The Bank of Thailand (BOT) has issued a new notification to sustainably address Thailand’s household debt problems by establishing responsible and fair lending requirements for lending service providers throughout their lending journey.
Notification No. SorKorChor. 7/2566 Re: Provision of Responsible and Fair Lending was announced on December 21, 2023, and took effect on January 1, 2024. The lending service providers this notification applies to include both commercial banks and nonbank business operators (e.g., personal loan business operators, nano-financing business operators, and credit card business operators).
The key principle of this notification is to provide criteria for responsible and fair lending that supplement market conduct principles, covering eight areas in the debt cycle:
- Lending product development. Service providers must offer lending products that are suitable to customers’ needs and repayment capabilities, avoiding encouragement of excessive debt. Loan interest rates should align with the borrower’s risk profile and credit characteristics (risk-based pricing) to ensure fair contract conditions.
- Advertising. Service providers must prepare and control advertisements with “correct and clear” content, presenting complete and comparable conditions, interest rates, and various fees to customers. The advertisements should not encourage excessive debt, enabling customers to make informed decisions and promoting financial discipline.
- Sales. In the selling process, service providers must ensure that customers receive complete, accurate, and unexaggerated information that facilitates appropriate consideration of decisions based on a correct understanding of the product or service. Products should also align with customers’ purposes or needs for fund utilization, avoiding encouragement of excessive debt.
- Consideration of debt repayment ability (affordability). Service providers must be conscientious in considering customers’ debt repayment ability, taking into account all obligations and residual income.
- Promotion of discipline and financial management. Service providers must provide important information and warnings to debtors, including regular reminders to promote responsible borrowing.
- Helping debtors with persistent debt. Service providers must convey essential information to make debtors aware of the negative effects of persistent debt. This includes establishing standard guidelines for helping debtors find an appropriate way to settle their debts.
- Helping debtors with debt repayment issues. Service providers must promptly propose debt restructuring guidelines in line with debtors’ ability to repay as soon as debtors begin to show signs of repayment problems.
- Legal proceedings and debt sales to other creditors. Upon request, service providers must inform debtors of their rights and important information when legal action has been taken. Additionally, debtors should be afforded an opportunity to engage in mediation regarding their debt problems. This includes providing appropriate debt repayment conditions after debt has been sold and transferred.
