Banks and the rest of us!

Many Nigerian banks have been making commitments to provide uninterrupted banking services to their customers without declaring “force majeure” or facing any penalties. This is due to the laxity of the Central Bank of Nigeria (CBN) in regulatory banking supervision and the absence of an enabling law that would allow bank customers to sue the banks and claim damages for failure to provide continuous electronic banking services.

It is a basic principle of law that “ubi jus ibi remedium”—where there is a right, there is a remedy. Bank customers find themselves in an awkward situation where they have a right but cannot enforce it because there is no enabling law allowing them to sue the bank.

For example, a few weeks ago, I suffered financial injury as a current account holder with a bank (name withheld). They announced they were upgrading their system, and for most of four days, no customer of the bank could transact any business because their system was down. On my part, I had to borrow N20,000 cash from a Point of Sale (POS) operator for out-of-pocket expenses and to buy petrol on credit to power my generator to work on my laptop. Yet, I had money in the bank that I could not access. My frustration and mental distress were unimaginable.

Elsewhere in the banking world, the bank would have, without a class court action, compensated me and others heavily to mitigate the impact of lost business opportunities and discomfort due to their system shutdown. The same applies to other banks. Now, I am reading on social media, which banks also use to officially communicate with customers, that a major first-generation bank plans to shut down for ten days to upgrade its system.

One might ask: what is the CBN, the regulatory authority, doing about this shutdown syndrome under the guise of system upgrades? Do they have no penalties in place for banks that fail to deliver services to their customers without a legal declaration of “force majeure”?

As a banker, I am aware that a bank that is unable to render services at any location, let alone all locations nationwide, must obtain prior approval from the CBN. Do these banks get permission, or is the CBN complicit in the inconveniences suffered by bank customers? If the CBN is not complicit, why has it not ordered banks that declare trillions of naira in profit to pay damages to customers who suffer losses due to the shutdown?

As noted earlier, the absence of an enabling law similar to the Bills of Exchange Act for electronic banking transactions makes it impossible for bank customers to sue in the event of a breach of contract between banker and customer.

The Supreme Court in Yesufu v. African Continental Bank LTD (1981) 1 ALL NLR 21 established the relationship between a banker and customer as debtor and creditor. In delivering the judgement, Bello JSC (as he then was) noted that “if any of the parties (the banker or the customer) fails to honour a demand for payment, the demanding party has a right to sue the defaulting party.”

In the earlier case of Osawaye v. National Bank of Nigeria Ltd, the High Court (Mid-Western State) ruled that the relationship between banker and customer is one of debtor and creditor, further stating: “A man is bound by what he does and he cannot alter what he does by saying that he did it without prejudice.”

It is thus clear that, by shutting down its operations to upgrade its system, a bank places itself in a position where it is unable to pay customers on demand. Most attempts to transact electronically failed. Unfortunately, customers who suffer injury and loss of business opportunities, along with the attendant frustration, have no access to their funds and cannot sue. A right cannot stand on nothing; where there is no law, there is no offence. A society that, by accident or design, extinguishes the right of an aggrieved customer to sue for failed transactions is an aberration. Where is the rule of law that ensures order in society?

Reflecting on 2020, when the 1968 Company Act as amended was repealed and replaced by the Companies and Allied Matters Act, one would have expected the legislature to also amend the Bills of Exchange Act (1958 and 1964) to align with electronic banking transactions. This exercise is not rocket science. Special attention should address issues like failed transactions, incorrect transfers, unauthorised debit charges, and more. It is essential to regulate internet banking and ATM transactions where customers’ accounts are debited without authorization, and banks then blame customers for allegedly compromising their PINs without proof.

Such unsubstantiated allegations have no place in law, which holds that whoever alleges must prove. Banks should refund money if they cannot prove that the customer compromised their PIN or authorised the transaction.

The issues raised here demand urgent action from relevant authorities. This is not a matter to be left solely to politicians in the National Assembly. The CBN and the Attorney General of the Federation should work on drafting an executive order for the President to transmit to the National Assembly to expedite the passage of enabling laws. All hands must be on deck to bring sanity and order to banking, considering the wide customer base across society.

To pressure banks to do not only the right things but to do things right, the CBN should impose a penalty of N100,000 (or as deemed fit) per day for every day that a bank defaults in rendering services without the rigours of litigation. Merely giving customers advance notice of a shutdown is insufficient. The law does not see such notice as a discharge of a bank’s service obligation. As affirmed in Osawaye v. National Bank of Nigeria, “A man is bound by what he does and he cannot alter what he does by saying that he did it without prejudice.” Need more be said?

Chris Enyinnaya Fellow Chartered Institute of Bankers [email protected]