Code of Best Practice

A. About this Code

  1. This Code has been prepared jointly by the Banker’s Society of Bahrain and the Central Bank of Bahrain (“Central Bank” or “CBB”). It sets out minimum standards for retail banks and financing companies (thereafter referred to as Central Bank licensees or licensees) to follow when providing credit and other fee-charging services to private consumers.
  2. This Code applies where any Central Bank licensee provides to a consumer:
    • Loans, overdrafts, etc.
    • Any other type of financial product creating a creditor - debtor relationship (including Shariah-compliant credit facilities of all types).
    • Any other financial service for which a Central Bank licensee charges a fee.
  3. Adherence to this Code is mandatory for all Central Bank licensees. Consumers are encouraged to inform the Central Bank where they suspect there has been non-compliance with the Code.

B. Principle Commitments
The overriding duty of all Central Bank licensees is to act fairly and reasonably in their dealings with consumers. Central Bank licensees are required to meet all the commitments of this Code.

The four overriding principle commitments are:

  • Licensees should make sure that all advertising and promotional literature relating to consumer loans, credit and charging is clear and not misleading in any way. 
  • Licensee staff should give clear information about the loan and credit products they offer, including the procedures, terms & conditions and interest rates that apply.
  • Licensees should send their customers regular statements and keep them informed about changes to interest rates, charges or terms & conditions.
  • Licensees should deal quickly and sympathetically when considering cases of financial difficulty.

C. Helping the Customer Choose a Product which Meets their Needs
For each new (or potentially new) customer, licensees should:

  • Give clear information on the key features of the product their customer is interested in and avoid trying to sell other products if their customer is already clear about their choice.
  • Inform customers if they offer products in more than one way (e.g. on the internet, over the phone, in different branches, etc.) and tell customers how they can find out more about such products.
  • Tell customers when they have chosen a product, the information they need to know and the things they need to do, before that product is provided.

D. Interest Rates

  1. Licensees must inform consumers how and where they can find information about interest rates. For example:
    • by looking at the notices in the branch (or branches);
    • by looking on the website, and/or 
    • by asking staff
  2. Licensees must provide consumers with written information about the initial interest rates that apply to their loan and when such interest is payable. Shariah-compliant institutions must provide consumers with written information (or equivalent forms of charging (such as “profit rates” etc.), and references to obligations concerning “interest rates” in this Code shall be construed accordingly.
  3. If a customer asks, a licensee must give a full explanation of how the interest is calculated.
  4. Licensees must publicise the annual percentage rate (ARP) and bring this to the attention of new customers.
  5. Licensees must inform customers of any changes to interest rates in an effective manner and as soon as practical.
  6. When interest rates change, licensees must update the information on their website (and/or helpline) within two working days. Licensees must also advise the old rate so that customers can compare how the new rate has changed.

E. Lending

  1. Before a licensee makes a loan or provides any other form of credit, it must assess whether the customer will be able to repay.
  2. Licensees should not advance a loan or any other form of credit to a customer unless they assess that the customer will have at least a reasonable chance of being able to repay (including any interest rate rises) in accordance with the agreed terms.
  3. If an overdraft (or any other type of facility) is repayable “on demand”, licensees should make this clear to the customer.
  4. Licensees should comply with Central Bank rules on consumer finance.

F. Charges

  1. Customers must be given details of any charges that apply (or may apply) to the product or service they are intending to purchase, including:
    • Administration / arrangement fees.
    • Pre-payment charges.
    • Default interest rates. 
    • Insurance
  2. Customers must also be given information on where to find out about charges, for example:
    • phoning the helpline;
    • looking at the website, and/or
    • asking staff
  3. If a licensee increases any charge or introduces a new charge, it must inform the customer in writing within 7 days of the charge taking effect. If the customer does not accept the increase or new charge, the licensee should give the customer the option of terminating the relationship.
  4. Licensees should advise customers of any charges both before a product or service is provided and at any time the customer asks.
  5. Licensees should ensure that all charges are reasonable and justifiable.
  6. Licensees that have web sites should publicise their charges on their site.

G. Financial Difficulties

  1. Licensees should consider cases of financial difficulty sympathetically.
  2. Licensees should always endeavour to discuss financial difficulties with their customers before threatening and/or commencing legal proceedings.
  3. Where possible, licensees should endeavour to propose alternative arrangements to enable customers to overcome their repayment difficulties, including proposals to reschedule a customer’s indebtedness.
  4. Licensees should provide customers with a minimal level of counselling on debt problems.

H. Complaints

  1. Licensees must have in place a formal customer complaints procedure and a copy of this should be submitted to the Central Bank. Moreover, licensees should appoint a customer complaints officer and publicise his/her details at all branches.
  2. Upon request, licensees must inform customers how to make a complaint and the procedure involved. Additionally, they should provide a written leaflet for customers outlining the procedure.
  3. Licensees should acknowledge customer complaints in writing within 5 working days of receipt.
  4. Within 4 weeks, licensees should write to their customers explaining their position and how they propose to deal with the complaint.
  5. If a customer is not satisfied with a licensee’s response, the licensee should advise the customer on how to take the complaint further within the organisation.
  6. In the event that they are unable to resolve a complaint, licensees must outline the options that are open to that customer to pursue the matter further, including, where appropriate, referring the matter to the Compliance Directorate at the Central Bank.

I. Monitoring

  1. All licensees should designate a “Code Compliance Officer” (who may be the same person as the CBB Compliance Officer) to monitor their institution’s adherence to this Code.
  2. The Central Bank may, from time to time, ask the Code Compliance Officer to report on the licensee’s record of adherence to the Code.
  3. Licensees should implement this Code and ensure that their staff are fully familiar with it.
  4. Copies of the Code should be made available to customers and notices should be displayed in all branches and on websites explaining that copies of the Code are available.
  5. The Central Bank will also display a copy of this Code on its own website.

J. Disclaimer
For the avoidance of doubt, this Code shall not have any legal implications, and the provisions therein shall be subject to the rules of the CBB Rulebook.