You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

March 2, 2021

Decree on Consumer Protection in the Financial Sector in Laos

Subscribe to Updates
Informed Counsel

Background

On May 8, 2020, the Lao Ministry of Justice published the Decree on Consumer Protection regarding Financial Services No. 225/GOV, dated April 6, 2020, in its online Official Gazette. The decree was drafted by the Bank of the Lao PDR (BOL), which is the central bank in Laos. In addition to supplementing the country’s guidelines on commercial banks’ obligations to their customers, the new decree bolsters the country’s consumer protection regulatory regime under its primary relevant piece of legislation, the Law on Consumer Protection No. 02/NA, dated June 30, 2010.

Scope of Application

The decree was drafted to elaborate on Article 57 of the Law on Commercial Banks No. 56/NA, dated December 7, 2018, which requires commercial banks to devise clear procedures for receiving and resolving consumer complaints. Besides its application to commercial banks as defined by the law, the decree also applies to a wide range of service providers, including microfinance institutions (deposit-taking or otherwise), deposit and savings cooperatives, leasing companies, pawnshops, and providers proposing other types of financial services under the supervision of the BOL (referred to collectively as “service providers”). Likewise, the decree addresses a spectrum of financial services, including:

  • Monetary deposits and issuance of deposit certificates;
  • Provision of credit;
  • Card services;
  • Hire-purchase and leasing;
  • Mortgages;
  • Payment services;
  • Buying and selling currencies; and,
  • Other services authorized by the BOL, which covers all types of banking services in Laos.

Fee Restrictions and Disclosure Requirements for Financial Services

The decree requires service providers to set a written policy determining the appropriateness of the selected product, official fee, service fee, representation fee, interests rate, and other fees, in accordance with the relevant law and regulations (if any), and to document the justification for the price of each product.

Service providers are also required to advise consumers on financial services through supporting documents and materials. Though the decree provides specific requirements for different types of financial services, it notes that all service providers must provide consumers with information on the following:

  • Fees or service fees, representation fees (if any), interest and other fees—to be summarized in the relevant section of the material;
  • Impact of a change of interest rate, exchange rate, or other factors that affect the price, remuneration, or other conditions relating to the financial service;
  • The expected return of the product;
  • Duration of the contract and payment plan;
  • Conditions for termination of contracts with consumers if the consumers cannot fulfill their obligations;
  • Risks to the financial service;
  • Other similar products (if any); and,
  • How the consumer’s confidential information will be kept private.

The supporting documents and materials, which must be written primarily in the Lao language, are to use terms that are easily understood and should be in an easily readable font size and color (especially the section on the consumer’s rights and obligations under the contract). Moreover, financial service advertisements should not mislead consumers. For instance, service providers cannot claim that they guarantee a return on investment for financial services that are deemed risky.

Consumer Data Maintenance and Other Requirements for Service Providers

The decree is also attentive to the manipulation of personal information, financial information, and card passwords. Service providers must not disclose the information of consumers, and if any information is leaked, the service provider must inform the relevant consumer and document the leak. If the leak affects a large number of consumers, the service provider must also report the situation to the BOL.

The decree also requires service providers to:

  • Provide the financial services without discrimination concerning nationality, ethnicity, gender, or religion;
  • Explain the financial services;
  • When applicable, propose options that may be most appropriate for the selected consumer, so that the consumer can make an informed decision (e.g., by discussing the pros and cons of selected financial services);
  • Not retain information that may harm the consumer for the benefit of the service provider;
  • Provide services based on the disclosed or advertised information of the selected product, and not charge undisclosed fees;
  • Provide consumers with all necessary documents, such as the unsigned draft contract, the original copy of the contract after being signed, and any accompanying documentation, and specify when the consumer has the right to terminate the contract; and,
  • Set a reasonable time for the consumer to review a contract before signing or to cancel the contract (in which case the service provider may charge the consumer for the actual expenses incurred).

The decree also requires service providers to assist non-literate or visually impaired consumers, either by explaining or reading the relevant contract and other relevant documents before their signing, or by having the consumers’ respective representatives sign the contract on their behalf.

Contracts for Financial Services

All contracts related to financial services must include the following information:

  • Names and addresses of the contracting parties;
  • Terms and conditions of using the financial service;
  • Rights and obligations of the consumer;
  • Fees, service charges, and penalties (if any);
  • Information on the confidentiality of the consumer’s information;
  • Dispute resolution requirements;
  • Rights, conditions, and methods for terminating the contract; and
  • Consequences of terminating the contract.

