Nigeria’s central bank releases guidelines to protect customers, businesses

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The Central Bank of Nigeria (CBN) yesterday released consumer protection framework guidelines on disclosure and transparency as well as guidelines on responsible business conduct.

According to the CBN, the objective of the guidelines on disclosure and transparency is “to protect consumers against the provision of inadequate, misleading or failure to disclose material and relevant information and generally guard against lack of transparency by financial institutions in their dealings with consumers.”

Specifically, the apex bank stated that the guidelines applied to all transactions by financial institutions “licensed and regulated by the Central Bank of Nigeria and their agents, subsidiaries and associates. These include commercial banks, merchant banks, specialized banks, micro-finance banks (MFBs), development finance institutions (DFIs), finance companies (FCs), bureaux-de-change (BDCs), primary mortgage banks (PMBs), credit bureaux, mobile money operators, payment service banks, switching companies, payment solution service providers, payment terminal service providers, non-bank acquirer, super agents and mobile money operators.”

For instance, on advertisements, the CBN said: “The overall impression of advertisements shall not emphasize benefits of a product or service while de-emphasizing its associated risks or important disclosure information; details of the cost of a product or services, including all fees and other charges shall be clearly disclosed; all interest rates in advertisements shall be disclosed on an annual basis and not for a shorter period and where an advertisement refers to, or is linked to other value adding benefits, the nature and value of such benefits shall be fully disclosed.”

“Advertisements shall not make references to unaudited financial statements; financial Institutions shall not mention names of competitors or make unverifiable comparisons in their advertisements or promotional materials; unsolicited advertisements through emails, text messages, voice calls and other channels sent by or on behalf of a Financial Institution shall be at no cost to the consumer and shall contain an opt-out provision for future advertisements and financial Institutions shall not advertise any product or service without the prior approval of Consumer Protection Department of the CBN.”

Another highlight of the guidelines was the, “disclosure on default.”

According to the CBN, “on the due date of the loan repayment, the consumer shall be notified within 3 days, through the agreed medium that a default charge would be applied on the account after 7 days from the date the obligation becomes due.”

Similarly, it explained that the objective of the guidelines on responsible business conduct “is to protect consumers against the unethical and predatory practices that undermine consumer confidence in the use of financial services.”

A noticeable highlight of the guidelines is the section on debt collection.

According to the CBN, in order to ensure that debt recovery processes “are courteous and fair, devoid of undue pressure, intimidation, harassment, humiliation or threat,” financial institutions shall among others “inform customers of the debt recovery procedures in loan contracts; proactively engage and give customers early notice of outstanding obligations prior to the commencement of debt collection process; initiate foreclosures only when other reasonable attempts to reach a resolution have been unsuccessful and give customers a minimum period of six months from the date of notice of foreclosure, the option of a private sale before commencing foreclosure, except where the customer waives the right.”

In addition, the CBN stated that financial institutions must “ensure that the entire debt collection process is transparent and with active participation of the customer including the foreclosure.”

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