CBB Volume 1: Contents

Central Bank of Bahrain Volume 1—Conventional Banks
Part A
Business Standards
BC Business and Market Conduct
BC-4 Customer Account Services and Charges
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Location: Central Bank of Bahrain Volume 1—Conventional Banks > Part A > Business Standards > BC Business and Market Conduct > BC-4 Customer Account Services and Charges > BC-4.3 Disclosure of Charges by Retail Banks
  • BC-4.3 Disclosure of Charges by Retail Banks

    • BC-4.3.1

      In order to improve retail customer awareness and enhance transparency of retail banks charging structures, all retail banks must display in a prominent position, in Arabic and in English, by notice in their banking halls (both head offices and branchesG ), a list of all applicable charges.

      Amended: October 2012
      Amended: April 2011
      October 07

    • BC-4.3.2

      Retail banks must also ensure that each customer is in receipt of their current list of charges, by enclosing such a list with account statements and displaying such charges on their websites. The list must specify standard charges and commissions that will be applied by the retail bank to individual services and transactions and to specific areas of business. Such notification must be made in instances where there are changes in the fees or when new fees are introduced.

      Amended: April 2013
      Amended: October 2012
      October 2007

    • Credit Agreements

      • BC-4.3.4

        For the purpose of this Section, the following definitions apply:

        (a) Credit agreement – Means all instalment financing agreements and lease agreements, as well as credit cards, overdraft, revolving and other types of credit offered to retail customers;
        (b) Customer – Means both the debtor and the guarantor (if any) and/or any potential debtor or guarantor;
        (c) Conspicuous notice – Means a written statement in both Arabic and English languages which is easily visible and legible and displayed in all retail banks' premises open to the public (head offices and branchesG ), and via means such as websites, newspapers and other press notices;
        (d) Nominal annual rate – Means the interest rate charged to the customer, calculated by dividing the amount of the total interest by the amount of the funds provided to the customer and excluding any other charges, the results of which is divided by the number of years of the term of the credit agreement;
        (e) Outstanding credit amount – Means the amount outstanding under a credit agreement representing the amount of funds provided to the customer and any other charges that are included as part of the principal amount to be repaid by the customer over the duration of the agreement less any repayment made related to the principal amount at a specified date;
        (f) Principal – Means the amount of credit received plus any other charges, the total of which is subject to interest; and
        (g) Retail customers – Means a natural person.
        Added: October 2012

      • BC-4.3.3

        A retail bank must make available, at their premises, information leaflets containing information on the key products and services in respect of all credit agreements including:

        (a) The Annual Percentage Rate (APR) as defined in Paragraph BC-4.3.10, for instalment financing facilities only; and
        (b) The annual interest rate on credit facilities (as referred to in Paragraph BC-4.3.14), commission, fees, one-off charges, expenses on behalf of third parties, exchange rates applied and any other charges.
        Amended: October 2012
        Amended: July 2012
        Amended: April 2011
        October 07

    • General Rules

      • BC-4.3.5

        Where a retail customer has a credit agreement with a retail bank, retail banks must:

        (a) Duly inform their customers in accordance with this Module about the nature and the characteristics (including relevant risks) of the credit agreements and services offered by them, and about the terms and conditions governing such agreements;
        (b) Periodically inform, in writing, their customers on the evolution and the terms of any credit agreement signed, throughout the duration of the contract (refer to Paragraphs BC-4.3.24 and BC-4.3.25);
        (c) Respond in due time, to customers' requests for the provision of information and clarifications regarding the application of contractual terms (refer to Paragraphs BC-4.3.29 and BC-4.3.30);
        (d) Appoint a customer complaints officer and publicise his/ her contact details (refer to Chapter BC-9 on Customer Complaints Procedures);
        (e) Ensure the proper training of employees involved in interfacing and providing specific information to customers;
        (f) Disclose information required in this document in both Arabic & English languages;
        (g) Show clearly the APR for instalment facilities and the annual rate of interest for other credit facilities on the credit agreement application and 'key terms disclosure' document; and
        (h) Disclose all information in a clear and readable form (refer to Paragraph BC-4.3.6).
        Added: October 2012

      • BC-4.3.6

        Marketing of customer credit agreements, advertising and sales promoting credit agreements, irrespective of the media used (SMS, Internet, printed material, telephone solicitation) must be clear and understandable, must be true and not misleading and meet the basic customer information requirements as defined in this Module. All advertisements for retail banking products and services are subject to CBB prior approval as per Paragraph BC-1.2.1. Retail banks are also asked to take special care to ensure that the content of any advertising material does not mislead or deceive the public in any way.

