SAMA has recently issued the first update on 'Regulations for the Issuance and Operations of Credit and Charge Cards' that supersedes the 'Regulations for Issuance and Operations of Credit and Charge Cards, August 2008'. The updated regulations include new rules that will enhance the protection of credit and charge cardholders' rights and promote transparency and disclosure principles. These rules will help cardholders obtain a clear understanding of their rights and obligations and enable them to more easily compare services provided by licensed Credit and Charge Card issuers. The entities licensed to issue Credit and Charge Cards have been granted a grace period ending on 10/14/1436H (30/07/2015) to adhere to all updated regulations.
SAMA's Governor, Dr. Fahad Al-Mubarak, has affirmed that SAMA gives special attention to the protection of credit and charge cardholders' rights and considers it a top priority. He has pointed out that the updated regulations have been developed based on an in-depth study of the Credit and Charge Cards sector in the Kingdom. Changing consumption and spending patterns and aligning this with the industry's international best practices was also considered. "The updated regulations will have a positive impact on the protection of credit and charge cardholders' rights and the enhancement of transparency and disclosure principles. This will lead to a more competitive environment that will ultimately better serve the needs of the market", the Governor cited.
The most prominent features of the updated regulations:
1. Card Agreement Synopsis: the card issuer must provide the cardholder with a simple, straightforward summary statement, which includes basic information and the most important provisions that the cardholder should be made aware of.
2. Transparency and Disclosure: the principles of transparency and disclosure must be used for marketing products; the use of misleading information must be avoided; and minimum limits on information that should be included in the agreements need to be established.
3. Objection Procedures: the contract shall contain clear procedures for a cardholder's objection to any transaction which is deemed unknown to the cardholder.
4. Warning Statements: a Card Issuer should include specific warning statements in all agreements, terms and conditions, application forms and advertisements, in red colors stating clearly the potential consequences for the cardholder in;
(a) Not meeting the Credit or Charge Card conditions as confirmed in the agreement.
(b) Only making the minimum repayments each month.
5. Annual Percentage Rate (APR): standards for calculating the annual percentage rate, which is an internationally recognized rate for disclosing the actual financing cost, are set forth in the regulations. All costs and administrative fees shall be included when calculating the rate to enable cardholders know the actual cost of finance and to compare the main features and charges for different credit and charge cards in an easy and transparent manner.
6. Fees and Commissions: setting maximum caps for cash withdrawal fees and for late payments.
7. Rules and Standards When Dealing With Cardholders: include the need to advise cardholders of any amendments to their contract, obtain their consent when necessary, adhere to the code of conduct when performing collection practices, and abide by complaint handling regulatory rules and procedures for the fair and transparent settlement of disputes that may arise thereof.
The full copy of the first update of 'Regulations for Issuance and Operations of Credit and Charge Cards' can be obtained here and 'Frequently Asked Questions' here.
