EDUCATION: Protecting banking consumers

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T HE   financial system is the axle on which the wheel of economy revolves, of which the banking industry is a key component, and of prime i...

THE  financial system is the axle on which the wheel of economy revolves, of which the banking industry is a key component, and of prime importance especially in developing countries, for funds channelisation for entrepreneurship and job creation, thus the need to ensure a sound and high ethical standard in the industry. Accordingly, the Central Bank of Nigeria,CBN, is not sparing  effort to protect banking consumers and ensure best practices towards improving the value perception and fortifying public confidence in the banking industry to enhance financial inclusion for the overall benefit of the economy.

Consumer protection and enlightenment is  a major aspect of CBN’s mandate to promote a sound financial system and advocate good banking habits that promote efficiency, sincerity and transparency between banks and consumers in the delivery of financial services. The apex bank upholds that, ‘’It is only when the welfare of consumers is given proper attention that we can restore investor confidence and also promote a strong and stable economy.’’


Banking hall

Globally, consumer protection is a main-stream topic on the front burner of many prominent organisations. The World Bank has been consistent on the topical issue and had in the past  collaborated with the Organisation for Economic Cooperation,OECD, and supported a conference on ‘’Empowering Consumers of Financial Services through Improved Financial Literacy and Effective Consumer Protection Systems’’, organised under Russia’s G-20 Presidency.

The parley focused on financial education and protection strategies, measuring financial literacy/capability and evaluating financial education programme, promoting young people’s financial competencies and developing innovative communication channels; and global initiatives and trends in financial consumer protection policy and regulation.

Finance ministers and Central Bank governors had also met in Moscow in 2013 to deliberate  on effective approaches and priority principles of promoting financial consumer protection, and identified responsible business conduct as an arrowhead principle as it ensures that banks act honestly and professionally with due skill, care and diligence, incorporating best interest, assessing consumer needs, staff training, remuneration, remuneration structure, complaints handling and redress.

Experts believe that consumer protection works best when it is supported by financial inclusion and finance education. And, in her capacity as UN Secretary-General’s Special Advocate for Inclusive Finance for Development, UNSGSA, Her Majesty, Queen Maxima of the Netherlands who visited CBN Governor, Godwin Emefiele late last year, had emphasised at a different forum that financial education must go hand in hand with the growth of inclusive financial system.

In line with global best practices, CBN released a Consumer Protection Framework,CPF, in 2016. The framework was  guided by the G-20 High Level Principles, the World Bank Good Practices and the Four Pillars of Consumer Protection. It also took cognizance of the peculiarities of the Nigerian financial services industry.  According to CBN, ‘’the G-20 principles were developed by the OECD, the Financial Stability Board, FSB, and other international organisations in response to the request by the G-20 Finance Ministers and Central Bank Governors, to develop principles to guide consumer protection in the field of financial service.’’

The objectives of the CPF are , ‘’to guarantee high standards for efficient customer service delivery, market discipline and ensure that consumers are treated fairly by financial institutions regulated by the CBN.’’ And, ‘’it shall form the bedrock for the establishment of a virile consumer protection regime in the industry, thereby enhancing financial inclusion and ultimately, a stable financial system.’’

The CPF encompasses legal, regulatory and supervisory structures, responsible business conduct, disclosure and transparency and consumer financial education. Other components include fair treatment, protection of consumer assets and privacy, complaints handling and redress, competition, enforcements and consumer rights and responsibilities.

With the CPF , the era of corporate rascality or inappropriate banking practices perpetuated by some banks may have come to an end going by the provisions to sanction banks and other financial institutions that violate the framework. Some of the stipulated sanctions include, refund to customers in line with relevant regulations issued by CBN, letter of apology, suspension/withdrawal of Foreign exchange dealership licence, publication of infractions and sanctions and supervision/removal of Board/Management Staff/ Employee. Others are, revocation of banking licence, monetary penalties and others deemed appropriate.

The Consumer Protection Department of CBN  has embarked on several consumer enlightenment campaigns using different communication platforms including seminars, workshops, TV appearances and radio phone in programmes to create awareness among consumers, who in turn, have been responsive. Reportedly, within 21 months of its establishment, the Department  received not less than 3,000 complaints against banks and other financial institutions in the process of settling disputes.

Also, no less than 5,000 mails, telephone calls and email correspondences were exchanged between CBN, complainants and financial institutions. In resolving problems, CBN  mandated banks to act as the first point of complaint for aggrieved customers and also resolve such complaints within 14 days of receipt. Complaints not resolved within the time frame were to be forwarded to the apex bank.  About N9 billion was refunded as excess charges deducted from customers’ accounts in August 2013.

In 2016, 2,656 complaints were lodged by the public which bordered on Automated Electronic Payment-related issues, excess charges, dishonoured cheques, fraudulent withdrawals and deposit irregularities. A total of N21.27 billion was recovered, being excess charges illegally deducted from customers’ accounts. Also, £19,263.62 and $3.35million were recovered and refunded. The leakages have been attributed to the lack of customer sophistication due to a  prevalence of financial illiteracy and customers’ ignorance of their rights and obligations in their relationship with banks.

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