The Ministry of Commerce and National Bank of Cambodia (NBC) have jointly issued a “Press Release on the Implementation of the Law on Consumer Protection and Prakas on Unfair Contract Clause in the Banking and Financial Sector”, to promote economic stability and instil confidence among investors and the general public.
The government institutions noted that the release – dated March 24 – was prompted by recent incidents of “business operators” using contracts that have “embedded [therein] some hidden meaning and unfair clauses in order to excessively exploit benefits from consumers”.
Offering examples, the release mentioned that some of those unfair clauses include those that exempt or limit the liability “of the business operators on the guarantee of their goods and/or services”.
Then there are those “that allow the business operators the right to make substantial changes to the kind, amount, price and quality of goods and/or services, or any modification of important elements of the standard form of other contracts”, without notifying the consumer and obtaining explicit consent, it said.
A third example are “clauses that grant a business operator the power to interpret the contract unilaterally or to terminate” it at their sole discretion, it added.
“The use of a standard form of contract by certain business operators does not grant consumers the power to modify or amend any of the contract's clause or conditions to safeguard the consumer's legitimate interests,” the release noted.
The ministry and NBC – the central bank – “advise all banking and financial institutions to operate in accordance with the Law on Consumer Protection and Prakas on Unfair Contract Clause in order to protect consumers’ rights and promote fair competition”, it said.
It explained that the ministry adopted the latter – Prakas No 0067 PNA/KBB/PRK dated March 1, 2022 – to complement the consumer protection law and better grapple with “unfair clauses that reap the benefits from the consumers”.
The two agencies also “encourage the general public, especially consumers, to report any excessive exploitation caused by the establishment of unfair standard forms of contract by business operators to the Consumer Protection Competition and Fraud Repression Directorate General [CCF]”, it said.
It noted that the ministry – in collaboration with the NBC – held a workshop on February 16 on the aforementioned law and prakas, with 170 representatives from locally-operating financial institutions in attendance.
Speaking to The Post on March 30, CCF director-general Phan Oun highlighted the importance of stability and clarity in the financial sector, given its central position in the economy, as well as guaranteeing that interest rates and certain other contract terms are not modified without the consent of all parties, to ensure fairness and transparency.
Oun shared that a working group – in which he claims to be involved – is set to hold on April 3 a similar workshop to the one mentioned in the joint press release, but for the real estate sector, motivated by the wide variety of contracts used in the field, along with the accompanying potential for disputes among signatories.
Interestingly, Sok Voeun, Cambodia Microfinance Association chairman and Association of Banks in Cambodia board member, maintains that there have “never” been significant issues in the formal banking and financial sector, and that institutions “always” implement contracts “honestly and transparently”.
To keep things that way, financial institutions in Cambodia are preparing a “Standard of Loan Agreement” concerning loans under $50,000 that “will be finalised soon and is scheduled for implementation in early June”, he revealed.
For reference, in its 2022 annual report, the NBC indicated that Cambodia’s formal “banking” system comprised 59 commercial banks; nine specialised banks; five deposit-taking MFIs (microfinance institutions); 82 non-deposit-taking MFIs; 224 rural credit institutions; 16 financial leasing companies; five third-party processors; 34 payment service providers; one credit information sharing service provider; six foreign bank representative offices; and 2,869 money exchange businesses.
The Kingdom’s five deposit-taking MFIs – or MDIs – were: Amret Plc, AMK Microfinance Institution Plc, PRASAC Microfinance Institution Plc, LOLC (Cambodia) Plc, and Mohanokor Microfinance Institution Plc.
