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  • PART II – Restricted Licence Finance Companies and Agents

    • Article (21) Licensing

      21.1Any person who intends to operate as a Restricted Licence Finance Company providing Short-Term Credit, must obtain a Licence to do so from the Central Bank.
       
      21.2An applicant for a License under this Regulation shall apply to the Central Bank in the form prescribed by the Central Bank.
       
      21.3Any applicant for a License under this Regulation must provide all information and documents required to assess the applicant’s suitability for a License.
       
      21.4The application and all supporting documents shall be in either Arabic or English. Documents in any other language shall be accompanied by a certified English or Arabic translation. Any financial figures should be presented in UAE Dirham (AED).
       
      21.5The applicant must disclose, at the time of the application, the sources of funding for its activities/ business and immediately inform the Central Bank of any material changes in its funding arrangements.
       
      21.6As part of the licensing process, an applicant for a License is required to submit a three (3) year business plan to the Central Bank with clear detail on the business model, lines of activity and governance arrangements.
       
      21.7The Central Bank may require the applicant to appoint a skilled person(s) to carry out a third party assessment of any aspect of the company’s proposed business model/systems. The findings and reports of the third party assessment will form part of the core licensing information required to be submitted by an applicant to the Central Bank.
       
      21.8The Central Bank shall communicate its decision considering the merits of the application and:
       
      a.Grant the License with or without conditions and limitations; or
       
      b.Reject the application, stating the reasons for rejecting the application.
       
      21.9A Restricted Licence Finance Company must commence the provision of Short-Term Credit within a maximum of twelve (12) months from the date of notification of approval of the License.
       
      21.10A Restricted Licence Finance Company which intends to amend, cease or suspend the provision of Short-Term Credit must apply to the Central Bank at least six months in advance, providing the reasons for such a cessation or suspension.
       
      21.11A Restricted Licence Finance Company must maintain a physical presence in the UAE.
       
      21.12The legal form of a Restricted Licence Finance Company must be in one of the forms stipulated in the Commercial Companies Law.
       
      21.13The commercial or trade name of a Restricted Licence Finance Company or Agent must comply with the restrictions of the Central Bank Law. The commercial and trade name shall not include any term that may indicate any activity other than the provision of Short-Term Credit in accordance with this Regulation.
       
      21.14A Restricted Licence Finance Company must not use the term Finance Company in its commercial or trade name. The trade name may include the term Short-Term Credit.
       
      21.15A Restricted Licence Finance Company must seek prior approval from the Central Bank for any changes to its name, legal form, memorandum or articles of association.
       
      21.16A Restricted Licence Finance Company must not engage in any regulated activity for which it is not licensed under the Central Bank Law and/or its Regulations.
       
      21.17As per Article (70) of the Central Bank Law, the Central Bank shall have the right, at any time, to impose, change or cancel any restriction or condition on any License granted under this Regulation.
       
      21.18As per Article (71) of the Central Bank Law, the Central Bank may, at any time, suspend, withdraw or revoke any Licence issued under this Regulation.
       
      21.19The Central Bank may take any action deemed appropriate to ensure the sound functioning of Licensees and/or the financial sector.
       
      21.20The Central Bank may, at its sole discretion, impose any penalty it deems appropriate on any person found to be carrying on Financing activities, including offering or granting Short-Term Credit, in the UAE, without a License.
       

    • Article (22) License Restrictions

      22.1A Restricted Licence Finance Company may only carry on the provisions of Short-Term Credit within the criteria set in Article (24) of this Regulation.
       
      22.2A Restricted Licence Finance Company’s activities must be funded exclusively through shareholder’s equity, retained earnings and/or debt instruments.
       
      22.3A Restricted Licence Finance Company is prohibited from accessing funds through Crowdfunding to finance its activities licensed under this Regulation.
       
      22.4A Restricted Licence Finance Company is prohibited from accepting deposits of any type.
       

    • Article (23) Permitted Activities

      23.1The maximum total Short-Term Credit extended to a Borrower by a Restricted Licence Finance Company or Agent, at any given time must not exceed Twenty Thousand Dirham (AED 20,000) or the total of three (3) months’ verified net income of the Borrower, whichever is lower (subject to any restrictions established in relevant UAE laws).
       
      23.2The maximum credit granted to a Borrower should be based on the results of affordability assessments conducted, given due consideration to the repayment ability, reducing the risk of overindebtedness and ensuring the fair treatment of Borrowers.
       
      23.3Restricted Licence Finance Companies or Agents must not charge interest on Short-Term Credit.
       
