Excess charges: Bank customers, banks and CBN
For several years now, especially since the birth, in the late 1980s and mid 1990s, of what has become known as new generation banks in the country, excess bank charges has become a household expression. The expression came about when some banks in the country indulged themselves in excessively charging their customers fees under various guises. It got to a point that in 2001 the Bankers Committee, a self-regulatory organ in the banking industry, comprising the managing directors of all commercial or deposit money banks (DMBs), the managing director of Nigeria Deposit Insurance Corporation (NDIC) and the Governor of the Central Bank of Nigeria (CBN) who is the Chairman, deemed it expedient to set up the Subcommittee on Ethics and Professionalism (SEP) to, among other things receive, investigate and resolve complaints from banks’ customers against their banks. The Subcommittee became an alternative dispute resolution organ in the banking industry.
Since 2001 SEP, with its Secretariat at the Chartered Institute of Bankers of Nigeria (CIBN) in Victoria Island, Lagos has been carrying out its mandate as given by the Bankers Committee. Unfortunately, complaints, especially of excess charges by banks did not abate; if anything, they increased many times over. It was partly as a result of the dangers inherent in bank customers being short-changed by their banks and the duty the CBN owes bank customers for protection against banks’ unethical and unprofessional practices that led the apex bank to establish a Consumer Protection Department (CPD). Thus, in March 2010, the CBN got seriously involved in the protection of consumers of banking services by receiving, investigating and resolving bank’s customers’ complaints against banks.
From published reports, while the SEP, from 2001-2015 received a total of 1749 petitions and resolved 1597, the CPD of CBN, from 2010-2014, received 6737 of which 4289 had been resolved (the number of petitions resolved in 2012 not available). The cumulative amount of refunds banks made to their consumers arising from the settled cases, in the period 2001-2015 (CPD’s 2015 figures not available) was N48.58 billion and USD18.89 million.
Although, complaints by bank’s customers cut across various issues, the CBN in its various Annual Economic Reports confirmed that most of the complaints bordered on ‘excess bank charges’. Some of the other complaints included conversion of deposits of customers and ATM transaction related issues. So, the bulk of complaints made by bank customers against banks were about excess charges.
Bank’s customers, for many years, had been complaining, to no avail, that the practice of banks deliberately and illegally imposing excess charges on them should be stopped. Their interest is not in CBN or any other organ recovering excess charges but to have the problem completely stopped. They believe that the CBN can stop banks from continuing the perpetration of the unwholesome practice if it wants to, especially given its enormous powers and being the licence issuing and supervising authority. They believe too, that no matter what efforts the CBN devotes to recovering excess bank charges, bank customers would still be at the losing end given time value of money and the fact that it is not all the excess charges that banks make that are usually recovered. The reason is that the excesses come in different forms including failure of banks to apply agreed interest rates on credit facilities, increase in rates of interest and other fees without notice to and consent of the customers, multiple but same charges for a single service, creation and charging fees that are not recognised in the Guide to Bank Charges and duplication of telephone text messages.
Experience has shown that what bank’s customers mainly complain and petition against are charges that run into thousands and millions of Naira and international currencies such as the American dollar. In most cases such excesses are discovered by financial consultants who review the accounts majorly of borrowing customers of banks. And this happens mainly when the repayment of credit facilities by customers becomes suspect and questions become rife as to the make-up and correctness of huge outstanding debit balances in debtor-customers’ accounts. At that point some customers engage consultants who eventually discover that banks had taken more than what was due to them and are engaged to make refunds. Failure to resolve the issue at the bank-consultant level is what necessitates petitions to CBN and/or the SEP or the other bodies such as Nigeria Deposit Insurance Corporation (NDIC), Consumer Protection Council (CPC) and Bank Customers Association of Nigeria (BCAN) that also entertains complaints from bank customers. Many a time also the cases are charged to courts of law. It is those petitions that involved huge amounts of money that were sent to CBN and SEP that the apex bank and SEP reported the excess charge refunds banks were made to cough out.
