Banking consumer protection and best practices

The era of inappropriate deductions from customers’ accounts by banks, either by mistake or otherwise, may have come to an end, as the Central Bank of Nigeria (CBN) has taken a tough line on banking consumerism, to ensure best practices.

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

It is widely believed that some banks and other financial institutions engage in illegality through frivolous and hidden charges, and CBN has been engaging bank CEO’s on the issue. Banks have been mandated to refund inappropriate deductions, and whereby they fail, CBN debits their accounts and pay customers. And the apex bank is walking the talk through its Consumer Protection Department.

Within 21 months of its existence, the department received not less than 3,000 complaints against banks and other financial institutions from customers. No less than 5,000 mails, telephone calls, SMS and email correspondences were exchanged between CBN, complainants and the financial institutions in the process of resolving disputes. As at August 2013, about N9billion has been refunded as excess charges deducted from customers’ account.

These leakages were attributed to a lack of customer sophistication – There is a prevalence of financial illiteracy and customers’ ignorance of their rights and obligations in their relationship with banks. In addition to prolonged regulatory neglect, this gave room to wide spread unethical practices as banks became chauvinistic in advancing their own pecuniary interest at the neglect of the customers and this resulted to heightened customer dissatisfaction and a deluge of complaints against banks.

In resolving the problem, CBN, had in the past, 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 CBN. They were also mandated to render monthly reports to CBN and the number of complaints received and those resolved/unresolved. The apex bank also employed gentle arm- twisting by demanding that banks disclose information on consumer complaints in their annual reports, failing which they would be sanctioned.

The Consumer Protection Department has been largely applauded for its effectiveness and efficiency. It has mounted several consumer enlightenment campaigns using different communication platforms, including seminars, workshops, TV appearances, and radio phone in programmes to create awareness among consumers of banking and financial services.

Globally, consumer protection is a main- stream topic. The World Bank has been consistent on financial consumer protection and other such topical issues of relevance. In June 13-14, 2013, the Bank in collaboration with the Organization for Economic Cooperation and Development (OECD) supported a conference on ‘’Empowering Consumers of Financial Services through Improved Financial Literacy and Effective Consumer Protection Systems’’ organized under Russia’s G20 Presidency.

The conference focused on four major areas, namely, 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.

In her capacity as UN Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA), Her Majesty, Queen Maxima of the Netherlands, reportedly, emphasized that financial education and consumer protection must go hand in hand with the growth of inclusive financial systems.

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

Experts believe that consumer protection works best when it is supported or complemented by financial inclusion and finance education; just as it promotes efficiency and stability and helps to create a positive outcome for both banks and their customers.