      23.4The total Fees, including late payment Fees charged on any Short-Term Credit by a Restricted Licence Finance Company or Agent, must not exceed 30% of the original credit amount. Therefore, the maximum recoverable amount from a Borrower on any Short-Term Credit, including where the credit is restructured, rescheduled, rolled-over or where there is any other deviation from the original agreement, must not total more that 130% of the value of the original credit granted to the Borrower. The Central Bank will review this requirement at regular intervals to ensure appropriateness of the maximum percentage and to adjust as needed, in the context of inter alia prevailing market conditions.
       
      23.5The repayment term of Short-Term Credit offered by a Restricted Licence Finance Company or an Agent must not exceed twelve (12) months from the date of the original agreement to lend, including any form of credit restructuring, rescheduling, roll-over or other form of deviation from the original agreement, affecting both the amount and the original term of the Short-Term Credit.
       
      23.6Restricted Licence Finance Companies and Agents must honour the original term of the Short-Term Credit and must not demand full payment prior to the end of the term of the credit agreed upon in the Borrower contract.
       
      23.7Borrowers’ assets, including movable and immovable property, must not be used by Restricted Licence Finance Companies or Agents to secure (whether fully or partially), any Short-Term Credit extended to a Borrower. Implementation of this requirement must be in alignment with Article (121 bis) of the Central Bank Law.
       

    • Article (24) Credit Reports

      24.1Restricted Licence Finance Companies and Agents must strictly adhere to the following credit reporting requirements:
       
      a.Provide credit information of Borrowers to the Credit Information Agency, based on the terms and conditions of the Credit Information Agency; and
       
      b.Request credit information of Borrowers from the Credit Information Agency, before extending credit to Borrowers in amounts of five thousand Dirham (AED 5,000) or higher.
       
      24.2The credit information of Borrrowers must not be shared or disclosed to any third party without the Borrower’s express consent to share with the identified party. Restricted Licence Finance Companies and Agents must ensure that they are in full compliance with all applicable legal requirements concerning data protection.
       
      24.3Access to and review of a Borrower’s Credit Report and other credit information by a Restricted Licence Finance Company or an Agent, including information from a Borrower’s employer must be conducted with the Borrower’s express consent.
       
      24.4Restricted Licence Finance Companies and Agents must disclose to Borrowers that credit information will be retrieved from (where applicable) and shared with the Credit Information Agency; and explain the implications of borrowing, late payment and default, on the Borrower’s Credit Report.
       
      24.5A Restricted Licence Finance Company or Agent must review Borrower information to conduct an affordability assessment to verify the Borrower's solvency and ability to repay and document such verification in a credit file. The credit information reviewed must incude the Borrower’s Credt Report in the case of credits granted in amounts of five thousand Dirham (AED 5,000) or more.
       
      24.6A Restricted Licence Finance Company or Agent must not grant a Short-Term Credit product with a credit limit that is unaffordable for the Borrower based on the results of the affordability assessment.
       
      24.7A Restricted Licence Finance Company’s or Agent’s review of a Borrower’s Credit Report must be conducted at the initiation of the credit relationship, prior to approving additional credit applications and before increasing the Borrower’s credit limit, if the total credit amount is five thousand Dirham (AED 5,000) or more.
       

    • Article (25) Minimum Capital Requirements

      25.1A Restricted Licence Finance Company must maintain a minimum level of capital on an ongoing basis.
       
      25.2A Restricted Licence Finance Company must hold and maintain the higher of:
       
      a.Aggregate Capital Funds of Twenty million Dirham (AED 20,000,000); or
       
      b.Aggregate Capital Funds equivalent to 5 per cent of the outstanding lending volume.
       
      25.3Aggregate Capital Funds consist of the following items:
       
      a.Paid-up capital;
       
      b.Reserves, excluding revaluation reserve; and
       
      c.Retained earnings.
       
      25.4The following items must be deducted from Aggregate Capital Funds:
       
      a.Accumulated losses; and
       
      b.Goodwill.
       
      25.5A Restricted Licence Finance Company must obtain prior approval from the Central Bank for any changes to its capital.
       
      25.6The Central Bank may, at its sole discretion, impose a higher minimum capital requirement on a Restricted Licence Finance Company, taking into consideration, inter alia, its size, the nature and scale of its operations and the volume of transactions.
       

    • Article (26) Governance

      26.1Restricted Licence Finance Companies and Agents must develop principles and policies for corporate governance; put in place an approved organisational and governance structure; and implement a Fit and Proper framework.
       
      26.2A Restricted Licence Finance Company must submit to the Central Bank, its organisational and governance structure; and provide updated copies in the event of significant changes to the structure(s).
       
      26.3Restricted Licence Finance Companies and Agents must ensure that they institute appropriate risk management frameworks; adequate internal controls; proper segregation of duties within the organisational structure; and that their operations are undertaken within the boundaries of clearly documented and internally audited policies, authorities and procedures.
       
