Le Minh Hung, Governor of the State Bank of Viet Nam (SBV) submitted a request to the Ministry of Justice (MoJ) and the Ministry of Public Security (MPS) last week, asking for clarification regarding the use of automobiles as banking collateral and the legal rights of credit institutions and borrowers.

The SBV reported receiving multiple complaints from credit institutions and companies recently, stating that traffic police refused to accept copies of vehicle registration certificates in place of the originals which had been submitted to secure loans.

Further confusion arose when a bank-issued confirmation of the vehicle’s use as collateral was not accepted either by traffic police.

The situation has inconvenienced creditors, banks and other credit institutions as not holding the original documents of collateral ownership increases risks to them, which may lead to them ceasing to accept automobiles as collateral.

This would make it harder for citizens and businesses to get loans, while at the same time not allowing credit institutions to hold either the collateral or its certificate of ownership incurs significant risk.

To fix this, the SBV has requested the MPS to instruct traffic departments to accept copies of vehicle ownership certificates in place of originals, provided drivers can produce legal confirmation of collateral from credit institutions.

Hung had asked the MoJ to adjust related decrees and submit a replacement decree to the Government, permitting creditors to hold any papers related to the collateral as negotiated with the borrowers and in accordance with the 2015 Civil Code.

Bui Quang Tin, lecturer at the HCM City Banking University, commented that these efforts are being applauded by commercial banks, since there is virtually no way to return all certificates of ownership to each individual borrower. Borrowers are happy to have the confusion cleared up as well, especially those who paid for their vehicles in installments.

Banks have held original certificates of ownership for collateral for years, with borrowers receiving a confirmation to use in its place. A check up is performed every three months to monitor the collateral and the loan eligibility. — VNS