The required content may also differ according to the type of financial service. For example, card services contracts must include information on withdrawal fees, using the card in Laos and internationally, and the credit granted and minimum monthly repayments, while contracts to provide credit must include interest rates and consequences of default.

Dispute Resolution and Penalties

In setting up a new unit or hiring an employee, service providers are required to set up communication channels to receive comments from and propose solutions to consumers’ feedback. The decree permits the service providers to administer these channels in writing, verbally, or electronically.

Upon establishing these communication channels, service providers must indicate the contact details of the unit or employee, and the relevant consumer protection department of the BOL, in every contract of services proposed. Service providers must also explain contact details and processes to the public by clearly displaying this information in their offices, branches, units, or websites.

The decree requires service providers to pay special attention to consumer complaints by recording them and, upon receiving the complete information of the source of the complaints, resolving them promptly. If the service provider cannot propose a solution to the relevant consumer immediately and requires further information on the corresponding issue, they must provide updates to the consumer every 15 days.

If the service provider’s solution is not satisfactory, the service provider and customer may then refer the dispute to the BOL (including cases involving multiple consumers). If the parties still cannot reach an agreement, the decree stipulates that they may then consult the Economic Dispute Resolution Center (a domestic arbitration center), the Lao People’s Courts, or both.

The decree provides only a broad outline of the penalties that may be triggered if its provisions are violated. It indicates that the particular sanctions will depend on the violation and may include disciplinary measures and civil compensation, but a sliding scale of the proposed fines is not given. As a result, the sanctions under the current decree may be difficult to implement, though future regulations may elaborate further.

Conclusion

By addressing financial services and their providers in Laos, this decree is an innovative regulation that is notable for its dedication to filling out the country’s consumer protection regulatory regime, as well as its transparent counsel and recommendations for service providers and their consumers. In particular, its obligations imposed on service providers, and its elaboration of the expected content of contracts for financial services, are significant steps. By clarifying the requirements of the contracts, the decree conveys its recognition of the surge of financial leasing services, which have become common for the purchase of various goods, such as cars, throughout the country in recent years, but which many had considered somewhat unregulated to date.

Overall, although the relevant sanctions have yet to be to clarified, this decree is another positive signal that the Lao authorities are expanding consumer protection in Laos after their publication earlier this year of other consumer protection-related decisions (including on the establishment of consumer protection associations, and consumer protection considerations for telecommunications and internet service providers). Moreover, the decree fulfills, in large part, its objective to elaborate on parts of the Law on Consumer Protection and the Law on Commercial Banks. Consequently, although the decree is not exhaustive, it has clearly made a positive contribution to Laos’ efforts to enhance the relationship between consumers, service providers, and financial services, both domestically and internationally.