        Added: October 2012

      • BC-4.3.7

        The use of "small print" to make potentially important information less visible is not compatible with good business conduct, and should be avoided.

        Added: October 2012

    • Minimum Disclosure Requirements

      • BC-4.3.8

        Retail banks must make:

        (a) Public disclosure regarding credit agreements; and
        (b) Disclosures to individual customer(s), whether these be during the course of the initial negotiation of the credit agreement or during the term of the facility being offered.
        Added: October 2012

    • Public Disclosure Requirements for all Credit agreements

      • BC-4.3.9

        The following public disclosures must be made by conspicuous noticeG for all types of credit agreements:

        (a) Any obligation on the part of the customer to open a deposit account with the retail bank as a condition of granting the credit agreement;
        (b) Any late payment charges;
        (c) The level of fees for any special services rendered, or one-off expenses, as well as any amount collected by retail banks on behalf of third parties;
        (d) Any fees or charges payable under any linked or mandatory contract entered into as a condition for the granting of the credit agreement, such as payment protection insurance; and
        (e) Any other charges not included above.
        Added: October 2012

    • Additional Public Disclosure for Instalment Financing Facilities

      • BC-4.3.10

        In addition to the requirements under Paragraph BC-4.3.9, retail banks must publicly disclose by conspicuous noticeG for instalment financing facilities:

        (a) The current Annual Percentage Rate (APR) as calculated using the APR methodology in Paragraph BC-4.3.31. The APR displayed must be calculated based on the following scenarios. In case of consumer finance, amount borrowed is BD10,000 for a 7-year term and for housing facilities, BD100,000 for 25 years.
        (b) The Annual Percentage Rate (APR), must be broken down as follows:
        (i) The annual nominal interest rate payable on the instalment financing;
        (ii) Administration/handling fees;
        (iii) In the case of finance lease contracts/ijara or deferred purchase contracts, any fees for purchasing the asset; and
        (iv) Any other mandatory charges (contingent costs are excluded); and
        (c) The terms and conditions for early repayment, partial or full, of the credit agreement, or for any change in the terms and covenants of the credit agreement, as well as any relevant charges (where permitted) and the way in which these are calculated.
        Added: October 2012

      • BC-4.3.11

        The APR is a standard measure that allows customers to compare total charges for instalment financing facilities on a like-for-like basis. The APR allows the customer to compare the total charge for credit over differing periods (e.g. – two versus three years) or offered by different retail banks with differing payment profiles and taking into account the payment of any other fees payable as a condition of the contract, such as administration fees or insurance premiums.

        Added: October 2012

      • BC-4.3.12

        Any advertising through any media means of instalment financing facilities, offered by the retail banks must specify only the APR (including all fees and charges) and no other rates, i.e. nominal, base, flat or rates by any other names.

        Added: October 2012

      • BC-4.3.13

        For the purposes of Paragraph BC-4.3.10, the disclosures can be provided as one APR or a range of APRs for retail banks that provide instalment financing to different segments and products. A retail bank may have different customer segments with different risk profiles, for whom the APR offered on the same product may vary. However, the disclosures must comply with the scenarios outlined in Subparagraph BC-4.3.10(a).

        Added: October 2012

    • Additional Public Disclosure for Credit Agreements other than Instalment Financing Facilities

      • BC-4.3.14

        In addition to the requirements under Paragraph BC-4.3.9, retail banks must publicly disclose by conspicuous noticeG for Credit Agreements other than instalment financing facilities:

        (a) For credit cards, the monthly and the annual rate of interest plus other fees and charges;
        (b) For overdrafts, the annual rate of interest plus other fees and charges;
        (c) For floating-rate credit agreements, the interest rate clearly defined on the basis of the relevant base rateG , the periods during which this rate would apply, as well as information on key factors that could affect the total cost of the credit agreement; and
        (d) For instances where the customer exceeds contractual credit lines, the terms and any relevant charges.
        Added: October 2012

      • BC-4.3.15

        For credit agreements other than instalment financing facilities, any advertising through any media means must specify only the annual interest rate and other fees and charges.

