The Guardian
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Banks in massive rip-off of customers with essential information

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Nigeria banks have surreptitiously used their bargaining strength (knowledge) against the “half-informed” customers, numbering in tens of millions today.

For example, how many times in a month will a savings account customer make withdrawals and lose the right of interest rate payment?

This is one of the least things the financially informed Nigerian knows.

It is also one of the bargaining chips the industry has deployed to enrich itself.

In a random sampling of 100 persons in Lagos State by The Guardian, 90 did not know what would make them lose their right of interest rate payment on savings account.

Eighty said they were aware that there is interest rate for savings deposit.

Seventy said they had never received interest rate on their accounts before.

Ten persons had an idea of the number of withdrawals that would make them lose interest rate on savings accounts, but only three got it right.

Coincidentally, one works in the bank and two others are family members of journalists.

All of them have two savings accounts each. Indeed, half education is dangerous.

It may interest you to know that the scarce answer to this question holds the key to tens of billions of naira not paid to customers as interest.

Not even in the curriculum of the Financial Literacy programme would you see this explicitly stated.

It is not until 2017, in the revised guide to banks’ charges, that this was clearly stated.

Since May 2017, when the guide was released, no bank has elected to speak on the subject.

Worrisome also is the observation that the answer is so obscure that some banks’ workers have no clue, while others are not sure, leaving only but few with accurate knowledge. Why is this knowledge such a scarce commodity?

What the law says

Section 2 (2) of the Consumer Protection Framework of the Central Bank of Nigeria (CBN) states that financial institutions shall act in the best interest of consumers in the provision of advice and execution of transactions.

For consumers to make informed decisions in choosing financial products and services, they must be acquainted with the features, costs, risks, penalties, terms and conditions.

By the term “features,” it is no doubt that the “dos and don’ts” associated with such product, must be enumerated.

Section 2.3 (1) adds: “In addition, financial institutions have a responsibility to make reasonable effort towards ensuring that consumers of financial products are knowledgeable about the products/service they wish to purchase.”

There is no doubt that majority of the banks’ customers are financial illiterates, who are confused about sudden developments in their banking relationship.

The same framework in Section 2 (5) espouses fair treatment, warning that contract terms must not undermine the rights of consumers, giving financial institutions undue advantage.

For example, in the account opening form, with an avalanche of questions and mandatory details, which takes no less than 20 minutes to complete, a single line to put the prospective customer in the know would do a lot to rest the matter.

Again, Section 2 (5), while explicitly stating that contract terms that conflict with regulations are null and void ab initio, it added in Section 3 (1) that financial institutions shall provide accurate and timely information on products and services to enable consumers make informed…and confident financial decisions to enhance their economic well-being.

By withholding the subject matter, are banks helping the customers to make informed and confident financial decisions to enhance their economic well-being?
Literacy rhetorics

In one of the Lagos State schools that gets regular visits during the yearly Financial Literacy Week by a mid-tier bank financial institution, a teacher, who asked to be known as Rachael, said she had participated fully for the past three years.

“There is sense in what you are saying. I have not thought about this. They have always told us about bringing our money to the bank.

They have also told us about interest on the money, but they have not told us what would make us lose our opportunity to earn interest.

“We are shortchanging ourselves, but they are helping us to do so and they are better off because we do not withdraw all the money.

They trade with the remainder and still walk away free,” she said.

True to the above observation, banks have neglected the importance of making a subject out of their regular campaign to enlist more customers into the formal financial system, to deal specifically on what transpires between the money deposited on savings account and withdrawals from the same account.

If this is not an important subject, why would the revised guide to bank charges, published by CBN in May 2017, contain the provision, which said the savings accounts are entitled to a “minimum of 30 per cent of Monetary Policy Rate (presently at 14 per cent)” but “not applicable if a customer makes more than four withdrawals in a month”?

The press statements of banks during the yearly event have always been about mentoring the youth on how to save money in the banks and financially responsible.

What the customers say Onome, a customer of one of the top three banks told The Guardian that “it is a trade secret. You can only guess, unless you are told.

It is strategic and deliberate. I think the regulator must count this as a big oversight that should have been pointed out before now.

Chijiuba was a victim of the knowledge’s negative influence.

With huge inflows into his savings account, he was worried that there was no interest payment.

On his visit to the bank, with heart full of fury, he could only get surprise exclamation from the Business Manager for a litany of transactions against the norms of a typical savings account. Poor customer education is to blame.

Thinking the exclamation was for his gain, the bank’s official rather queried him: “What do you think you are doing?”

In fact, Chijiuba was conducting no less than 25 transactions per month with the account for more than two years. He was not well informed.

He said: “I can read and write. I did not see any instruction or warning regarding this in the form that I filled for the opening of the account.

