Saudi Arabia: Consultation on Draft Rules and Regulations to Protect Customers of Banks and Other Financial Institutions Launched

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Saudi Arabia: Consultation on Draft Rules and Regulations to Protect Customers of Banks and Other Financial Institutions Launched

Saudi Gazette, 15 March 2022: Saudi Arabia’s Central Bank has launched a consultation on draft rules and regulations to protect the interests of customers of banks and other financial institutions. It will last for 30 days.

The consultation has been launched as part of the Bank’s efforts to protect the rights of consumers in getting fair and transparent treatment in financial services in line with global best practices in this area.

The Bank has identified several principles which banks and other financial institutions must comply with when dealing with customers. They must deal with customers fairly, honestly and equitably, as well as take care of them, especially those on low incomes and education, the elderly and those with special needs.

Financial institutions must also protect the privacy of information and data, as well as customers from fraud. The Bank has asked them to enforce technical and control systems to limit and detect fraud, embezzlement or misuse and take the necessary action if they occur.

Financial institutions must provide the best products, services and prices to meet the customer’s needs and desires as well as address customer’s complaints and set policies which help detect potential conflicts of interest.

The Bank has urged financial institutions to encourage customers to read contracts, their appendices and any other document which requires the customer’s approval or signature to provide information to customers clearly and accurately and avoid misinformation, fraud and deception.

The financial firms must also include all the terms and conditions in the application form for obtaining the product or service, provided the warning statements include the possible consequences when using the product or service other than what was agreed on, as well as informing the customer of any change which occurs at least 30 days from the entry into force of this change.

The Bank has also banned financial institutions from requesting a customer’s signature on any blank document or complete data of the incomplete document. Financial institution must also protect and preserve clients’ documents and signatures.

The general rules of conduct state that financial institutions must not make any change with an increase in fees and commissions which natural customers must pay after obtaining the service or product and signing the contract or agreement or the like.

There will be an exemption in the fees and commissions related to the third party provided it is related to the customer’s use of the financed asset and the customer must be notified of this when concluding the contract. The financial institution must put the list of fees and commissions in a clear place on its building and branches as well as on its websites as well.

Financial institutions must not exceed the fees, commissions and costs of administrative services they obtain from natural customers or the equivalent of 1% of the financing amount or 5,000 Riyals, whichever is less.

It may be deducted only after the contract is signed, with the exception of real estate appraisal fees, which may be deducted after the customer obtains initial approval to grant real estate financing.

The Bank has instructed financial institutions to explain to customers all the information, services and products provided to them clearly and transparently. This will include information regarding prices, commissions, fines, types of risks and benefits and the rights and duties of the customer.

Financial institutions must ensure all electronic channels are available intact and in a safe way. In the event of customers incurring any direct loss as a result of hacking of these channels or because of a security breach, they must be compensated for any resulting losses.

Financial institutions have also committed to apply more than one standard for identity verification when accessing electronic services, taking the necessary measures to reduce electronic fraud and include the purpose for which text messages containing the verification code were sent to customers.

The Bank has stressed financial institution must not benefit from any returned amounts which may arise because of an error or a technical malfunction. It has also advised of the need for amounts to be returned to affected customers without delay and other customers who were exposed to the same error within five working days and without waiting for a claim, in addition to repairing the defect or malfunction.

Financial institutions must also inform the affected customers about the error and the remedial measures taken through one of the documented channels and announce this through all available channels.

Financial institutions should provide multiple channels to receive complaints, inquiries and requests to enable customers to submit complaints according to their preference easily and conveniently. These channels may include toll free numbers, branches or websites, smart phone applications and e-mails. It must also put the complaints handling mechanism in a conspicuous place in the building of the financial institution and its branches.

If the customer is not satisfied with the outcome of the treatment of their complaint and wants to escalate the complaint, they must be provided with the mechanism to approach the higher authorities in the financial institution or be directed to the competent authority in line with their preference.

Financial institutions must also provide a free phone number which customers can use from inside or outside the Kingdom to submit complaints and inquiries. The number must be published on the home page of the financial institution’s website clearly for the client as well as other channels.

Financial institutions should take humanitarian cases into account when dealing with customers who have emergency financial difficulties and find appropriate solutions for them before starting to take legal measures against them.

In addition, financial institutions and their employees must not discriminate between clients in an unfair way based on race, gender, religion, colour, age, disability or marital status.

Banks, money exchanges, payment service companies and firms issuing credit and debit cards have to ensure their business customers don’t pass or impose additional fees on holders of credit cards and Mada cards when paying through point-of-sale devices, operations through payment service providers and e-commerce websites.

Banks, money exchanges and payment service companies must also set the upper limit for transfers, daily withdrawals, point-of-sale operations, online purchases and payment operations. They have to notify customers of this limit when they obtain the service and review it at least once a year.

Banks and other firms must also inform customers of the cash withdrawal limit and fees for withdrawals through technical devices and systems such as exchange machines and not calculate the annual fees for credit or monthly discount cards until after they are activated by the customer. The card issuer has the right to cancel the card if it is not activated within 90 days of the issued date.

The regulations also state the firm receiving the transfer must ensures the beneficiary’s name matches the IBAN number and the transfer amount will be returned to the issuing authority if there is a difference between them.

All customer data recorded in the transfer form will be verified and the customer notified before agreeing to carry out the transfer process within the expected date of the arrival of the transfer amount to the transferee, as well as the amount of fees and commissions, including fees imposed by the third party, if any, and their details, along with the net amount which will be received by the transferee.

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Benjamin Filaferro