Sri Lanka: New CBSL Regulations to Protect Distressed Bank Customers

New CBSL Regulations for Consumer Protection published on 22nd August 2023 to provide protection  to customers from inappropriate actions of the Banks and other financial service providers.

The Central Bank of Sri Lanka (CBSL) issued Financial Consumer Protection Regulations, No. 01 of 2023 in terms of Section 10 (c) of the Monetary Law Act, No.58 of 1949 and published the same in the Government Extraordinary Gazette No. 2344/17 on 09.08.2023. These Regulations will apply to all Financial Service Providers regulated by CBSL on a uniform basis and are expected to strengthen the current financial consumer protection frameworks of CBSL, particularly Financial Consumer Protection directions issued under the Banking Act, the Finance Business Act and the Finance Leasing Act. Further, these regulations, formulated in line with international standards will establish the foundation for market conduct supervision by CBSL facilitating the development of a trusted and stable financial system in Sri Lanka.

“Financial service Provider” means a Licensed Commercial Bank, a Licensed specialised Bank, a Licensed Finance Company, a specialized Leasing Company, an authorized Primary dealer, an authorized Money Broker, a Licensed Microfinance Company, a Participant of the Payment and Settlement System or any other financial institution approved by the Monetary Board.

https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/laws/cdg/fcrd_regulations_no_01_of_2023_e.pdf

1.1 these Regulations shall be cited as the Financial Consumer Protection Regulations No. 01 of 2023 and shall come into operation on the date which completes the period of six months from the date of these Regulations except for Regulations 15, 17, 18.3, 43, 44, 45, 46 and 47 which shall come into operation on the date which completes the period of twelve months from the date of these Regulations.

1.2 these Regulations shall apply to Financial service Providers regulated by the Central Bank. authorized Primary dealers, authorized Money Brokers and the participants of the Payment and settlement systems shall comply with these Regulations to the extent such Regulations are relevant to their operations.

REGULATIONS APPLICABLE TO DEBT RECOVERY

Debt Recovery

28.1 the Financial service Provider shall ensure that the debt recovery processes are transparent, courteous and fair, devoid of undue pressure, intimidation, harassment, humiliation or threat on the financial consumer.

28.2 the Financial service Provider shall ensure that sales proceeds from foreclosure assets are immediately applied on recovery of the credit facility, and the financial consumers shall be informed and refunded with the balance, if any subject to other provisions in applicable laws. Further, the Financial service Provider shall provide a report on the sale of collateral, which includes but not limited to the process involved, total sales proceeds, all incidental expenses/ costs and the net proceeds, to the financial consumer within reasonable time period from date of sale/ transfer of title of the asset.

28.3 the Financial service Provider shall not engage in any of the following:

i. Contacting friends, employer, relatives or neighbours of a financial consumer for any information other than information or verification of employment status, telephone numbers or address, except where:
a. the person has guaranteed the loan; or
b. the person has been nominated to be contacted by the financial consumer.

ii. Requiring any persons listed in the (i) above to offset the debt, except where the person has acted as a guarantor.

iii. unnecessary or excessive contact or communication with a person, beyond what is reasonable in thecircumstances.

iv. disclosing the existence of a debt to a third party (including friends, family, etc.).

v. Making any misrepresentation in connection with a debt, such as its characteristics, the amount owed, the Financial service Provider’s legal rights or the potential legal consequences for any person if the debt is not paid.

vi. Public shaming.

vii. Calling or visiting the workplace of the financial consumer to seek repayment,except with the prior consent of the financial consumer.

viii. threatening to harm or harming any person.

ix. threatening to seize, or seizing, property which has not been provided as collateral.
(Debt Recovery Action on Personal and Corporate Assets not provided as collateral Suspended? If so Banks and Finance companies cannot take winding up action against companies nor can come after the personal assets of individual borrowers)

x. threatening to damage, or damaging property.

xi. Making contact with financial consumers in person or by other means such as telephone between the hoursof 9.00 pm and 6.00 am, for the purpose of debt recovery.

Is this applicable for Margin trading as well?  They simply escape mentioning that this not for investment loans like margin facilities and SEC is also not coming forward to protect investors from malaction by some margin providers at a wrong time.