Factors that motivate and sustain excess bank charges
There have been series of sad and uncomplimentary comments on banks in Nigeria concerning their practice of imposing excessive charges on their customers-public and private. Towards the twilight of year 2017, in a group of members of Bank Customers Association of Nigeria, somebody asked: “Our President”, (referring to the President of BCAN), “do you think banks will, from 2018, stop the practice of collecting more fees than is due to them from us, the customers?” He quickly requested for justification of any adduced answer.
In effect, the person tried to find out: banks’ readiness to abide by the motto (Honesty & Integrity) of the noble Banking Progression in Nigeria as captured by their professional body-The Chartered Institute of Bankers of Nigeria (CIBN); whether banks would abide by their industry’s Code of Conduct, Code of Corporate Governance and Guide to Charges by Banks. He also put the President on the spot as to whether, banks would operate within corporate values they, without compulsion or interference, crafted and imposed on themselves?
The President, being a very optimistic person, did not disappoint the audience when he told them of his conviction that banks would mend their ways from year 2018, perhaps, to the surprise of their worst critics and customers whose confidence and trust had been betrayed for several years. He emphasized that it would be in banks’ enlightened self-interest to overcome whatever debases their integrity in the eyes and consciousness of the public. This is particularly needful as no amount of their so called Corporate Social Responsibility (CSR) provisions and image laundering via the media would change a real or perceived bad image that has been sustained over the years.
As it were, all over the world, banks are one of the most sensitive organizations in an economy and their business thrives on the trust and confidence of the public in general and their customers in particular. Any bank that fails to earn and sustain public and customer trust and confidence knows where the survival pendulum would tilt towards.
Unfortunately for the banks, the issue of their unethical and unprofessional practices of collecting excess charges from the customers they should protect is no more an accusation but a reality that has been confirmed by CBN and Nigeria Deposit Insurance Corporation (NDIC)-regulatory and supervisory bodies. So, banks cannot continue to operate in denial.
But the President also gave the audience some foot-notes on the factors that fuel and sustain excess charges which banks and their regulators must strategically address to vindicate his optimism in their defense. These factors include lack of understanding and appreciation of the foundations and bedrocks of banking as a business and profession. This singular missing factor makes it possible for banks’ directors, management and staff to be involved in such dishonorable practices as non-compliance with laws, rules, regulations and guidelines even though they covenanted to comply.
And when there is no compliance, unethical and unprofessional practices take over and fester. It also breeds unfairness, inequity and even outright stealing – factors that also question banks’ good corporate governance standing.
The other factor is peer-pressure. For example, if one bank has declared huge deposit liabilities, loans and profits, others will want to do the same, whether or not they are comparable in size, products, strategy, etc. Consequently, outrageous deposit, loans and profit targets are set for the management and staff whose career advancement depends on meeting such targets. Most of such targets are met through cutting corners, including imposition of excess charges on customers and other unwholesome practices. Unfortunately, not much attention is focused on how individuals and groups achieve their targets. It is a matter of the “end justifies the means”. Excessive charges being ready contributor to banks’ bottom-line performance, nobody cares.
The obvious factor of vested interest is another one. Banks and their employees are unconscionably benefiting from over-charging their customers with fees, interest, commission, etc. The huge emoluments of directors, employees and profits declared are, no doubt, partly supported by the excess charges. In other to sustain them, such excesses must be continued.
The fact that the Bankers Committee, chaired by the Governor of CBN, has since 2001, formally recognised banks’ penchant for unethical and unprofessional practices and set up a framework (Bankers Committee Sub-committee on Ethics and Professionalism) to resolve, among others, customers’ complaints (including the ones on excess charges) has not eliminated the practice, after over seventeen years. Indeed, because of some of the policies of the framework, banks cannot but continue to sustain some of their unhealthy practices.
If, for instance, a customer who borrowed money from a bank at say, 21% per annum interest rate is discovered to have been over-charged by the bank with say, N200, 000, the subsisting policy of the Sub-Committee, requires the bank to refund the money to the customer at average Treasury Bills (TB) interest rate plus 2% within the period the over-charge was committed. So, if average TB rate is 12%, effectively the bank will refund at 14% (12+2). Meanwhile, the customer was charged 21%. Consequently, the customer suffers 7% (21-14) which becomes a gain to the bank-that is, for violating regulations. As the bank ultimately profits from that type of policy, nothing will compel it to stop the practice.
Even, the sample recovery of 14% interest comes up only if the excess charge is discovered and reported. If not, the whole 21% is lost and gained by the customer and bank, respectively. Worse, given that many bank customers do not suspect their banks for dishonesty, they do not review their accounts. The result is that not all excess charges are discovered and recovered. The banks run away with such cheats.
Many a time, when customers bother to review their accounts, they observe “small amount” say, N4.00 over-charge. They do not request for reversal as the process and logistics of resolving such complaints often necessitate spending more than the N4.00. So, they leave the money for the banks. Just image a monthly N4.00 excess charge per customer in a bank with customer strength of say, 2,000,000.
That can be significant; the banks know and capitalize on it. The regulators also know; and they close their eyes.Perhaps, the most important factor why excess bank charges are sustained is that banks are not punished for the economic and financial crime. This is where Consumer Protection Council (CPC), CBN and Economic and Financial Crimes Commission (EFCC) should, through the force of law, ensure that banks put a stop to this unfair and disreputable practice. Except the long arms of the law catches and deals ruthlessly with the perpetrators, there may be no respite.
In summary, from this year 2018 and thereafter, excess bank charges can become a historical reference if banks know and believe that banking is a business of absolute trust, and they resolve and do handle the transactions of their customers fairly, ethically and professionally. That will be voluntary resolution of the matter.
If however, banks fail to voluntarily bring to an end this crime against the persons that are growing and sustaining their businesses and the economy, the alternative to voluntary compliance should be the next option to extract obedience from them. This will require a strong will by banks’ regulators, supervisors and other institutions set up by the government to enforce the rule of law. That way banks will be compelled to do the right thing they have, for long, failed to do. Thus, under voluntary compliance and its alternative, obedience to laws and regulations can be secured from banks in order to attain a forever bye-bye to excess bank charges in Nigeria.
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