Some 2.5 million bank clients who took out personal loans from local banks are being denied the benefit of lower interest rates, according to a report by the Arabic daily Al-Watan on Tuesday. Some local banks offer loans with interest rates as low as 3.5 percent. As a result, employed people who had borrowed some SR250 billion by the end of 2007, are forced to miss out on the most recent low-interest rate offers and continue to pay back earlier loans at interest rates averaging 7.5 percent. Since the beginning of this year, the smaller banks in the Kingdom have been launching intensive promotional campaigns to lure clients into taking out Islamic personal loans at low interest rates, as well as to convince already indebted clients to sell their debts and obtain re-financing from other banks to take advantage of the much lower installments. National banks have embarked on a fierce competition featuring low interest rates to attract the employees of large companies, such as the Saudi Arabian Airlines, the Saudi Telecommunications Company, and the education sector, as lending these employees is relatively risk-free. The problem is that those who had already taken out loans prior to the campaigns still have to pay their loans at the higher rates, as the banks will not include them in the promotions and reschedule their payments at the lower rates. A director of personal financing at one bank, who spoke to Al-Watan on condition of anonymity, said that the Saudi Arabian Monetary Agency's (SAMA) regulations do not prevent banks from buying debts or re-financing clients, on the condition that the amount withheld from individual salaries does not exceed 33 percent of the client's registered. He indicated that 150 of his bank's clients who approached other banks for repayment of debts totaling some SR24 million, were turned down. The source said that a number of banks deliberately delay pending repayment orders or decline transfers issued by other banks stipulating that a client's debt to the lending bank could be paid by another bank. They also turn down requests to exempt clients from the interest rates for the remaining period and levying the same interest rate as that required for new loans, in addition to rejecting debt payment bank cheques. The source added that clients are faced with the rejection of early repayment, despite the letters issued by creditor banks. Some creditor banks deliberately delay clients' applications for release for a period of up to 60 days in some cases, causing clients to become so frustrated that they abandon debt repayment applications. The source also indicated that clients face problems with lending banks which decline to issue them with debt certificates or provide them with statements of accounts and also require them to pay back loans in full. __
