CBN Seeks Ways To Protect Bank Customers

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The Central Bank of Nigeria (CBN) has embarked on the development of a Consumer Protection Framework (CPF) for the banking industry.

The purpose of the CPF is to amongst other things engender public confidence in the financial system with a view to enhancing financial inclusion.

In the exposure draft for the CPF, the central bank explained that the document would guarantee standards for customer service, market discipline and ensure that consumers are treated fairly by financial institutions under its regulation.

It explained that the document was developed in line with international standards and best practice as well as principles established by Standards Setting Bodies. These it explained included the World Bank Good Practices for Financial Consumer Protection, G-20 High Level Principles on Financial Consumer Protection and Financial Services Consumer Panel’s 4 Pillars of Consumer Protection amongst others.

“The Nigerian financial crisis of 2009 will be a continual reference point on the need for robust structures to protect consumers’ assets in the Nigerian Financial Services Industry. The crisis had significant adverse impact on the economy; N18billion of consumer deposits were trapped when 224 microfinance banks had their licenses revoked, unethical use of customer deposits by some banks to purchase shares which were lost as a result of the near collapse of the capital market1, and decline in consumer confidence which threatened financial system stability.

“Following the crisis, the CBN introduced stringent measures to stabilise the banking system and rebuild consumer confidence in the industry. In 2009, the injection of N620billion liquidity into the banking sector and forcible replacement of the leadership of eight deposit money banks were some of the measures taken by the central bank. These measures helped in restoring confidence to the system.

“In a bid to give the consumer interest its deserved focus, the CBN upgraded the status of the Consumer Protection function from a unit to a Department in 2012. The CBN has recorded remarkable progress towards the elimination of unfair and unethical practices by financial services providers thereby further restoring consumer confidence,” it explained.

However, it noted that despite the major achievements and the increasing consumer confidence, prevalent issues still remained unresolved.

Consequently, to enhance focus on the consumer agenda and ensure that consumers of financial services are protected and treated fairly, the CBN stated that it recognised the need to define a strong, effective and overarching regulatory/supervisory consumer protection framework.

It stressed that the ultimate aim of the framework is to ensure enhanced consumer/investor confidence in the financial services Industry and ultimately promote financial stability, growth and innovation over the long term.

The draft documents reads in part: “Protecting the rights of consumers should be a fundamental principle for operators of banking services within the financial services industry. As such, financial operators are expected to consider both pecuniary motives as well as ethical considerations in reaching business decisions. As a matter of principle, financial operators shall be required to observe the highest ethical standards and professionalism in their business transactions with consumers of financial products and services.

“Financial operators are required to assess the financial capabilities of consumers of financial products/services as well as confirm that products/services offered will address the needs of consumers. In addition, it is expected that financial operators will provide consumers ample opportunity for enquiries and resolution on matters requiring attention.

“Financial operators are obliged to provide appropriate financial advice to consumers before the sale of any financial product or service. For contracts or classes of financial products or services which the CBN deems to be potentially risky to the consumer, financial operators shall be required to document records of pre-contractual deliberations with consumers.”

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