Saudi Gazette report

RIYADH — Saudi Central Bank (SAMA) has instructed all banks, local lenders and finance companies operating in the Kingdom to cancel previously issued promissory notes linked to credit card products and to stop requesting any commercial papers from individual customers when offering new credit card financing.

Under a recent circular, SAMA set a deadline of 2/1/1448 AH for the cancellation of all existing promissory notes related to credit cards.

The directive also requires financial institutions to cease the practice entirely for new applications, following the regulator’s monitoring of its growing use in the market.

The central bank further mandated banks and finance companies to update their internal policies, procedures and controls in line with the new requirements.

Institutions must submit, within 30 days, a corrective action plan to SAMA’s Customer Protection Supervision Department outlining how existing situations will be addressed.

The plan must, at a minimum, include measures to return or cancel promissory notes or other commercial papers previously obtained from individual customers.

Full implementation of the corrective measures must be completed within six months from the date of the circular, issued on 2 Rajab.

SAMA said it had recently observed an increase in the practice of requiring promissory notes from individual customers as part of credit card financing products, prompting regulatory intervention to curb the practice and strengthen customer protection.