• Dr. Omran: Concluding a contract between the customer and consumer finance company shall maintain the maximum possible protection
• Dr. Omran: Three companies sent requests to the Authority to practice consumer finance activity , one of whom is willing to issue commercial payment cards
• Dr. Omran: The Authority’s Board of Directors issues the grievance mechanism and procedures against the administrative decisions issued in implementation of the provisions of the law
• Dr. Omran: Consumer financing parties must submit the annual financial statements within a period not exceeding three months from the end of the fiscal year, and at least 21 days before the date of the general assembly’s meeting .
Within the context of FRA’s role to regulate consumer finance activity – which is recently subjected to FRA’s supervision – FRA started to set minimum rules to protect customers and ensure the transparency of transactions. In accordance to the executive decision No. 457 of 2020, Dr. Mohammed Omran – FRA’s Chairman called upon consumer finance companies and providers of consumer finance licensed by the Authority to engage in the activity to conclude a contract between them and their customers. The contract shall specify the goods or services to be purchased, indicate their price upon purchasing and the amount to be paid by the customer upon concluding the contract.
Dr. Omran also stressed on the necessity that the contract shall include the amount of financing provided by the company to the customer, payment period, number of installments and the value of each, rate of return taken as a basis for calculating financing value and whether it is fixed or variable. In addition, the contract shall include the customer’s right to expedite his loan payments and also it shall include the conditions set in this regard. Also, the contract shall clarify the license number and that the company is subjected to FRA’s supervision.
Dr. Omran said that the law regulating consumer finance activity had taken into account the Egyptian state’s move towards the digital economy and allowed consumer finance companies – licensed by the authority – to provide financing through commercial payment cards or one of the payment methods approved by the Central Bank based on its contract with a network of Vendors and providers of consumer goods and services, and required them to conclude a contract between them and their customers. The contract shall include vendors and providers of goods and services at the time of concluding the contract, ways of amending the contract whether by deleting or adding new item within its validity period besides determining the maximum financing provided by the company, payment terms and rate of return and whether it is fixed or variable.
FRA’s Chairman added that the decisions issued by FRA’s Board of Directors were approved through the video conferencing mechanism. He noted that the said decisions have completed the establishment and licensing framework for practicing consumer financing activity and its requirements, adding that it will be applied upon considering the three requests submitted to the Authority to practice consumer finance activity, including a company that wishes to issue commercial payment cards for financing purposes.
FRA’s Chairman revealed that FRA’s BOD issued a package of four decisions to complete the regulatory and procedural framework of consumer finance activity. The first of which came decision No. (60) of 2020 on the rules set for preparing and presenting financial statements of consumer finance companies. The said decision asked consumer finance companies and providers to prepare their financial statements in accordance with the Egyptian accounting standards, provided that these financial statements are independent in case the consumer finance company is licensed to practice another non-banking financial activity. The decision also required the auditor to disclose in his report the adequacy of allocations in accordance with allocations’ policy approved by the company’s board of directors.
Dr. Omran added that the Board’s decision has set the minimum data that the consumer finance company must adhere to in the complementary clarifications in terms of stating the types of goods and services, financing volume and its distribution according to the goods and services, the volume of non-performing loans and its percentage to the company’s total activity , the average of credit returns, basis for calculating the allocations that the company makes for doubtful financing. The decision also arranged the timing of submitting the company’s annual financial statements attached with the Board’s report and the auditor’s report that include auditing of these financial statements within a period not exceeding three months from the end of the fiscal year, and at least 21 days before the date set for the general assembly’s meeting. The decision also obliged the companies to submit quarterly financial statements to the Authority within 45 days of the end of each quarter.
FRA’s Chairman explained that the package of decisions issued included Board decision No. 61 of 2020, which stipulated that companies licensed to practice consumer financing activity shall adhere to corporate governance rules as one of the requirements for continuing licensing to practice the activity. These rules stipulates that the company’s statute shall specify the number of Board members and that most of them shall be Non-executives – including at least two independents – provided that the Board formation shall include at least one female member . In addition to the commitment to use the cumulative voting method upon electing Board members. Also, the rules stipulate that the Board member shall remain on Board for two consecutive terms only.
FRA’s Chairman pointed out that the Board of Directors of the Consumer Finance Company is obligated to form a number of committees from among its non-executive and independent members to assist the Board in performing its duties effectively and in a manner commensurate with the company’s activity and needs. The Board shall form an Audit Committee to ensure that the company adheres to the laws and decisions regulating its activity. Then, a Risk Committee shall be reformed to set the regulatory frameworks, procedures and rules for dealing with operating risks, market risks, credit risks, reputation risks, information systems risks, risks affecting the company’s sustainability and other non-strategic risks that may face the company’s Board.
The company and members of its board of directors shall comply with conflict of interest requirements, conclude replacement contracts, disclose to the Authority and the shareholders any significant events that the company is exposed to and evaluate them to verify their effectiveness. Also, the company shall have an internal control system, an internal audit management, and one or more independent auditors listed at FRA’s registry.
FRA’s Chairman noted that the Law on Regulating Consumer Finance Activity No. 18 of 2020 came with the aim of doubling citizens’ purchasing power and providing repayment with deadlines commensurate with their income, which increases the volume of investments and operating rates. At the same time, the said Law ensured the establishment of systems that protect consumer finance customers. The Law stipulates that the Authority shall receive complaints from customers and shall respond to them. On the other hand, the Law provide a mechanism for settling grievances and aggrieved against administrative decisions issued in implementation of the provisions of the law.
Dr. Omran clarified that the Authority’s Board of Directors decision No. 63 of 2020 had specified the formation of one or more grievances committee headed by a deputy of the State Council and with the membership of two members from the State Council and a representative from the Authority . That is besides an expert that shall consider grievances against the administrative decisions issued in this regard within sixty days from the date of notification or certainty. Moreover, FRA’s decision organized grievance procedures and considering the grievance in a period not exceeding thirty days from the date of completing the documents, data or clarifications that were requested. Decisions of the committee are final and effective. On the other hand, the case shall not be accepted in the competent court Only after resorting to the grievance committee or after missing the deadline set for submitting the grievance.
FRA’s BOD decision No. 62 of 2020 stipulated that money laundering and terrorist financing controls previously applied in non-banking financial activities shall be applied by consumer finance companies. The decision also called for considering some guidelines indicators upon identifying suspected operations that may include money laundering and terrorist financing.