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Bank debtors’ list raises more dust


Debt copy• Lawyers differ on propriety of publishing names
• Controversy casts doubts on credit records

WHETHER or not banks – acting on a purported directive of the regulator, the Central Bank of Nigeria (CBN) – are legally right to have published names of delinquent debtors, has now become a subject of public debate.

The Guardian sought the opinions of some commercial and constitutional lawyers, as well as stakeholders in the banking sub-sector on the issue, following the denials and controversy the exercise generated.

For publishing her name as one of the promoters of a debtor company, former broadcaster and member of the House of Representatives, Abike Dabiri-Erewa, has already sued one of the banks. Other influential Nigerians are also threatening to follow suit.

The CBN had reportedly directed banks to publish list of delinquent debtors in specified number of national newspapers and within a given time frame.

Although bank officials initially agreed that the action was a product of a CBN directive, that position was to change when the apex bank Governor, Godwin Emefiele, reportedly said the CBN did not issue such express directive.

But Senior Advocates of Nigeria (SAN), including Mr. Kemi Balogun, and other lawyers like Mr. Tony Odiadi and Olumide Apata, differ in their views. Also, some industry stakeholders said the controversy has thrown up issues of credibility for corporate book keeping.

While some lawyers, who spoke to The Guardian on the matter, endorsed the act, others condemned it, describing it as illegal and morally unjust since the purpose is mainly to ridicule the debtors.

The closest regulation on the issue stems from the CBN Act as well as the Bank and Other Financial Institutions Act (BOFIA).

The CBN Act No.24 of 1991 (sections 28 and 52) as amended, which established Credit Risk Management System (CRMS) or Credit Bureau, empowers the regulator to obtain from all banks, returns on all credits with a minimum outstanding balance of N1,000,000 (now N1.million and above of principal and interest), for compilation and dissemination by way of status report to any interested party (i.e. operators or regulators).

The Act makes it mandatory for all financial institutions to render returns to the CRMS in respect of all their customers with aggregate outstanding debit balance of N1,000,000.00 and above.

It also requires banks to update these credits on monthly basis as well as make status enquiry on any intending borrower to determine their eligibility or otherwise. Banks are penalised for non-compliance with the provisions of the Act.

Section 32 (1), under the Incidental Powers: “The Bank may, subject as is expressly provided in this Act, generally conduct business as a bank, and do all such things as are incidental to or consequential upon the exercise of its power or the discharge of its duties under this Act.

Section 33(1a) under the Power to require or share information: “In addition to any of its powers under this Act, the Bank may require persons and institutions having access thereto at all reasonable times, to supply, in such forms as the Bank may from time to time direct, information relating to or touching or concerning matters affecting the economy of Nigeria; and

“Section 42(1c), under the Co-operation with banks in Nigeria: “The Bank shall further such policies not inconsistent with this Act as shall in the opinion of the Bank be in the national interest.

But at the 323rd Bankers Committee meeting in Lagos recently, the Director of Banking Supervision, Tokunbo Martins, who was represented by Mr. Kolawole Balogun, said the ongoing publication of delinquent debtors in the national dailies is the decision of the committee, not the CBN.

Though the Bankers Committee, made up of chief executives of banks in the country and CBN governor as chairman, might have made the decision, it was not without the final approval of the regulator – the CBN.

A top source from CBN, who pleaded anonymity said the linking of the exercise with CBN Act and that of the Bank and Other Financial Institutions Act, is not necessary since there may not be a connection at all.

According to the source, the issue in question is operational, just like the Biometric Verification Number (BVN) project, which came out of the need to enhance operational efficiency in banking transactions.

Some of the closest mandates of the CBN, as encapsulated in the powers of its Financial System Stability Directorate, include the “conduct of off-site surveillance and on-site examination of deposit money banks, specialised institutions credit registry bureaux, and related institutions.

“Development of standards for examinations and consolidated supervision; develop and implement an effective consumer protection framework that promotes consumer confidence in the financial system; and development and implementation of policies and regulations aimed at ensuring financial system stability, among others.’’

Renowned commercial litigator, Mr. Kemi Balogun (SAN), however, described the publication as “lawful,” saying it would only become unlawful if someone who did not take a loan was accused of doing so without paying up.

“If he has taken a loan and has not paid back, it is lawful. There is a need to balance law with justice. Law doesn’t operate in a vacuum. It operates within so many contexts, including the need to keep the society and economy in check.”

He stated that in other climes, they would have criminalised their action. “So for us to debate whether it is lawful or not is beyond the issue. What we should debate now is whether government should not go a step further to criminalise their action of constituting what is called economic sabotage.

“When you take loan and don’t pay back, you create what is called systematic collapse in the economy. When that happens, the ripple effect is that people won’t be able to find work. The multiplying effect of that is armed robbery, prostitution and so many social vices,” he said.

