CBN to Introduce Measures to Protect Bank Customers

The Central Bank of Nigeria CBN intend to introduce a set of measures that will protect bank customers from unethical interest rates, illegal charges and other manipulations by bank officials. The rules which will be in draft form are aimed at protecting bank customers from excessive exploitation by banks. The draft rules are currently being discussed by stakeholders.   According to the soon-to-be-introduced rules, the “CBN shall ensure that operators (banks), establish structures to prohibit predatory lending and hence support a positive credit culture in the industry.

CBN

 Financial operators shall provide credit counseling to prevent consumers’ indebtedness due to limited financial knowledge. Credit counseling is the process of educating consumers to prevent unnecessary debt and support in debt settlement”. The CBN draft rules will further ensure that “Credit counseling facilities are available in Nigerian banks and accessible to all customers especially for customers that are most in need of this service or consumers that request this service.

Consumers, the draft rule states “shall be made aware of such services and shall be encouraged to take advantage of such facilities provided by the operators. When the rules become operational the rules stipulates that “Operators must provide detailed information on the terms and conditions of a loan agreement to consumers prior to executing the loan agreement. Such information must at a minimum include the pricing, repayment schedule, repayment amount, tenure and opt out options”.

According to the rules being fine tuned by monetary authorities, “The CBN shall set guidelines for ethical debt collection practices in the industry. These guidelines shall be based on dialogue, respect for the consumers’ privacy and longevity of consumer-operator relationships amongst others.

“In the event that consumers fail to meet their financial obligations, financial operators shall be encouraged to adopt ethical debt recovery practices such as recovery processes must be courteous, fair and non-coercive. Operators shall ensure that personnel assigned to recover debts are properly trained. Consumers shall be informed in advance before a recovery process is initiated”.

The new rules that may come into effect soon states that “Sales promotions or related activities shall be conducted professionally and ethically. In a bid to generate increased business volumes or attract new customers, financial operators shall provide factual information and shall not seek to mislead consumers. Financial operators shall also not take advantage of consumers’ inexperience, gullibility or lack of understanding.

“ Financial operators shall be required to meet the demands of promotional offers. In addition, before the launch of any sales promotion, operators must provide the CBN with evidence of capability to manage the influx of customers without diminishing service quality”. The CBN in its draft rules said “Financial operators shall provide accurate information on financial products and services to consumers at all times to enable them make informed decisions.

Such information must be timely, detailed, clear and unambiguous. The primary coverage areas to be addressed under this principle are: contract terms which   “terms should contain adequate information that will enhance consumers’ decision making process prior to execution of the contract. Financial operators shall also inform consumers of the possibility of variations in terms and conditions of contracts due to changes in economic conditions before such contracts are executed.

Banks must provide terms and conditions of a loan agreement

Pricing, repayment schedule, repayment amount, tenure and opt out options
Banks to provide financial counseling
Set guidelines for debt collection

More details coming soon............