INTRODUCTION

The Central Bank of Nigeria (CBN) on April 21, 2017, released a new Guide to Charges by Banks and other financial institutions in Nigeria. This new guideline which replaces the Guide to Bank Charges issued in April 1, 2013 takes effect from May 1, 2017. The above action is in line with Section 2(d) of the CBN Act 2007 which stipulates the promotion of sound financial system in Nigeria.

The Guide to Charges by Banks and other Financial Institutions is the instrument that CBN uses to moderate the application of charges on various products and services offered by banks. Bank rates and charges are legally agreed fees paid by parties in any bank transaction for the services rendered. Common examples of rates and other bank charges are account maintenance fee, interest on loans, interest on deposits; SMS alerts fees and ATM withdrawal fees.

The Guide also stipulated that banks should obtain approval from CBN before applying any charge that is not captured in the new Guide. Further, banks and other financial institutions (OFIS) are expected to inform the customers of their right to negotiate if a charge is identified as ‘”Negotiable” in the Guide.

It is a known fact that some banks and financial institutions in Nigeria indulge in the unethical practice of fleecing their customers through excess charges and unauthorised deductions. The intension of this article is to create awareness and share knowledge on how to detect and eradicate such unethical practices. This article will also discuss the need for banks to focus on pragmatic ideas that promotes higher level of professional conducts in service delivery.

Examples of Excess Charges and Illegal Deductions

1) Charging interest on loans and overdrafts at a rate that is higher than the agreed rate in the offer letter.

2) Arbitrary increase in interest rate on loans and overdrafts and increase in other fees without notifying and getting customer’s consent as stipulated in the CBN/CIBN guidelines

3) Creation of charges and fees that are not recognised in the CBN Guide to Bank charges

4) Charging other fees that are not in the offer letter issued to customers for loans and overdrafts.

5) Wrong application of maintenance fees. Banks overcharge maintenance fees by inclusion of transactions that are exempted from maintenance charge (Loan liquidation, liquidation of FTD, Customer to customer transfers, bank induced transactions, returned cheques etc.)

6) Outrageous ATM/E-Banking charges

7) Charging interest on unauthorised overdrafts that are due to systemic failure on part of the bank

Charging interest that are above the interest margin allowed (Consideration of MRR and MPR) on loans and overdraft

9) Back dating of debit transactions which may cause overdraft charges

10) Using dual rates for overdraft charges

Other unethical practices through which banks short-changed their customers:

1) Delay in booking customers’ request for term deposits and other investments as at when due and subsequent refusal to back-date the booking of such investments to the date the customers submitted the requests

2) Deliberate delay in carrying out customers’ requests for interbank transfers

3)Failure to roll over fixed deposits and other investments as at when due

4) Changing of agreed rate on fixed deposits without informing the customer

5)Non-compliance with fees concession agreements

6) Failure to promptly treat ATM cash withdrawal refund requests.

AWARENESS OF EXCESS CHARGES AND ILLEGAL DEDUCTIONS BY BANKS

With the implementation of the TSA policy which mopped up liquidity from the banking sector, most banks in an apparent bid to cut cost of operations and, perhaps, shore up dwindling revenue and capital base introduce all sorts of unapproved charges under different names. In spite of several complaints by customer and repeated warnings by the Central Bank of Nigeria to Deposit Money Banks against illegal deductions and excess charges on customers’ accounts, there are fresh indications of an upsurge in this practice by majority of Nigerian banks.

Data from CBN (2016) indicates that between January and June 2016 a total of 1,473 complaints were received from customers. There are increasing concerns from customers on excess charges and illegal deductions by banks. Experience has shown that most bank customers will only complain when excess charges on their bank transactions are running into thousands and millions of naira.

Banks are not supposed to take charges that have not been fully disclosed in the loan offer letter issued to customers. Arguably, not all bank customers have the capacity to complain about excess charges and illegal deductions. Most customers who are being charged illegally with as little as N50-N500 every month may not notice such charges and those that noticed are likely to ignore them.

The CBN established the Consumer Protection Unit in 2010 in a bid to provide a strong voice for the bank’s customers and to stop arbitrary charges and illegal deductions. The CBN strengthened the Consumer Protection unit to Consumer Protection Department in 2012 to curb the increasing unethical cases of excess charges and illegal deductions by banks and other financial institutions. According to the Director Consumer Protection Department CBN, between 2010 and 2014 over N14.69billion refunds of excess charges were returned to banks customers. Further, in 2015 alone Nigerian banks were compelled to refund over N6.2billion excess charges deducted from bank customers. Also, between January and June 2016 the sums of N4.63billion, $80,415.46 and E19, 263.62 were refunded to bank customers respectively. This implies that between 2010 till June 2016, an estimated sum of N25.25billion excess charges have been refunded to customers of banks who complained.

IMPACT OF THE NEW CBN GUIDE TO CHARGES BY BANKS ON STAKEHOLDERS

As the regulator of the financial sector, it is commendable that the CBN has taken positive steps to ensure that Nigeria banking public is empowered to take necessary actions in line with the new guidelines. The immediate impacts of this action by the CBN on the stakeholders are:

1. Banks customers are now aware of the minimum disclosure that banks and other financial institution must make in the offer letters for credit facilities/loans.

2. Customers are better equipped to know the parameters and basis for bank charges and this will assist them in detecting and reporting cases of excess charges and illegal deductions from their accounts.

3. The reduction/cancelation of charges on some banks products will promote the CBN financial inclusion policy.

4. Banks are to leverage on the recent guidelines and commission proactively a strategic team to identify quick wins to ensure sustainability of revenue

5. There will significant deductions in the fees and commissions earned by banks based on the strict compliance to the Guide.

Furthermore, all stakeholders are aware of the need to protect their rights and seek redress where necessary.



Nevertheless the Central Bank of Nigeria encourages bank customers to follow due process of lodging complaint against banks and other financial institutions. The steps are shown below:

1. Contact Your Financial Institution First.

· Report the complaint at the bank/branch where the issue occurred

· Allow two weeks for the issue to be resolved by the bank.

2. If your bank fails to resolve your complaint within two weeks, escalate your complaint to the Consumer Protection Department of the CBN through the following channels:

· Email : cpd@cbn.gov.ng

· Letter: Director, Consumer Protection Department, CBN Abuja.

WAY FORWARD

Banking business is based on trust, equity and best practice. That is why most customers of banks are concerned about the integrity of the charges in their accounts. Reports have shown that customers tend to avoid banks that are known for illegal deductions and excess charges even if such banks are offering excellent customer service.

The Customer Protection department (CPD) in CBN needs to be strengthened to carry out periodic review of the operations of banks and other financial Institutions, with the view of identifying illegal deductions and excess charges on customer’s accounts and compelling the banks to make prompt refunds to customers.

Source:Investment Managers and Asset Consulting Ltd
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That we should stop over the counter transfers and deposits or be charged. Now if I log on to my bank's app I am charged; session fee and sms alert for logging in. Any transfer attracts N65 some times N72. I laughed at my cummulative bank charges.

What's the way forward abeg? They've reduced bank tellers thereby saving cost and now charging me after I pay for connectivity also.

Naija matter eh