The National Bank has approved a Code of Ethics for debt collection by financial institutions and changes in the regulation on protecting the rights of consumers by financial institutions when providing services. The Governor of the National Bank of Georgia presented the documents to the members of the Parliament of Georgia, representatives of international organizations, financial institutions and the non-government sector and experts at the Rooms Hotel. A document signing ceremony was also held at the same venue.
The Code of Ethics is based on the requirements of developed economies and international best practice, reflecting the peculiarities of the local financial sector and the important issues raised by consumers. The enactment of the code will help to strengthen the image of financial institutions as trusted partners in the eyes of consumers, and protect consumer rights and interests in the best way practicable, while ensuring that financial institutions conduct business relationships based on the principles of good faith, transparency and fairness.
The Code introduces the obligations of the financial institutions vis-à-vis the customers in the process of collecting debt, which includes the following important issues:
The document sets the obligation to provide correct information to the customer, adhere to ethical and moral norms, and communicate in a business and polite manner. In dealing with customers and contact persons, the financial institutions should not provide misleading and/or incorrect information to them. The information that is delivered, undelivered, inaccurately and/or incompletely provided to the customer should not motivate them to make a decision that they would not have made if they had accurate, complete and complete information;
The Code establishes a procedure for contacting customers and contact persons. It includes the form of communication, time and a list of information to be provided and/or sought. Contacting a contact person will only be possible in the cases provided for in the current/active contract, while contacting related third parties will only be possible to determine the location of the borrower. It is not permitted to share information on customer liability with a third party. The said persons can be contacted only in the period from 09:00 AM to 20:00 PM. In addition, the contact person is entitled to request the financial institution to terminate communication with them.
The financial institutions now have an obligation to maintain records of communication with customers and contact persons and to store them for a period of two months.
Disposal of the loan portfolio will be allowed only to entities under the supervision of the National Bank of Georgia, with some exceptions. However, if the loan portfolio is managed by another entity, the entity subject to the supervision of the National Bank of Georgia will be responsible for the implementation of the Code, etc.
Amendments to the regulation on the protecting consumer rights by financial institutions when providing services were based on the requirements of the European Directives and market challenges. The changes include important issues such as:
Standardized assumptions needed to calculate the effective interest rate on demand deposits, allowing for easy comparison of different products and increasing transparency of different interest rate schemes;
Additional requirements imposed for calculating the effective interest rate for loans secured by movable property will help better meet the requirements of the Civil Code of Georgia with respect to interest rates;
For transparency purposes, customers will be able to receive information about their funds and overdraft at the ATM separately. This will allow them to see more clearly what part of the amount available to them is the overdraft limit, and, consequently, help them make an informed decision about using that limit. Also, whenever a customer decides to use the overdraft limit, the financial institution will be required to notify them in a text message, to increase their awareness.
The financial institution websites will feature templates of loan and deposit agreements and information on important terms and conditions. Also, loan and deposit agreements with the financial institution and key terms of these agreements, including information on effective interest rates, will be available on Internet Banking, etc.
The main requirements of the Code of Ethics and changes in the regulation on protecting consumer rights by the financial institutions when providing services will take effect from March 1, 2022, and the obligation to maintain records of communication with customers and contact persons will take effect no later than June 1. In addition, loan and deposit agreements already concluded with financial institutions will be available on Internet Banking from April 1, 2022.
"Safeguarding the rights of consumers in the financial sector is regarded by the National Bank of Georgia as one of its important tasks. We maintain consistence with the international best practices by communicating with the market and managing the ongoing amendments and upgrade of the legislative framework. The changes to the Code of Ethics and the Regulation on Consumer Protection that we were pleased to present to the public today will help achieve a greater transparency in the terms of use for financial products, while sustaining the improved quality of consumer protection in the financial sector. The National Bank of Georgia is committed to ongoing monitoring of market practice, and, is prepared to fine-tune the applicable regulatory framework, as necessary, "- Governor Gvenetadze said.
