consumer loan customers, their spouses, parents, or children.
According to the Draft, the Circular specifies that financial companies are prohibited from lending for the following capital needs:
- Loans for purchasing or using goods and services listed under the prohibited buying, selling, exporting, and importing categories as per legal regulations.
- Loans for purchasing or using goods prohibited from circulation, and services prohibited from use under emergency measures as prescribed by law.
- Loans to meet financial needs for transactions or activities prohibited by law.
- Loans to repay existing loans from the same financial company and/or other credit institutions, foreign bank branches.
- Loans for purchasing houses; renting, lease-purchasing houses; constructing, repairing houses.
- Loans for purchasing ships, gold (excluding gold jewelry, fine arts).
A customer who is a consumer loan subject includes individuals with Vietnamese nationality, and foreigners living and working legally in Vietnam, must:
- Have civil legal capacity and civil act capacity as prescribed by civil law.- Have a purpose for using consumer loan capital in accordance with regulations in Clause 1, Article 3, especially not falling into the 06 cases prohibited from lending as mentioned above.- Have financial capacity to repay the debt as committed.- Have a feasible plan for using the loan capital.
According to the Draft, the Circular, financial companies shall have autonomy in operations as provided in Article 7 of Law on Credit Institutions and the right to select and be responsible for their decisions regarding consumer lending, methods of lending, and consumer loan products, ensuring transparency, appropriateness with risk management capacity of the financial company, and compliance with this Circular.
Regarding loan interest rates, financial companies and customers shall negotiate and agree, provided that the interest rates conform to the regulations of the State Bank of Vietnam. Additionally, financial companies must issue internal regulations on consumer loan interest rates, which must include:
- The highest and lowest loan interest rates for each consumer loan product;- The factors and basic principles for determining consumer loan interest rates such as: cost of capital, risk cost, return on capital, market interest rate, ensuring to cover the related costs, risks, protect customer rights, and support the financial company's development.
When the due date for payment arrives and the customer fails to pay or does not fully pay the principal debt and/or interest as agreed upon with the financial company in the consumer loan contract, the customer must pay the loan interest as follows:
- The interest rate applied to overdue principal debt shall be agreed upon by the financial company and the customer in the consumer loan contract but shall not exceed 150% of the interest rate for on-term loans.- In case the customer fails to pay interest on time, the customer must also pay interest on the overdue interest calculated at a rate agreed upon by the financial company and the customer but shall not exceed 10% per year calculated on the overdue interest amount for the overdue period.
For detailed rights and responsibilities of financial companies and consumer loan customers, please refer to the proposed Draft Circular.
Currently, the Draft Circular is open for public consultation on the Government of Vietnam's Electronic Information Portal.
