Banks and the menace of excess charges
There should be measured jubilation by customers of banks in the country on the new stance of the Central Bank of Nigeria (CBN) that banks imposing excess charges on their customers would be made to refund such with interest.
CBN took the stand as a result of “repeated complaints from banks’ customers of excessive charges by their banks for withdrawals from Automated Teller Machines” (ATMs) and as part of the “punitive measures” to stem the unethical and unprofessional practice.
But cases of excess charges by banks go far beyond ATMs.
Transactions affecting loans, money transfers, foreign trade, bonds, guarantees and so on also come under imposition of excess charges by banks.
The reason for measured jubilation is the failure of CBN to indicate the interest rate that should be used to compute the interest that should be refunded to affected customers.
If an indicative rate had been stated, computing the amount due to affected customers would be easy and free from manipulation by banks.
Indeed, it would save banks and customers needless arguments.
For example, if a bank over-charges a customer and refunds the money at say, 0.25% per annum interest, the bank would have fulfilled the directive by CBN notwithstanding that its lending rate may not be less than 15% per annum.
Yes, the excess charge has been refunded with interest but the customer suffers in terms of loss over use of his money and also time value of such money.
If indeed, CBN wants to sincerely penalise banks for imposing excess charges on customers, it should make it clear that such excess charges must be returned at any offending bank’s maximum lending rate plus at least 1% flat per month penal rate.
This will serve, at least, two main purposes: mitigation of the loss of use of funds and a serious deterrent to perpetrators of excess charges in the banking system.
It is, however, essential to acknowledge the role the CBN is playing towards the protection of bank customers and other consumers from cheater-banks.
For instance, CBN has dedicated a whole department (Consumer Protection Department) in its operational structure to such purpose.
It is also instrumental to the setting up of the Bankers Committee Sub-Committee on Ethics and Professionalism.
Both organs, among other things, receive and resolve customers’ complaints against banks.
And it was to provide for charges on various products and services offered to customers by banks, other financial institutions and mobile payment operators that CBN also produced banking industry’s Guide to Bank Charges now christened Guide to Charges by Banks and Other Financial Institutions in Nigeria (The Guide).
The latest edition of the Guide took effect May 1, 2017.
CBN stated that provisions in the latest Guide apply to banks and other financial institutions under its supervisory purview.
It further stated that although the Guide “provides for charges on various products and services of banks and other financial institutions, it is not exhaustive.”
Thus, “banks and other financial institutions are required to present any new product, service or charge not covered by this Guide to the CBN for prior written approval.”
It is rather curious, unfortunate and unacceptable that despite CBN’s consultations with banks and other stakeholders in preparing The Guide, banks still violate the provisions by excessively charging their customers.
And this has been going on for several years. Rather than abate, it is on a steady rise.
Many businesses and individuals who borrowed money from banks have been ruined by, in a majority of cases, banks’ excessive charges.
The same is true of those involved in international businesses, to mention a few.
No doubt, it was in order to save the situation that CBN decided, through its Consumer Protection Department, to go into recovery of excess charges for customers.
The other parties also involved in the recovery of excess charges from banks include the Sub-Committee on Ethics and Professionalism set up by the Bankers Committee, Consumer Protection Council, Nigeria Deposit Insurance Corporation and Consultants.
Evidence from these organs clearly confirms that excess bank charges have transformed from a challenge unto a problem; and from an exception to the rule.
For instance, according to the Chartered Institute of Bankers of Nigeria, from its inception in 2001 to December 2017, the Sub-Committee on Ethics and Professionalism has recovered N28.43 billion and USD 17.39 million for bank customers.
On its part, the Consumer Protection Department at CBN in 2014 and 2015 alone recovered N39.4 billion and USD 12.1 million.
In spite of public outcry, there is no end in sight to this unethical practice as banks, rather than stop and repent, are perpetrating it in greater proportion and with impunity.
The reality the CBN must face is that no amount of refund of excess bank charges with interest will bring a stop to this ignoble, selfish and greedy practice of banks deliberately collecting more fees than is due to them, from their customers.
One simple reason is that, not all customers that are excessively charged by banks are aware of such charges let alone being disposed to the recovery.
And, banks will neither soft-pedal nor back-pedal on the illegal practice since they still profit from so many customers who do not ask for refund.
To stop this imposition on their customers, banks require very strong sanctions that should, in the minimum, include a 200% refund of confirmed excess charge at an interest rate not below the affected bank’s maximum lending rate or CBN’s Monetary Policy Rate (MPR); a written apology letter to customers/consumers short-changed (with copies endorsed to the regulatory and supervisory authorities); listing in banks’ Annual Report and Statement of Accounts, the names of the customers to whom apologies were written and what occasioned such; and penalising (including blacklisting in CBN) individual bank officials responsible for excess charges.
Given the apex regulator’s interest in ensuring that banks’ customers and other consumers are not fleeced by banks, there is also the urgent need for serious review of the subsisting Guide to Charges by Banks and Other Financial Institutions to, among other things, address all ambiguities; make compliance with provisions of the Guide mandatory; expressly provide stringent penalties for excess charges and other infringements; re-name the Guide to “Approved Charges by Banks and Other Financial Institutions.”
It is important to bear in mind that as the industry pursues and promotes greater level of financial inclusion, such issues as excess bank charges can only serve as disincentive to prospective bank customers.
It is no wonder the CBN recently reported decline in the rate of financial inclusion in the country.
Finally, this newspaper seriously frowns at excess bank charges as they are inimical to the growth and sustainability of Nigeria’s financial system.
The malaise can be brought to a stop if operators, regulators and other relevant government agencies appreciate the long-term adverse implications and commit to addressing the problem squarely.
In this technological age, there ought to be no excuses for excess charges except, of course, banks have incompetent and incorrigible employees or they have so trained them to always do the wrong things with their customers’ accounts.
Good corporate governance, ethics and professionalism, the guiding lights of the banking and finance industry, do not support such.
CBN, aided by the Economic and Financial Crimes Commission (EFCC) and supported by the National Assembly, should rise to the occasion to put a stop to this bourgeoning economic and financial crime ravaging the nation’s financial sector and indeed, the economy.