        Added: October 2012

      • BC-4.3.16

        For credit agreements other than instalment financing facilities, banks are prohibited from using the term APR in any advertising.

        Added: October 2012

    • Disclosure to Individual Customers: Initial Disclosure Requirements of Key Terms

      • BC-4.3.17

        Retail banks must make clear to potential customers, prior to entering into a credit agreement, all relevant key terms of the agreement in the credit agreement application and 'key terms disclosure' document, in order for them to clearly understand the characteristics of the services and products on offer. Retail banks must also comply with the disclosure requirements under the "Code of Best Practice on Consumer Credit and Charging" (see Appendix CM-2).

        Added: October 2012

      • BC-4.3.18

        The above "key terms disclosure" document must be summarised in plain English and Arabic. This document must be signed and dated by the customer(s) in duplicate as having been read and understood, prior to signing a credit agreement. One copy should be retained by the customer and the other must be retained by the retail bank in their customer file.

        Added: October 2012

      • BC-4.3.19

        For credit agreements where a retailer extends credit to purchase goods or services by operating in agreement with retail banks, all conditions of the credit agreement must be disclosed in the credit agreement application and 'key terms disclosure' document, including when interest will begin to accrue, along with information on any indirect charges.

        Added: October 2012

      • BC-4.3.20

        Credit agreements, referred to in Paragraph BC-4.3.19, must be finalised with an employee of the retail bank, whether located at the premises of the retailer or at the premises of the retail bank providing the credit. Interest must in no event be charged before the disbursement of funds.

        Added: October 2012

      • BC-4.3.21

        Retail banks must inform the customers on the nature of their contractual relationship with the retail outlet and the customers' rights arising as a result of this relationship.

        Added: October 2012

      • BC-4.3.22

        In addition to the initial disclosure of key terms noted in Paragraphs BC-4.3.17 to BC-4.3.21, the "key terms disclosure" document must at the time of signing the credit agreement, amongst other things, make clear:

        (a) The detailed breakdown of the payments:
        (i) The principalG amount being borrowed, the interest per month and the maturity of the credit agreement;
        (ii) The net amount provided to the customer after deducting or applying any upfront or other charges;
        (iii) The total interest payments and principalG repayment for the term of the credit agreement; and
        (iv) The total administration/handling fees and any other fees and charges spread over the term of the credit agreement.
        (b) The APR and the nominal annual rate as defined in Paragraphs BC-4.3.10 and BC-4.3.4(d) respectively;
        (c) Whether the rate of interest is fixed or can be varied, and under what circumstances;
        (d) The basis on which interest is charged (e.g. actual reducing balance) and applied to the account (e.g. monthly or quarterly compounding) and whether principalG repayments are taken into account in the calculation, together with an illustration of the calculation method;
        (e) The detailed costs associated with "top-ups" of credit agreements or other alternative arrangements for extending additional credit or early repayments, whether partial or full, of amounts due including the treatment of remaining interest and the payment of premium for insurance;
        (f) Any late payment charges;
        (g) The annual interest rate and credit limit being offered for credit agreements such as credit cards and overdrafts; and
        (h) Any other charges related to the credit agreement not included above.
        Amended: January 2019
        Added: October 2012

      • BC-4.3.23

        Retail banks are free to design the layout and wording to be used in their 'key terms disclosure' document, as they see fit, providing they contain the information specified in Paragraph BC-4.3.22. The CBB will monitor compliance with the spirit as well as the letter of the requirements in this Chapter.

        Added: October 2012

    • Disclosure to Individual Customers: During the Term of the Credit Agreement

      • BC-4.3.24

        Retail banks must, at the time of signing the credit agreement, give the clients information on the payment schedule of the credit agreement, including the breakdown of principal, interest and other charges per month for the whole life of the facility. Information must be given, free of charge, at least on a semi-annual basis, unless the period of debt servicing is shorter or where there exists a prior agreement on a more frequent basis.