      26.4Restricted Licence Finance Companies must obtain prior approval from the Central Bank prior to the appointment of any Authorized Individuals.
       
      26.5All individuals required to be approved as Authorized Individuals of a Restricted Licence Finance Company, including but not limited to members of the board of directors, Senior Management and persons in control functions, must be Fit and Proper and remain so for the duration of their appointment.
       
      26.6Restricted Licence Finance Companies must obtain approval from the Central Bank prior to any membership changes in its board of directors.
       
      26.7Restricted Licence Finance Companies and Agents shall have adequate staff who possess the requisite qualifications, competencies and skills to individually and collectively provide the range of skills and experience to manage their affairs in a sound and prudent manner.
       

    • Article (27) Risk Management and Internal Controls

      27.1Restricted Licence Finance Companies and Agents must have appropriate, approvcd risk governance frameworks in place that identify all material risks. This includes policies, processes, procedures, systems and controls to identify, measure, evaluate, monitor, report and control or mitigate material sources of risk on a timely basis.
       
      27.2Restricted Licence Finance Companies and Agents must ensure that they have instituted adequate internal controls, ensured proper segregation of duties within the organisational structure and that their operations are undertaken within the boundaries of clearly documented policies, authorities and procedures
       
      27.3Restricted Licence Finance Companies’ and Agents’ definition and assessment of material risks must take into account its risk profile, nature, size and complexity of its business and structure.
       
      27.4Restricted Licence Finance Companies and Agents must have in place mitigating action plans for key material risks and monitor and report on these on an ongoing basis.
       
      27.5Restricted Licence Finance Companies and Agents must institute adequate internal controls and management procedures in relation to cyber and fraud related risks.
       
      27.6Restricted Licence Finance Companies and Agents must have adequate resources to undertake proper underwriting of credits and compreshensive credit risk assessments of Borrowers prior to approving a Short-Term Credit.
       

    • Article (28) Compliance with Laws and Central Bank Regulations

      28.1Restricted Licence Finance Companies and Agents must institute adequate compliance arrangements to ensure that they remain in full compliance, where applicable, with relevant UAE laws, including the Central Bank Law and the Commercial Companies Law, this Regulation and any other applicable Regulations. Any breaches must be reported to the Central Bank.
       
      28.2The Central Bank may set additional prudential or other requirements for Restricted Licence Finance Companies and/or Agents. Such requirements may include, but are not limited to, restrictions on the size and scale of activities; requirements for specific governance or management arrangements; and/or capital adequacy requirements.
       
      28.3Restricted Licence Finance Companies and Agents must comply with the AML Law; and address money laundering and terrorist financing risks through appropriate preventive measures to deter abuse of the sector as a conduit for illicit funds, and detect money laundering and terrorist financing activities and report any suspicious transactions to the Financial Intelligence Unit at the Central Bank.
       
      28.4Restricted Licence Finance Companies and Agents must be operated prudently and with competence in a manner that will not adversely affect the interests of Borrowers. Restricted Licence Finance Companies and Agents must also comply with all applicable regulatory requirements for consumer protection of the Central Bank, per the CBUAE’s Consumer Protection Regulation (Circular No. 8 – 2020) and related standards which may be updated from time to time.
       
      28.5Restricted Licence Finance Companies and Agents must ensure that Outsourcing service providers, maintain an appropriate level of information security, risk management, and service delivery; and are in compliance with all relevant UAE laws and Central Bank Regulations applicable to their outsourced services.
       

    • Article (29) Transparency and Disclosures

      29.1Restricted Licence Finance Companies and Agents must, where applicable, comply with the requirements related to transparency and disclosures as articulated in the Central Bank’s Consumer Protection Regulation and Standards.
       
      29.2Restricted Licence Finance Companies and Agents must structure their activities in a clear, transparent format using plain language.
       
      29.3Advertising by Restricted Licence Finance Companies and Agents, and all information provided, must in all cases, indicate to Borrowers in a clear and conspicuous manner, that products being offered are Short-Term Credit.
       
      29.4To ensure that Borrowers are able to make an informed assessment of the suitability of the Short-Term Credit to their needs and financial circumstances, Restricted Licence Finance Companies and Agents must provide comprehensive and transparent information on key product features including, but not limited to, the total amount and expiry date of the credit, the process for accessing and repayment of the credit, related Fees, actions in the event of default, and Borrower rights.
       
      29.5Restricted Licence Finance Companies and Agents must disclose the terms and conditions of their business to Borrowers and articulate these within an enforceable contract; and disclose any subsequent updates to these terms and conditions.
       