But there are multiplicities of other over charges by banks that no one is petitioning against because of the size of the amount, logistics and cost that will be involved in following them through. In the majority, these are small amounts ranging from say 50k for stamp duty to N4 telephone alert messages and ATM transaction-related charges that banks collect multiples of times without justifications. Banks do this because they know that no customer will leave other important things to be chasing insignificant amount of money in a bank. Transportation money to the bank will be more than the amount to be pursued for refund. Indeed, it will be a ‘kobo wise and Naira foolish’ pursuit. Thus, banks knowingly and deliberately, take this undue advantage of their customers.
The worst is even when some banks, at certain periods in a month, impose charges on all the customers for no known service rendered and against the provisions of the Guide to Bank Charges (a banking industry’s document that indicates what charges/fees banks can legitimately collect for services rendered) issued by CBN on behalf of the Bankers Committee. It is such general unauthorised levies that often deplete balances on savings accounts until they are thrown into debit, especially if the amount realised from the low rate of interest paid by banks on such accounts is inadequate to cover the charges. They also reduce credit and exacerbate existing debit balances in customers’ current accounts.
The CBN had periodically published in some national dailies the huge amount of money it recovered for bank customers from banks. The SEP is yet to use the national dailies to make public the excess charges it recovered for customers. Similarly, not much has been reported publicly by CPC and NDIC on recoveries they might have also made for customers.
As earlier stated, N48.58 billion and USD18.89 million had been reported by the SEP and CBN as refunds to customers from 2001-2015. The figures may look huge but they are a tip of the ice-berge given that most of the excess charges by banks are neither reported nor investigated. However, the significance of the reported recovered amount can be appreciated when viewed from the fact that they are enough for the establishment of at least, two national banks, each with a minimum share capital of N25 billion; five (5) regional banks and many microfinance banks.
While all bank customers, without any exception, suffer from proven unethical and unprofessional practices of many banks in the country, is anybody asking questions on the short to long-term implications or is anyone doing something concrete to stop banks and/or save customers?
Well, one notable outcome is that this practice of banks has created a new industry of consultants that specialise in reviewing customers’ accounts and recovering excess bank charges. Such consultants, who are in the majority ex-employees of banks, know where the corpses were buried, are in prayer that banks should not abate in their unwholesome practice as it keeps them employed and puts bread on their tables. But how many are such consultants compared to the large numbers of employees of various classes of bank customers who have lost their jobs because the businesses of their employers who are bank customers had gone belly-up?
It is public knowledge that many ‘bank borrowers’ are finding it difficult, if not impossible, to repay the money they borrowed. Incidents of non-performing and outright bad credits are on the increase in banks. Even Asset Management Corporation of Nigeria (AMCON) is finding it hard to cope. The genesis of the bad state of a majority of banks’ credit facilities is as a result of excess charges by banks. This problem has become endemic that agitations are cutting across all categories of bank customers and they are saying that something needs to be done, and urgently too. If no other evidence exists that brings to the fore that customers are at the brink of a snap, stakeholders must remember that customers were sometime in the recent past called upon to stay away from banks for one day to protest against excess bank charges.
That was a signal. Is anybody listening or taking necessary action(s) to prevent a situation the generality of bank customers in Nigeria someday rising and insisting that enough is enough? That day, they will rightly be saying that, it is an anomaly for the tail to be wagging the dog and that an egg does not lay the hen. When and if it gets to that point, what will become of the banking industry we are all looking forward to its support to the real sector to enhance productivity? Can anyone imagine that out? If governments can return to trade by barter who says banking cannot be conducted outside banks? Indeed, why has the parallel/underground economy in the country been intractable? And of course, emerging global experiences are pointing to the fact and direction that nobody necessarily needs banks to conduct banking transactions. Notwithstanding, who can and should stop banks from these economic and financial crimes?
Dr. Ogubunka, a financial and management consultant, is the President, Bank Customers Association of Nigeria (BCAN)