The Saudi Central Bank (SAMA) has issued binding directives to all banks, financial institutions, and finance companies operating in the Kingdom, mandating the immediate cessation of requiring promissory notes or any other commercial papers from individual customers as a condition for obtaining credit card financing products. This decision comes as part of the Central Bank's ongoing efforts to regulate the financial sector and protect the rights of beneficiaries. The bank has set January 2, 2027 (2/1/1448 AH) as the deadline for canceling all previously issued promissory notes for this purpose.
circular
issued by the Saudi Central Bank (SAMA) mandates that financial institutions update their internal policies, procedures, and controls to comply with the new instructions. The central bank also granted financing entities a 30-day period to provide the Customer Protection Supervision Department with a detailed action plan to rectify existing situations. This plan must include a clear mechanism for returning or canceling promissory notes previously issued to customers, and must be fully implemented within six months of the circular's issuance date of 2 Rajab.
The regulatory context and consumer protection:
This move by the Saudi Central Bank (SAMA) comes after the bank observed the widespread practice of requiring customers to sign promissory notes when applying for credit cards, a practice SAMA deemed necessitating regulatory intervention. This step falls within the central bank's strategy to promote responsible financing principles and protect customers from practices that may carry legal and financial risks exceeding the nature of the financing product (credit cards). A promissory note is a commercial instrument that is immediately enforceable through the courts, and its use in simple consumer retail products could create an imbalance in the relationship between the lender and the beneficiary.
The economic and legal impact
of this decision is expected to enhance confidence in the Saudi banking sector by reducing legal risks for individuals and fostering a more transparent financial environment. The decision also reflects the Kingdom's commitment to developing the financial sector in line with the objectives of Vision 2030, which focuses on improving the quality of financial services and protecting consumer rights. This measure will encourage banks to develop more accurate credit assessment models based on the client's creditworthiness rather than relying on direct legal pressure tools such as commercial papers, thus promoting the maturity of the local financial market.
