| 8. | The creditor must adopt a clear, transparent and documented scientific method, criteria and procedures to evaluate the creditworthiness of the consumer and his/her ability to repay. These methods, criteria, and procedures must be in accordance with the best practices in this area without prejudice to the principles herein. The board of directors of the creditor must adopt, revise annually, and update when necessary these criteria and procedures. The creditor must apply these procedures and document this application in the finance file before granting finance.
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| 9. | Upon the consumer’s consent, the creditor must examine the credit record of the consumer to verify his/her solvency, ability to meet the monthly credit obligations, and his/her credit behavior. The information obtained must be documented in the finance file. The creditor must ask the consumer to disclose, in writing, any other credit obligations he/she has, such as loans from his/her employer, friends or relatives, whether current or expected, and this must be documented in the finance file. Upon granting the finance, the creditor must, in accordance with the provisions of relevant laws, regulations and instructions, register all credit information relating to the finance granted to the consumer with licensed credit bureaus after obtaining his/her consent. The creditor must then update such information throughout the period of dealing with the consumer. The creditor must reject a finance request if it does not obtain the consumer’s consent to all matters stated in this paragraph.
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| 10. | The creditor must assess the ability of its consumers to meet monthly credit obligations, especially in cases where consumer's deductible ratios are close to the maximum deduction limits set out herein. The assessment of the ability to meet monthly credit obligations is primarily based on the assessment of the consumer’s monthly disposable income that can be used to meet his/her monthly credit obligations. Basic expenses that vary according to several factors, such as income levels, number of dependents, and residence place, whether the consumer owns such a place, rents it, or otherwise, must be taken into consideration, the creditor should develop appropriate rules in line with best practices to apply comprehensive factors to various categories of consumers. The finance is considered bearable if the consumer’s total monthly credit obligations, upon granting him/her finance, are less than the consumer’s monthly disposable income. This must also be consistent with the deductible ratios stated in Chapter IV on Quantitative Principles of Responsible Lending, Paragraphs (15, 16, and 17) hereof.
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| 11. | Based on a credit study and assessment of consumer’s monthly disposable income, the creditor must use financial models and tools to measure the consumer’s ability to meet monthly credit obligations and to what extent such finance suits his/her needs and circumstances. Such models depend on some basics, including identifying and classifying the regular basic expenses of various consumers. Basic expenses cover, as a minimum, the following groups:
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| | a. | Food expenses, which are affected by the number of dependents;
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| | b. | Housing (rent) and services’ expenses, which depend on whether the consumer is the owner or tenant of the house or otherwise;
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| | c. | Wages for domestic worker;
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| | d. | Education expenses, which are affected by the number of dependents;
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| | e. | Health care expenses, which are affected by the number of dependents;
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| | f. | Transportation and communications expenses;
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| | g. | Insurance expenses for individuals and their dependents, as the case may be; and
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| | h. | Any expected costs or expenses.
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| | In addition to the above-mentioned expenses, existing monthly credit obligations, which can be verified through licensed credit bureaus; finance granted by the consumer’s employer, friends, or relatives; and any other finance that is repaid through installments on a monthly, semi-annual, or other basis must be considered.
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| 12. | The creditor must ensure both the efficiency and effectiveness of such financial models and tools, used to measure the consumer’s ability to repay finance. It should benefit from its information and data, as well as legally available general statistics sources. The methodology of such models and tools must include, as a minimum, the following:
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| | a. | A mechanism to calculate and analyze total monthly income;
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| | b. | A mechanism to calculate and analyze monthly credit obligations; and
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| | c. | A mechanism to calculate and analyze basic expenses, including the following:
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| | | o | A list of basic expense indices compared to verified data;
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| | | o | The ability of changing basic expenses according to income levels; and
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| | | o | The ability of changing basic expenses according to the number of dependents.
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