Related Professionals

Practices

Banking and Finance

Location

RELATED INSIGHTS​ 

March 14, 2025
The Bank of Thailand (BOT) has published the Draft Guidelines for Digital Fraud Management, which aim to help financial service providers tackle digital fraud and ensure safety and trust in the Thai financial system. These draft guidelines, which are available for public comment until March 18, 2025, provide a comprehensive framework for financial service providers, covering prevention, detection, management, and resolution of digital fraud, as well as support for customers affected by fraud. The BOT tentatively plans to implement these draft guidelines on April 1, 2025, along with circular letters on the minimum required measures for tackling “mule accounts” (deposit or e-money accounts used as tools to receive and transfer funds obtained through the commission of any offense) and measures to strengthen Thailand’s customer due diligence and enhanced due diligence procedures. Under the draft guidelines, “financial service providers” include financial institutions and special financial institutions under the Financial Institution Business Act and payment providers under the Payment Systems Act. Commercial banks, special financial institutions, and operators of transferable e-money services must adhere to every requirement in the draft guidelines. Other financial service providers (e.g., payment providers other than operators of transferable e-money services) can implement the draft guidelines as deemed appropriate to their services, products, and service channels. Digital Fraud Management Requirements The draft guidelines establish the following key requirements: Policy and oversight. Directors and senior executives of financial service providers must set and adopt appropriate “end-to-end” fraud management policies and KPIs to manage digital fraud, covering prevention, monitoring, detection, management, resolution, and support for affected customers. Fraud management processes. Financial service providers must establish a clear framework for managing digital fraud throughout the customer lifecycle, from customer onboarding to service termination, according to industry standards at a minimum and covering at least the following processes: Know your customer
Read More
February 24, 2025
On January 31, 2025, the Bank of Thailand (BOT) announced a new Notification re: Responsible Lending, replacing a similar notification from 2023. This new notification provides updated measures to assist debtors in different circumstances and clear implementation guidelines for lenders, with the aim of resolving household debt issues. Scope The service providers covered by the notification include banks and nonbanks (e.g., credit card companies, asset management companies, licensed personal loan providers, and nano finance operators) that conduct lending business. New Requirements The notification’s core focus remains loan management throughout the lifecycle of a loan—from credit product development to legal proceedings and debt transfers to other creditors—but with further clarification and detail compared to the 2023 notification. The key revisions in the new notification are summarized below. Advertising standards: The notification tightens requirements in some areas and relaxes them in others. Stricter requirements: It is now clearly stipulated that the BOT oversees taglines that may encourage excessive borrowing. More examples of noncompliant statements are also added (e.g., “Elevate your lifestyle now, pay later”; “Get approved, even with credit challenges”). In addition, advertising material that contains multiple credit products should provide clear minimum and maximum interest rates, especially when there are significant differences in the interest rates of each product. Relaxed requirements: The required information for some marketing activities is now reduced. For example, in marketing events with staff promoting loan products and offering free giveaways, service providers have the discretion to provide effective interest rate information in the manner they deem appropriate, and the advertisement material can display only the mandatory warning statements without providing interest rate details. Encouraging customer financial discipline: The notification requires service providers to implement more elaborate and extensive tools to influence customer behavior (termed “nudging” by the BOT) at every stage of the lending cycle. This
Read More
February 19, 2025
On January 3, 2025, the Bank of the Lao PDR (BOL) issued Decision No. 11/BOL on the Use of Foreign Currency in Lao PDR, taking effect on the same date. This decision sets out the rules for using foreign currency in Laos and ensures the Lao kip (LAK) remains the primary currency while allowing flexibility for international transactions. Key points in the decision are outlined below. Permissible Activities for Foreign Currency The decision provides that authorized entities can use foreign currency as a secondary currency to LAK in the setting of cost and pricing structures, announcing and advertising prices, and making or receiving payments for goods and services that are imported or have manufacturing inputs imported from other countries. Otherwise, LAK is the only permitted currency. The decision also stipulates that foreign exchange must be conducted only via authorized commercial banks or foreign exchange markets. The exchange rate for setting costs, pricing structures, announcing and advertising prices, and making and receiving payments for goods and services in foreign currency must match the exchange rate announced by commercial banks from time to time. Businesses Allowed to Use Foreign Currency The decision allows certain businesses and organizations to use foreign currency. These entities are divided into two groups: those that need approval before using foreign currency, and those that can use it immediately. Enterprises that can use foreign currency with BOL approval include: Businesses that export goods or services and entities that lease or obtain concessions from the government, generating revenue in foreign currency through commercial banks. Enterprises that provide international freight and passenger transportation services. Enterprises that provide services related to cross-border logistics and warehousing. Enterprises located at international borders and airports, such as duty-free shops and restaurants. Enterprises that have obligations to make payments in foreign currency to other
Read More
February 17, 2025
Thailand’s draft Emergency Decree on Technology Crimes Suppression, which we covered in a client alert in January 2025 primarily addressed to telecom operators and financial institutions, is expected to have significant implications for a wide range of business operators.  The draft emergency decree has already been approved by the cabinet but may undergo further developments as it continues in the legislative process. In this article, we will highlight the material impacts of the draft emergency decree on overseas and local fintech operators. Expanded Definition of “Technology Crimes” The definition of “technology crimes” now includes the following acts of forgery or alteration: Forging or altering the identity of individuals and biometric characteristics by utilizing computer or communication systems or other electronic means to commit offenses. Forging or altering symbols, trademarks, or seals of groups (e.g., foundations, community enterprises) or juristic persons, including acts by juristic persons using individuals or juristic persons as nominal directors or shareholders, regardless of whether such individuals or legal juristic persons reside in Thailand. Forging or altering digital or online platforms, regardless of the platform’s location or legal status. Individuals who conspire, utilize, assist, or support the commission of these offenses will face the same penalties as the principal offender. Business Operator Definition The scope of “business operators” is now expanded to cover various fintech and digital asset operators beyond those under the Payment Systems Act (PSA). The draft emergency decree now includes the following operators, whether they are legally authorized or not: Business operators under the PSA and business operators who operate “as if” they are payment system operators Business operators under the Royal Decree on Digital Asset Businesses or business operators who operate “as if” they are digital asset business operators. Foreign exchange business operators. Disclosure and Exchange of Information Business operators must disclose
Read More