        Amended: January 2019
        Added: October 2012

      • BC-4.3.25

        In addition to the requirements under Paragraph BC-4.3.24, when credit is granted through credit cards or overdraft facilities, monthly statements must be provided and include information on minimum payment.

        Added: October 2012

      • BC-4.3.25A

        Retail bank licensees must, when billing their customers, reflect the card transactions without rounding off the amounts in Fils. Retail bank licensees must collaborate with acquirers and Visa/MasterCard network schemes to ensure that there is no rounding off in any transaction irrespective of the currency of the transaction.

        Added: January 2019

    • Variation Disclosures Requirements

      • BC-4.3.26

        Retail banks must disclose to the customer in advance, either collectively or individually, all relevant changes or variations to a credit agreement. The circumstances in which a customer must be provided with variation disclosures are:

        (a) If both the retail bank and customer agree to change the credit agreement; in this case, the customer must be provided in writing with full particulars of the change, at least seven calendar days before it takes effect; and
        (b) If the credit agreement gives the retail bank power to vary fees or charges, the amount or timing of payments, the interest rate or the way interest is calculated, and the retail bank decides to exercise that power, the customer must be provided with full particulars of the change, including an updated schedule of the total interest payments and principalG repayment for the remaining term of the credit agreement, at least thirty calendar days prior to the date the change takes effect. Such notice is to enable the customer to decide whether to accept the new terms or terminate the agreement by settling the outstanding credit amount, in accordance with relevant provisions therein, which must have been stated in a clear and understandable manner.
        Added: October 2012

      • BC-4.3.27

        Any increase of the interest rate or the amount of any fee or charge payable under a credit agreement, must be disclosed publicly, by conspicuous noticeG , at least thirty calendar days prior to the date the change takes effect by:

        (a) Displaying the information prominently at the retail bank's place of business; and
        (b) Posting the information on the retail bank's website.
        Added: October 2012

      • BC-4.3.28

        Any deferral of interest or principal announced by the retail bank must also take account of the APR methodology as shown in Paragraphs BC-4.3.31 to BC-4.3.33, and the new APR must be given to the client or made public in advertisements.

        Added: October 2012

    • Request Disclosure

      • BC-4.3.29

        The retail bank must provide a reply to any request for disclosure within fifteen business days of receiving the request.

        Added: October 2012

      • BC-4.3.30

        Disclosures requested by the customer may include but are not limited to any or all of the following information about a credit agreement:

        (a) The effect of part prepayment on the customer's obligations;
        (b) Full particulars of any changes to the agreement since it was made;
        (c) The amount of any fee payable on part prepayment and how the fee will be calculated;
        (d) The amount required for full prepayment on a specified date and how the amount will be calculated;
        (e) The outstanding credit amount, including any outstanding interest charge (calculated at the date the disclosure statement is prepared);
        (f) The amount of payments made or to be made or the method of calculating the amount of those payments;
        (g) The number of payments made or to be made (if ascertainable);
        (h) How often payments are to be made;
        (i) The total amount of payments to be made under the agreement, if ascertainable; and
        (j) A copy of any disclosure statement that was or should have been provided before the request was made.
        Added: October 2012

      • BC-4.3.31

        The APR must be calculated using the following methodology:

        K=m K'=m'
        Σ   Ak
        (1 + i) tk =  
        Σ   A'k'
        (1 + i) tk'  
        K=1 K'=1
        Added: October 2012

      • BC-4.3.32

        The meaning of letters and symbols used in the above formula are:

        K is the number identifying a particular advance of credit;
        K' is the number identifying a particular instalment;
        Ak is the amount of advance K;
        A'k' is the amount of instalment K;
        Σ represents the sum of all the terms indicated;
        m is the number of advances of credit;
        m' is the total number of instalments;
        tk is the interval, expressed in years between the relevant date and the date of advance K;
        tk' is the interval expressed in years between the relevant date and the date of instalment K';
        i is the APR, expressed as a decimal.
        Added: October 2012

      • BC-4.3.33

        For the purpose of this Chapter, the 'relevant date' is the earliest identifiable date on which the borrower is able to acquire anything which is the subject of the agreement (e.g. delivery of goods), or otherwise the 'relevant date' is the date on which the credit agreement is made.

        Added: October 2012

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