Egypt’s Financial Regulatory Authority has issued the first comprehensive guide to the rules and controls governing consumer finance companies, with the aim of bringing together the supervisory requirements applicable to the sector in a single reference that helps existing and new companies understand and facilitate compliance with their obligations.
The guide comes at a time when consumer finance activities are expanding in terms of the number of institutions and products, as well as the means of providing financing, while multiple decisions, instructions, and circulars have accumulated over the past years to regulate the market. The guide is based on Consumer Finance Activity Regulation Law No. 18 of 2020, as well as decisions issued by the Authority’s Board of Directors and its chairperson and relevant circulars up to the date of its issuance.
A Framework That Starts with Licensing and Does Not End at Granting Financing
The guide covers the business cycle of consumer finance companies from incorporation and licensing, capital requirements, and shareholder structure through governance rules, the formation of boards of directors and committees, key functions, and internal control systems. It also addresses the basic rules for conducting the activity, financial solvency standards, the preparation of financial statements, financing contract templates, and branch registration procedures.
In dealings with customers, the framework requires information to be presented clearly and accurately, with repayment schedules and details of costs, expenses, benefits, and risks made available. It also regulates guarantees provided by customers and prohibits obtaining signed blank documents or trust receipts as security for financing.
More Consistent Credit and Supervisory Requirements
The guide includes rules for assessing creditworthiness, reviewing existing financing, monitoring delinquent customers, and verifying that financing is used for its designated purpose. It also permits the adoption of digital creditworthiness assessment systems based on factors related to the customer’s repayment capacity and financial position.
The framework also includes requirements for combating money laundering and terrorist financing, conducting due diligence to identify customers, reporting suspicious transactions, and retaining records and documents. It further regulates companies’ provision of customer data to credit inquiry companies, supporting the integration of information used in lending decisions and risk management.
At the level of financial stability, the guide includes Basel III standards relating to capital adequacy, leverage, and liquidity, in addition to rules on provisioning, concentration risk, stress testing, and periodic reporting.
What Changes in Practice for Companies and Customers?
The guide places technical requirements among the conditions for maintaining a license. It requires licensees to provide the necessary technological infrastructure and information systems, establish frameworks for information technology governance, technology risk management, and cybersecurity, and conduct periodic penetration tests. This makes technology and security management part of core regulatory compliance, rather than a support function separate from the financing activity.
The guide also establishes a register of companies collecting receivables in non-bank finance activities and requires entities to inform customers of the details of the contracted collection companies, the means of verifying collectors’ identities, and official communication channels. The rules include monitoring complaints and taking the necessary corrective measures.
The rules require consumer finance companies to provide insurance coverage for customers up to the age of 65 against the risks of death and total permanent disability, with the insured amount equal to the outstanding financing balance. They also address advance cash financing, monitoring cases of financing liquidation, violations, and the administrative measures that the Authority may take.
From certi.news’s perspective, the importance of the step lies in transforming rules distributed across multiple laws, decisions, and instructions into a single reference that links consumer protection, risk management, and technology governance. However, the guide’s effectiveness will depend in practice on how it is implemented and compliance is monitored, as well as on how clear the implementation procedures are to companies and customers.