      29.6Restricted Licence Finance Companies and Agents must disclose to Borrowers, the total Fees payable by the Borrower for the Short-Term Credit. The total amount/value of Fees must be disclosed as a total amount/value and as a percentage of the credit value. Restricted Licence Finance Companies and Agents must also provide clear examples of how the Fees will be calculated and applied, particularly as they relate to any late payment Fees.
       
      29.7Restricted Licence Finance Companies and Agents must advise Borrowers of the consequences of late payment and encourage them to make prompt settlement. Any applicable late payment Fees must be explicitly outlined to Borrowers, and must be reasonable.
       
      29.8The Borrower must sign the credit documentation and be provided with a copy signed by both the Restricted Licence Finance Company and/or the Agent, and the Borrower.
       
      29.9Restricted Licence Finance Companies and Agents must clearly disclose the available provisions for hardship assistance to Borrowers who experience financial difficulties, including suitable debt management solutions and the related policy on forbearance.
       
      29.10Restricted Licence Finance Companies and Agents must develop adequate collection policies and procedures, setting out actions to be taken against Borrowers who fail to make timely payments. The relevant details of these policies and procedures should be clearly communicated to Borrowers. The collections policies and procedures and related controls must meet the requirements of the Central Bank’s Consumer Protection Regulation and Standards.
       

    • Article (30) Dispute and Complaints Management

      30.1Restricted Licence Finance Companies and Agents must establish internal complaints handling, dispute handling and grievance redress mechanisms to deal with complaints from Borrowers or other parties in a timely and fair manner; and include the details of these mechanisms in their agreements.
       

    • Article (31) Reporting and Record Keeping

      31.1A Restricted Licence Finance Companies must submit reports to the Central Bank in the prescribed form, frequency and timeframe, which are established by the Central Bank from time to time.
       
      31.2Restricted Licence Finance Companies shall report the following to the Central Bank, at intervals stipulated by the Central Bank:
       
      a.Financial position;
       
      b.Description of its products and services;
       
      c.Description of its Fee structure;
       
      d.Description of its customer base;
       
      e.Details of its credit portfolio, including size and demographic allocation;
       
      f.Portfolio in arrears and defaults;
       
      g.Description of complaints received and resolution status of these complaints;
       
      h.All fraud related activity including internal, external and attempted cases of fraud;
       
      i.Details of vulnerabilities identified in the online systems and security;
       
      j.Details of contracts/Outsourcing arrangements ; and
       
      k.Any other information requested by the Central Bank.
       
      31.3A Restricted Licence Finance Company must immediately notify the Central Bank of any changes in its ownership and/or senior management.
       
      31.4Restricted Licence Finance Companies and Agents must maintain adequate and accurate books and records at all times in respect of their business, agreements, contracts and accounting records, in line with the relevant legal framework.
       
      31.5Restricted Licence Finance Companies and Agents must demarcate and segregate their business in respect of Licensed Financial Activities from any other business as it relates to the maintenance of separate accounting and accounts; and segregating files and other information.
       
      31.6Restricted Licence Finance Companies and Agents must maintain the strictest standards of Borrower data protection and information confidentiality and security, including implementing the necessary systems and controls to ensure such standards are met.
       
      31.7All documents, records and materials must be made available for inspection by the Central Bank from time to time at the request of the Central Bank and/or during the conduct of assessments, including Central Bank onsite examinations, other third party reviews requested by the Central Bank and/or special audits by an external auditor.
       
      31.8The records maintained by Restricted Licence Finance Companies and Agents must include:
       
      a.Historical records of information displayed online (websites / social media / any other media) and any print copies, if applicable, displaying the Restricted Licence Finance Company’s and Agent’s promotional communication, advertisements or online banners and tag lines;
       
      b.Internal policies, procedures and operating documents;
       
      c.Corporate and financial records and general ledger and sub-ledgers;
       
      d.Reports and statements issued to Borrowers and regulators;
       
      e.Any contracts, agreements, Credit Reports, communications and other documents related to Borrowers;
       
      f.Records demonstrating that the Restricted Licence Finance Company or Agent has control mechanisms in place to address complaints and grievances;
       
      g.Records of Borrowers’ complaints and resolution status;
       
      h.Management information, accounts and communications;
       
      i.Human resource records;
       
      j.Information technology architecture and security related documents; and
       
      k.Any other records stipulated by the Central Bank.
       

    • Article (32) Supervision and Examination

      32.1The Central Bank may carry out, or appoint a third party to carry out onsite examinations of a Restricted Licence Finance Company or an Agent, at any time it deems appropriate, to ensure adherence to UAE laws and Central Bank’s Regulations.