Protecting the consumer against unethical practices by banks, OFIs

As part of efforts to protect the rights of consumers and to hold financial institutions accountable as a result of the skewed power imbalance, the Central Bank of Nigeria (CBN) on Monday released the guidelines on ‘Responsible Business Conduct.

The objective of the Guidelines is to protect consumers against the unethical and predatory practices that undermine consumer confidence in the use of financial services. The Guidelines therefore sets out the minimum standards expected from Financial Institutions on responsible business conduct.

The Guidelines according to the CBN shall apply to all transactions by financial institutions licensed and regulated by the Central Bank and their agents, subsidiaries and associates.

These include Commercial Banks, Merchant Banks, Specialized Banks, Micro-finance Banks, Development Finance Institutions, Finance Companies, Bureaux-deChange, Primary Mortgage Banks, Credit Bureaux, Mobile Money Operators, Payment Service Banks, Switching Companies, Payment Solution Service Providers, Payment Terminal Service Providers, Nonbank Acquirer, Super Agents, Mobile Money Operators, and other licensed providers of digital financial services.

Financial Institutions are expected to ensure that the provisions of the Guidelines form part of any consumer related transaction, product or service agreement they may enter into with any other institutions which are otherwise not regulated by CBN.

Under the guideline, Financial Institutions are expected to conduct their businesses in a responsible, professional and ethical manner, in order to promote good business practices.

They are to Train their staff to promote competence, efficiency and professionalism in the discharge of their duties; provide clear information about products and services, features, terms and conditions and the applicable fees and charges.

To help consumers determine their financial needs and ensure proper planning to meet the needs, Financial Institutions are to provide financial advisory services incidental to their business activities such as advising on financing and business strategies and structures, conducting research and economic intelligence services, building financial models, writing business plans, conducting private placements, arranging loan syndications and advising on project structures.

To ensure that debt recovery processes are courteous and fair, devoid of undue pressure, intimidation, harassment, humiliation or threat, Financial Institutions are expected to inform customers of the debt recovery procedures in loan contracts; proactively engage and give customers early notice of outstanding obligations prior to the commencement of debt collection process.

The guideline stated that financial institutions should initiate foreclosures only when other reasonable attempts to reach a resolution have been unsuccessful. Also, they are to give customers a minimum period of 6 months from the date of notice of foreclosure, the option of a private sale before commencing foreclosure, except where the customer waives the right.

To ensure that advertisements and promotional materials on products and services are clear and not misleading, financial institutions are expected to prominently display information that could affect consumers’ decisions, as well as carry out incentive-based marketing of products and services in an ethical and professional manner.