CM-8.4 CM-8.4 Maximum Limits
Total Repayments Ratio
CM-8.4.1
Licensees may only provide a new consumer facility (or renew, extend or otherwise modify an existing consumer facility) for an amount such that the borrower's total monthly repayments on all his consumer finance commitments do not exceed 50% of his monthly gross income. This limit may only be exceeded in the circumstances described in Paragraphs CM-8.4.6 and CM-8.4.10.
October 07CM-8.4.2
When reviewing an applicant for a consumer facility, licensees may only take into consideration regular income. A spouse's income may only be taken into consideration when the credit facility would be in joint names, such that the spouse would also be legally liable for the obligation incurred.
October 07CM-8.4.3
Notwithstanding the above limit, licensees must review in detail an applicant's personal financial standing and ability to service their obligations. Where a spouse's income is being taken into consideration, then their individual circumstances must also be similarly assessed. In many cases, these reviews may require consumer finance repayments to be kept significantly below 50% of monthly gross income.
October 07CM-8.4.4
Licensees must enquire as to applicants' sources of income, their past credit history, their regular outgoings and other financial commitments, including potential liabilities such as guarantees. Particular attention must be paid to housing costs (such as payments to Eskan Bank). A person's regular income, net of consumer finance repayments and other financial obligations, must remain sufficient for that person to support himself and any dependents. Licensees must also take into account likely future trends in income and outgoings, and the impact this may have on the 50% ratio.
Amended: October 2013
Amended: July 2011
October 2007CM-8.4.5
When factoring in credit cards into the repayment limit in Paragraph CM-8.4.1 above, licensees must include 5% of the credit limits available on these facilities. If the amounts outstanding (including profit) under such facilities exceed their limit, then the full amount outstanding must be included in the repayments ratio calculation. Charge cards are not included under this definition.
Amended: October 2016
Amended: July 2011
October 2007CM-8.4.6
In the case of high earners – defined for these purposes as persons earning more than BD 3,000 month - the 50% limit may be relaxed, providing that the licensee has undertaken the review required in Paragraph CM-8.4.4 above and is satisfied that the borrower can comfortably support a higher facility service ratio.
October 07CM-8.4.7
The review undertaken to satisfy requirements in Paragraph CM-8.4.4 above must be documented and made available to the CBB's examiners on request. The documentation must include all relevant information used to support the decision to extend credit facilities. In the case of high earners granted a facility in excess of the 50% limit, the documentation must also include a written statement, signed by an appropriate member of management, explaining the justification for relaxing the limit.
Amended: January 2011
October 2007Maximum Tenor Limit
CM-8.4.8
The maximum tenor for instalment consumer finance facilities is seven years. The tenor may not be extended more than twice during the period of the agreement.
October 07CM-8.4.9
The CBB does not believe it prudent for licensees to encourage lending by offering long-term borrowing to fund short-term consumption. The CBB will review the development of market practices in this respect and will consider further measures if required.
Amended: January 2012
Amended: January 2011
October 2007Non-compliant facilities
CM-8.4.10
Where a customer's monthly gross income falls (e.g. due to redundancy or disability or a similar event outside the control of the customer), the bank must identify such accounts as 'technically non-compliant'. If a customer requests an extension to the tenor of the facility due to reduced income, then the bank may increase the term to assist the customer. The bank must take account of the 50% limit outlined in Paragraph CM-8.4.1. Such facilities must also be identified as 'technically non-compliant'.
Amended: January 2022
Amended: July 2021
Amended: October 2019
Amended: July 2012
Added: October 07