But another senior lawyer, Mr. Tony Odiadi thinks differently. He said the publications violate some of the banking regulations. He said: “Banking regime is based on confidentiality. Transactions between any bank and its customers have certain fiduciary content. A bank is not to throw open the fact that there have been some kind of failures to payments.

“If there is any issue about inability to repay loan, the proper thing for a bank to do is to go ahead and approach the courts. The banks by publishing that Mr. A or Mr. B owed them money is not a proof in the eye of the law that there is a debt. They are trying to illegitimise the other party.” He maintained that they are trying to make the customer lose certain esteem and prestige in the minds of reasonable members of the society.

According to him, when banks go ahead and publish names, it is an abuse of what ought to be proper legal procedure. “It simply suggests that that debt has been proven whereas it is not so since it has not gone through the legal process. Even when it is done at the behest of the regulator, it is still wrong because the regulator did not bring the parties together.

“The parties came together on the strength of confidentiality. It is part of political posturing of the regulator that you begin to hear of such instructions. What does publishing their names amount to? Does it pay the debt?” he queried.

For Apata, “as long as I know, publication of the names did not violate any law.” According to him, the banks are complying with the orders of their regulators. “In fact, it is something I need to research to be able to make informed comments, but if you ask me to talk off my head, I will say that there is no law that they have contravened,” he said.

He added that when banks enter into a contract with somebody and give the person time to pay and he did not pay, it is justifiable if the names of such individuals are published.

Raging debt-list controversy
At the last count, about nine notable individuals and corporate customers have raised various objections ranging from the listing of non-existent relationship, non-harmonisation of account before publication to over statement of figures.

Already, Dabiri-Erewa got immediate re-publication for wrongful inclusion as director of a company having N143.8 billion debt in four banks.

A former Defence Chief, Domkat Bali, also denied ever taking the loan from Fidelity Bank Plc in the first instance, much less refusing to pay.

Senator Ayo Arise described his inclusion as “lacking probity and organisational competency”, while the immediate past Minister of State for Works, Dayo Adeyeye, not only faulted his inclusion as a director, but blamed banks for giving loans without adequate collaterals.

Prince Arthur Eze also faulted the inclusion of his name in a company that he had no link with, adding that even the said firm is made up of distinguished and upcoming entrepreneurs that deserve encouragement.

Others who have protested their inclusion in the bad-debt list include Dr. Kalu Idika Kalu, MRS Oil and Gas Company limited and Sam Nda-Isaiah.

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  • Yomi Ade

    A bank debtor who refused to pay, does not deserve any cover up. The accumulated unpaid interest is almost equal to the principal of the loan amount. Nothing wrong from getting a loan from the bank, but non-payment of the loan is not good for our economy. Publishing the names of bad debtors is necessary options for the banks to recover their funds, before writing the loans off as bad debts.

  • Mazi JO

    Something is fundamentally wrong when discussing this matter of bad Loans. On all the arguments about the publication of the delinquent Debtor list controversy, none of the counsels made references to the genesis of the Loan agreements which is, Collateral; I mean marketable collaterals of these Loan advances. If there has been a professional appraisal of ‘insurances’ against these Loans, both parties to the Loan agreements should have been careful from their positions. The lender from the assurance that if the payments are lost, the recovery of principal and interest are reduced to a minimum risk and the borrower that defaulting has his assets in business in a certain danger. The publication of the delinquent list is the least of our troubles in this argument. Who borrows has an obligation to pay back and who lent has even a bigger incumbency to collect. This brings to question the nature of our credit reporting system, if we have any. Blacklisting is even worse than publishing for when blacklisted, the intermediation process will be able to recognize quickly those potential credit risks and to nip their antics in the bud before mistakes are made. This is not to fault the publication anyway. So what, their egos are bruised? How about the struggling men and women whose little 1000Naira deposits in the Banks make up the volume of money sourcing the Loans in the first place? This also brings to mind, the decision by ‘The CBN Act No. 24 of 1991(Sections 28 and 52 as amended’ establishing the CMRS or the Credit Bureau empowering regulators to obtain from all Banks, returns on all credits with a minimum outstanding balance of N1,000,000(now N1. and above of Principal and Interest) for compilation and dissemination by way of status report to any interested party.(i.e. Operators and Regulators)’. In aggregation, the information so gathered will be inadequate in painting the real picture of the bad loan impact relevant to the operations and regulation. Setting that minimum is deficient. So if 10Banks have an average balance of N850,000 each in their Books in an operational and regulatory windows, N8,500,000 is omitted from the data, not to talk about 15, 20 or 25 lending Institutions? We are running in circles Ladies and gentlemen. There are criteria to borrowing and lending. They include capacities to pay back and quality collaterals. When we lend and borrow outside these prescribed guidelines we must live with their recriminations Operating or Regulating. If established names were published in error, honorable apologies should be tendered not for those that have fiduciary associations with the Loan defaulting Outfits by implications of their Executive management and the Boards. Recover the Loans or Write them off as Bad Debts. Let’s move and think about how to get back to the Bull market. The Bears are about to undertake migrating journeys to hibernation.