Is it not reasonable to include this in the form?

Should it not be part of their routine messages to customers? Why have they not advised me against this since?”

Oyebade, a journalist, admitted he was receiving “handsome” interest payments on his savings account, which accumulated huge receipts for about two years, with rare withdrawals.

He is now bewildered since a top five financial institution stopped the interest payment, after he started making withdrawals from the account, despite leaving substantial amount in the account.

Alex, a health worker in Lagos University Teaching Hospital told The Guardian that his colleague unconvincingly explained the “hearsay” about how series of withdrawals from an account, would deny one interest rate payment.

“I was curious, because that was a new story for me. So, I stopped by my bank’s branch to get all the details.

Surprisingly, the staff of the bank was also not sure too.

In fact, she consulted another person, who wrongly told us that it is four withdrawals in a quarter.

This happened inside the banking hall. So, the rich also cry,” he said.

The above scenario is worrisome, especially, as it indicated that the banking industry’s “code” for denying millions of customers the rightful knowledge to earn interest on their savings accounts, totaling in billions, is not evenly known among banks’ workers.

An aggrieved trader at Delaeko Market, in Isolo area of Lagos, who identified himself as Bankole, banks with four of the top five banks in the country.

He said even if there is a book containing such information, how many of the millions of banks’ customers will know, read and/or have access to the book? Is it not them that will educate customers properly?

“They are with the information and know the implications of that knowledge.

They give forms to prospective customers during account opening, so it is not difficult to write the rule in one of the lines.

They can also make a copy of the book as a compliment to customers. They also have the electronic copy to send to their customers.

“It is deliberate, because all it takes is just four-time withdrawals in a month to lose the right and like in my case, the rest of the millions of naira will become free money for them.

They should restitute savings accounts’ customers because this is extortion,” he said.

A nurse, Mrs. Cherechi Zeal, described the development as a deliberate plan, comparing it to withholding essential information that can restore a patient’s health, which is unethical.

“As a health worker, I owe my patient the duty, voluntarily, to explain a prescription, dosage, side effects, including behaviours or actions that would render the drug ineffective.

“They know that customers have the right to earn interest on their savings accounts, but they have withheld what they know that will cause customers to lose their deserved interest rate.

This is not a case of ‘it is written in whatever book or a common knowledge’, after all, it is a common knowledge that bank is where valuables are kept, yet they still canvass for people to bring money.

“Government should not sweep this under the carpet.

Banks should make restitution and nothing less than five years backlog is good,” she said.

Far-reaching implications

Economic theory holds that savings and investments are influenced by interest rate, assuming that other factors like inflation and socio-political environment is predictable.

Given this scenario, it also stands that banks hurt themselves too, because proper information would raise customers’ awareness, leading to reduction in such behaviour.

This would keep the banks more liquid for lending, which is their primary duty and major source of earnings.

When people save more, banks will earn more, especially, in a situation where they pay “peanuts” on savings product, but generally lend at the range of 20 per cent to 30 per cent.

A banker, Bolaji Lawal, while discussing a new initiative- Shared Agent Network and Expansion Facility, aimed at bringing more customers into banking relationship, observed that there are about 98 million accounts so far in the industry, owned by 33 million persons.

This is an approximation of three accounts per person.

Given the prevailing standards of living and the nature of Know-Your-Customer principles, the easiest of requirements for customers are those found in the savings accounts, when compared to Current and Time Deposit classes.

So, millions of banks’ customers belong to savings account class than the other forms of accounts.

According to the National Bureau of Statistics (NBS) in a report titled “Selected Banking Sector Data, out of N23.21 trillion domiciled in banks as at June 30, 2018, N14.03 trillion were sourced from Time and Savings Deposits.

The savings accounts in the industry have been estimated at two-third of the banking industry’s total accounts, with several reports putting it at between 58 million and 65 million.

Still, if we conservatively assume that savings accounts in the banking had 30 per cent of the N14.03 trillion reported by NBS at the end of June 2018, we have about N4.21 trillion.

Assuming that the holders are well-informed customers, it is only the banking industry that will explain what would have been the interest rate payment accrued to customers at the end of June 2018, at a conversion rate of 30 per cent of the subsisting Monetary Policy Rate (14 per cent).

From the low level of knowledge about savings account, it is obvious that the majority of account holders lose their right to interest rate payment by ignorance, but at the gains of the bankers.

The banking sector is not only breaking the cycle of its money creation, but also creating a leakage in wealth creation that is inherent in interest incomes, which also provides taxable opportunity for government.

The prevailing ugly trend must be reviewed by the banks and regulators.

Every details, no matter how insignificant it is, relating to banking relationship, must be explained to customers. That is what the law says and it should be obeyed.


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