In a bold move that could shake up the financial dealings in Saudi Arabia, the Saudi Central Bank, commonly known as SAMA, has put its foot down on a practice that's been quietly growing in the shadows. Promissory notes, those slips of paper that have been a backbone for credit card financing, are now being shown the door. But why? And why now?

The Directive: No More Promissory Notes

SAMA has delivered a clear message to all banks, local lenders, and finance companies operating within the Kingdom. They've instructed them to cancel any previously issued promissory notes tied to credit card products. That's not all. The directive also forbids these financial institutions from asking for any commercial papers from individuals when doling out new credit card financing. The clock is ticking, with a deadline set for 2/1/1448 AH to wipe out all existing promissory notes linked to credit cards.

Why the Sudden Change?

So, what pushed the central bank to lay down the law? It turns out, they've been keeping a close eye on the growing use of promissory notes in the market. This uptick didn't sit well with them. They saw it as a potential risk to consumer protection, and they weren't about to let it slide. So here we are, with a regulatory intervention in place to curb the practice.

What Banks and Lenders Must Do Now

It's not just about stopping the issuance of these notes. SAMA's directive goes further. Financial institutions are now required to update their internal policies, procedures, and controls to align with these new demands. And they're not getting much leeway on this. Within 30 days, banks and finance companies must submit a corrective action plan to SAMA’s Customer Protection Supervision Department. This plan needs to spell out how they intend to tackle existing situations. At the very least, it should outline measures to return or cancel promissory notes or any other commercial papers they previously got from customers.

Timeframe for Compliance

Six months. That's the timeline given for the full implementation of these corrective measures, starting from the date of the circular issued on 2 Rajab. It's a tight schedule, but SAMA seems adamant about seeing these changes through.

In a world where financial practices can often tilt in favor of institutions, SAMA's move appears to be a step towards leveling the playing field. But will it be enough to protect consumers in the long run? Only time will tell.