Guidelines on Standard Loan Contracts and Standard Text of Contractual Terms for Banks and Financial Institutions
Following the adoption of the Law on Consumer Protection and its relevant regulations to implement the law, more particularly Prakas No. 0067 P.N.A.KBB.PRK dated 01 March 2022 on Unfair Contract Clause in the Banking and Financial Sector/Industry, the Standard Loan Contracts and Standard Text of Contractual Terms was introduced and implemented national wide for the Banking and Financial Institutions with an attempt to promote transparency, effectiveness, and consumer protection in the Banks and Financial Institutions (BFIs).
The Standard Loan Contract and Standard Text of Contractual Terms (SLC) are effective from 1 November 2023 and shall apply solely to new loans or new customers while current contracts and conditions between the banking and financial institutions and consumers will stay unchanged. Furthermore, this SLC will be applicable to the following Banks and Financial Institutions:
- Commercial Banks (“CB”),
- Specialized Banks (“SB”)
- Microfinance Deposit-Taking institutions (“MDI”),
- Microfinance Institutions (“MFI”),
- Rural Credit Institutions (RCI); and
- Financial Leasing Companies.
- Scope of the Standard Loan Contracts and Standard Text of Contractual Terms:
SLCs will be used in all BFI loan contracts to support the development of the Banking Sector by promoting fair and transparent competition as well as consumer protection. The scope of the SLCs are:
- For loans up to USD50,000, all BFIs are required to use the Standard Loan Contract issued by the Association of Banks in Cambodia and the Cambodia Microfinance Association.
- For Loans ranging from USD50,000 up to USD100,000, all BFIs are required to incorporate the Standard Text of Contractual Terms provided by the Association of Banks in Cambodia and the Cambodia Microfinance Association in their credit agreement.
- The Association of Banks in Cambodia and the Cambodia Microfinance Association do not establish any Standard Loan Contracts with loan amounts greater than USD 100,000.
- Mandatory Clause:
| Mandatory Clause | For CB/SB/MDI/MFI and RCI | For Financial Lease Company |
| 1. Lock-In Period | The maximum lock-in period shall be half of the loan tenor, but not more than 24 months for the Term Loan from the date of the first disbursement. This lock-in period does not apply to Overdraft facilities, Revolving Facilities, Credit Cards, and Trade Finance Facilities. | The maximum lock-in period is half of the leasing term, but not more than 24 months, from the starting date. |
| 2. Notice period for early settlement in part or in full DURING the lock-in period | Advance notice of early settlement DURING lock-in period in part or in full shall not be over 30 calendar days prior to the repayment date. Customer/Borrower shall pay an early settlement fee of 3% (three percent) on the early settled amount in part or in full during the lockup period. | The notice period for early settlement in full DURING the lock-in period shall not be over 30 calendar days prior to the repayment date. For those customers/borrowers who make for early settlement in full during the lock-in period, will pay the early settlement fee in the amount not over 3% (three percent) and 10% (ten percent) VAT obligation on the amount of principal period paid off (if there is any). |
| 3. Notice period for early settlement in part or in full AFTER the lock-in period | Advance notice of early settlement AFTER the lock-in period in part or in full shall not be over 30 calendar days prior to the repayment date. Those borrowers who fail to duly serve such notice shall pay an early settlement fee of 1% (one percent) on the early settled amount in part or in full. | The notice period for early settlement in full AFTER the lock-in period shall not be over 30 calendar days prior to the repayment date. For those customers/borrowers who fail to duly serve such notice, will pay a prepayment fee in the amount of not over 1% (one percent) of the full prepayment amount of principal paid off and a 10% (ten percent) VAT obligation on the amount of principal paid off (if there is any). |
| 4. Period of Collateral Release after full settlement | Collateral shall be released to the borrower withing 7 (seven) working days after full settlement, not including the period for discharging encumbrance. | Releasing Documents for Ownership Transfer: The period of releasing documents for ownership transfer after full settlement shall not be over 7 (seven working days) after the paid-off. The customer/borrower will receive documents for ownership transfer as well the letter of dent settlement. |
| 5. Hotline Number | Shall use the same word “hotline” and in case there are complaints occurring, [Customer/Borrower] can file a complaint to [Bank] via a phone number …… [Bank Complaint Handling Number] ……… or to the customer complaint working group of the Association of Banks in Cambodia via the phone number (023 238 760 /092 771 881) on the loan contract/agreement, letter of offer, terms, and conditions, and repayment schedule or In case there are complaint occurring, [Customer/Borrower] can file a complaint to [Microfinance] via a phone number …….. [MFI Complaint Handling Number] or to the customer complaint working group of the Cambodia Microfinance Association via phone number (015 365 222) on the loan contract/agreement, letter of offer, terms, and conditions, and repayment schedule. | Shall use the same word “hotline” and in case there are complaints occurring, [Customer/Borrower] can file a complaint to [Bank] via a phone number …… [Bank Complaint Handling Number] ……… or to the customer complaint working group of the Association of Banks in Cambodia via the phone number (023 238 760 /092 771 881) on the loan contract/agreement, letter of offer, terms, and conditions, and repayment schedule or In case there are complaint occurring, [Customer/Borrower] can file a complaint to [Microfinance] via a phone number …….. [MFI Complaint Handling Number] or to the customer complaint working group of the Cambodia Microfinance Association via phone number (015 365 222) on the loan contract/agreement, letter of offer, terms, and conditions, and Term Loan repayment schedule. |
The SLC will be periodically reviewed when necessary or as the banking and financial sector in Cambodia develops or when the material changes take place and/or are required by applicable laws and regulations, in order to ensure continued compliance with the relevant applicable legal and regulatory framework. The SLCs can be obtained from the Association of Banks in Cambodia and/or the Cambodia Microfinance Association.
Contributing Authors:
Sophary NOY:
Senior Associate
+855 17 88 33 61
Sokchantepy SIM:
Paralegal
+855 77 371 434
sokchantepy.sim@soksiphana.com
This alert is for general information only and is not a substitute for legal advice.
