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  • The Guidelines on Standing Orders for Financing Entity

    No: 43033273 Date(g): 18/11/2021 | Date(h): 13/4/1443Status: In-Force

    Translated Document

    Based on the powers vested to SAMA under its law issued by Royal Decree No. (M/36) dated 11/04/1442H, the Banking Control Law issued by Royal Decree No. (M/5) dated 22/06/1386 H, and the Finance Companies Control Law issued by Royal Decree No. (M/51) dated 13/08/1433 H.

    To contribute to providing different financing options for customers, reduce the risk of default, and establish a minimum set of regulations that must be adhered to when offering or utilizing this service. 

    You will find the regulations for the standing payment order in favor of the financing entity, which replace the standing payment order regulations in favor of real estate financiers as notified by SAMA’s Circular No. (41039820) dated 05/06/1441 H. The most notable changes are as follows:

    1. The service now includes all financing products and is no longer limited to real estate financing products.
       
    2. The scope of financing entities now includes banks and funds affiliated with the National Development Fund.

    For your information and action accordingly as of this date.

    • First: Definitions and General Provisions

      • A. Definitions

        The following terms and phrases—wherever mentioned in these regulations—shall have the meanings specified next to each of them, unless the context requires otherwise:

        Financing Entity: Banks, commercial banks, and financing companies subject to the supervision of SAMA, as well as government financing entities such as banks and funds affiliated with the National Development Fund.

        Financing: Credit granted to the customer by the financing entity.

        Customer: A natural person who has obtained a financing product from a financing entity.

        Standing Payment Order in Favor of the Financing Entity: A service provided by banks through which regular financial transfers are made from the customer's account to the financing entity’s account for a specified period and amount to repay the financing.

        Reliable Means of Communication: A registered means of communication that can be verified and retrieved in written or electronic form.

      • B. Objective

        These regulations aim to establish the minimum provisions that must be adhered to regarding the standing payment order in favor of financing entities, promote and protect competition between financing entities, support the availability of financing options for customers, and contribute to reducing the risks of default in repayments.

    • Second: Regulations for Standing Payment Order in Favor of a Financing Entity

      • A. Bank Obligations

         

        When offering a standing payment order in favor of a financing entity, banks must adhere to the following:
         1.Verify the existence of a fixed monthly income for the customer (such as a salary or equivalent) before accepting the request to establish a standing payment order in favor of the financing entity.
         
         2.Obtain the customer’s acknowledgment of their awareness of the consequences of establishing a standing payment order in favor of the financing entity, according to the acknowledgment form specified in the annex.
         
         3.Notify the customer upon establishing the standing payment order in favor of the financing entity via reliable means of communication, with the notification including, at a minimum, the following: the transfer amount, the date the order will begin, the duration in months, the account number to which the amount will be transferred monthly, and the name of the beneficiary financing entity.
         
         4.Execute the standing payment order for the full transfer amount on the due date or within five (5) days of the due date if the amount is not available on the specified date.
         
         5.Notify the customer if the standing payment order is not executed, providing the reason via reliable means of communication. 
         
         6.Obtain the beneficiary financing entity’s approval for the standing payment order or receive a clearance letter from the financing entity when the customer requests to amend or cancel the standing payment order.
         
         7.Ensure that the amount to be transferred from the customer’s account is not among the amounts that SAMA has confirmed should not be touched or deducted. Also, comply with the regulations related to account freezing, enforcement, and blocking bank accounts when creating or executing standing payment orders.
      • B. Obligations of the Beneficiary Financing Entity

        The beneficiary financing entity of a standing payment order must adhere to the following:
         1.Grant the customer approval to change the standing payment order amount when their circumstances change, leading to a rescheduling of the debt. This must be done within (3) working days from the completion of the rescheduling procedures by the financing entity.
         
         2.Provide the customer with a clearance letter and a no-objection certificate for cancelling the standing payment order within (7) working days from the date of the customer’s request in the following cases:
           a. Full repayment of the outstanding obligations.
         
           b. Exemption from the obligations as specified in the relevant instructions of SAMA, according to the applicable laws and regulations, or as stipulated in the contracts.
         
         3.Beneficiary financing entities may coordinate and reach prior agreements with each bank individually to obtain immediate notifications or periodic data reports that include details of the standing payment orders executed in their favor.
         
         4.Notify the customer upon receipt of the standing payment order amount via reliable means of communication.
    • Annex

      I acknowledge that the standing payment order to settle my obligations from my bank account (IBAN No.: .......) is a result of the financing granted to me by the financing entity, and that I cannot cancel it without providing a clearance letter from the beneficiary financing entity. I also acknowledge that I am not entitled to change the monthly deduction amount or the deduction period without the approval of the beneficiary financing entity. I further acknowledge that the bank has the right to deduct the monthly amount on the specified date or within (5) days of the specified date. I acknowledge that the bank executing the standing payment order is not responsible for any damages that may arise from the standing payment order, and bears no liability resulting from the execution of this order. The bank also reserves the right to seek recourse for any damages it may incur as a result of this order.