Clients Alert – Consumer Finance Law

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Clients Alert – H.E. President Abdel Fattah El Sisi approved the Consumer Finance Law

On March 16th, 2020, H.E. President Abdel Fattah El Sisi approved the Consumer Finance Law no. 18 of 2020 (“Law”) to regulate the consumer finance activity in Egypt in a way that aims to increase the purchasing power of consumers and to expand funding options for businesses of all sizes.

The Financial Regulatory Authority (“FRA”) will be the Authority to regulate and supervise the consumer finance activity and to ensure the proper application and compliance with the Law, its executive regulations and all related decrees. This is due to its important impact on the national economy, as it will increase the rates of domestic demand by increasing the purchasing power of consumers and allow them to pay on installments that suit their incomes.

The new Law includes 32 articles and its scope applies on companies operating in financial non-banking markets. The Law excludes from its scope of application the financing activities provided by Banks, Financial Leasing, Mortgage Finance, Factoring, Micro Finance or Real Estate companies.

By virtue of this Law, Consumer Finance Companies will be able to offer their services after obtaining a license from FRA to fund the purchase of certain goods/services on installments, as follows:

  1. All types of vehicles;
  2. Durable goods (including electrical appliances and electronic devices);
  3. Educational services;
  4. Medical services;
  5. Travel and tourism services;
  6. Any other goods or services to be approved by FRA.

The Consumer Finance Companies must conclude a contract with their customers as per the template to be prepared by FRA with set of terms and conditions set out under the Law.

The Law requires from companies, currently operating and conducting the consumer financing activity, to reconcile to its new regulations within six months from the date of its application. As for investors who are willing to establish new Consumer Finance Companies, they should address the FRA to be registered in the Consumer Finance Companies record according to the Law requirements.

The Law sets up a federation for non-banking Consumer Finance Companies to provide recommendations with the aim of developing the consumer finance activity and raising awareness.

Among the sanctions set out under the Law for the violation of its provisions, any person/entity, which conducts the consumer financing activity, prescribed under this Law, without obtaining the required license from FRA will be subject to a fine of not less than EGP 200,000 and not exceeding EGP 1 million and/or imprisonment.

The Law entered into force on March 18th, 2020.

If you have any questions, feel free to contact:

Mohamed Kamel Saleh 

Nourhan Bakeer