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Bank Charges: Role, Responsibilities and Rights

Business Regulations, Law & Practice	8062 VIEWS
Business Regulations, Law & Practice
8062 VIEWS

Thursday, July 27, 2017 12:00PM/ Proshare Business & Market

Executive Summary
On April 21, 2017, the Central Bank of Nigeria (CBN) issued its Guide to charges by Banks and Other Financial Institutions in Nigeria”. The guide according to the CBN “provides for charges on various products and services that banks, other financial institutions and mobile payment operators offer to their customers.”

Following the release of the Guide customers have raised concerns regarding the charges stipulated, while questioning the intent of the CBN on whether it is really in the business of regulating or assisting banks to make more money for themselves at the expense of customers.

Experts also concluded that excessive charges as well as the lack of transparency and timely communication by banks to customers was detrimental to the successful drive for financial inclusion.

Nevertheless, increasing competition with numerous alternatives within the industry as well as activities within the Fintech space appears to offer a way out for the financial savvy that can easily opt out when the services offered by a bank is becoming unbearable.

The CBN in response to the concerns raised has reiterated that the guide reflects developments within the economy and the financial market, and it had “in the quest to provide a strong voice to banks’ customers and moderate the arbitrary charges established its Consumer Protection Department in 2012.”

Other bodies such as the Consumer Advocacy Foundation of Nigeria (CAFON) and the Bank Customers Association of Nigeria (BCAN) have continued to advocate for customers rights, while these concerns have presented opportunities for consulting firms to benefit from the reviewing of bank charges and interest on loans - all in an attempt to alleviate the burden customers have to bear.

The continuous groaning against excessive charges and more has thus drawn our attention to the quest to understand the place and essence of bank charges, why they have to occur, how it works, what the law says concerning same and the opportunities and developments inherent in dealing with customers concerns.

We also sought to examine the role of the CBN in providing guidance, the fiduciary responsibilities of banks and the rights of customers as this will further beam light on the issues surrounding the subject matter while encouraging all concern to ensure necessary measures are taken regarding their dealings with banks from the point of opening an account to maintaining same and dealing with complaints.

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Understanding the Place and Use of Bank Charges
Banking just like any business comes with associated costs and challenges. A cursory review of the income and expense statements of Nigerian banks show that expense on electronic products, fuelling and maintenance of operations in various locations account for 10 – 20% of its operating expenses, just as fees and commissions account for 10 – 20% of Gross Earnings.

In addition, banks in accordance with Basel III - an international regulatory framework for the regulation, supervision and risk management of the banking sector, and the Central Bank of Nigeria’s requirements are expected to maintain certain capital and liquidity positions to guard against the risk of financial shocks.

The cost of running banking operations as well as the regulatory requirements stipulated are thus the main reasons why banks have to charge, since they are not running a “not-for-profit making” organization. This notwithstanding is not enough to allow banks exploit customers.

What the Law Says
The Central Bank of Nigeria Act 2007 specifies in Section 33 sub section 1b that “In addition to any of its powers under this Act, the Bank may issue guidelines to any person and any institutions under its supervision.” This implies that the CBN can offer guidance on any matter of concern as it relates to financial institutions within the country.

The CBN in providing guidance thus commenced the publication of the Banker’s Tariff now popularly called the “Guide to Bank Charges” in 2004 with the intent of “providing a standard for the application of charges on various types of services rendered to customers by bank.”

The Guide which replaces the existing Bankers Tariff and is subject to periodic reviews and updates in line with changes within the business environment includes ten (10) sections namely:
1.       Interest on Deposits

2.      Interest Rates/Lending Fees

3.      Commission on Turnover now Account Maintenance

4.      Commission on Bonds, Guarantees & Indemnities, etc

5.      Foreign Exchange Commission

6.      Bills for Collection

7.      Straight Forward Handling of Documents

8.     Inward & Outward Letters of Credit

9.      Internal Transaction and Electronic Banking

Some specific changes observed between the 2017 and 2013 guide are as presented below:

Description	2013	2017
Interest on Savings Deposit	Minimum of 30% of MPR per annum with no withdrawal condition.	Minimum of 30% of MPR per annum. Though not applicable if the Customer makes more than 4 withdrawals in a month
Local Currency Loans	Notification of changes in agreed date should be sent 5 business days in advance of application date	Notification of changes in agreed date should be sent 10 business days in advance of application date
Current Account Maintenance Fee (CAMF)	This was known as Commission on Turnover (COT). It was also negotiable subject to a maximum of N3 per mille in 2013, N2 per mille in 2014, N1 per mille in 2015 and COT-Free in 2016	Negotiable subject to a maximum of N1 per mille
Cheque Books	Full recovery of costs plus stamp duties	Cost recovery
Counter Cheque	N200 per leaflet	N50 per leaflet
Performance bond (chargeable from date of contingent liability)	Negotiable subject to a maximum of 2% of the Bond value (one-off charge)	Negotiable subject to a maximum of 1% of the Bond value (one-off charge)
Other Bonds, Guarantees and Indemnities	Negotiable subject to a maximum of 2%, minimum of N5,000 (one-off charge)	Negotiable subject to a maximum of 1% (one-off charge)
Domiciliary Accounts withdrawals	Negotiable subject to a maximum of 0.05% of transaction value for current account but free for savings account.	0.05% of transaction value or $10, whichever is Lower (for savings and current account)
Form M Processing	Negotiable subject to a maximum of N5,000	N3,000 in addition to maintenance fee on e-Form platform in line with CBN directive
Bank Draft for non-customer	N500 + COT	N500 + 0.1% of Draft value
Charge paid by non-account holders for initiating cash transactions (e.g. local money transfer, Prepaid Card loading), subject to maximum daily limit of N20,000	0.3% of the Value of the Transaction	N200 flat
Processing fee for the Purchase/sale of Treasury Bills for customers	0.125% on the yield	N100 flat
Electronic Funds Transfer	N70 – Below N500,000; N100 – Between N500,000 & N10,000,000; N500 – above N10,000,000	N50
RTGS	N550	N700
Hard Token	Maximum of N1,500 (one-off charge)	Cost recovery subject to a maximum charge of N3,500
Foreign Currency Denominated debit/credit cards	N3,000 per annum	$20 per annum
Debit Card maintenance charge	N100 annual charge	N50/Month, applicable only to month card is used
ATM Transactions	No charge within and on other banks, N150 on approved Independent ATMs	No charge within the bank. N65 after the third withdrawal within the same Month; No charge on approved Independent ATMs
SMS alert (Mandatory) However, where a customer opts not to receive sms alert, the customer should issue an indemnity (for losses that may arise as a result) to the bank.	N4 subject to NCC directives	Not more than N4/SMS (fees on alerts are restricted to only customer-induced transactions).
PIN reissue	No Charge	N100
Special request for statement of account	N50 per page	Maximum of N20 per page