Thread by @yinkanubi

ICYMI: On Aug 1st, the CBN released new guidelines on disclosure and transparency for Commercial Banks, Micro-Finance Banks, Mortgage Banks, BDCs, Payment Solution Providers and even Mobil Money Agents. These guidelines have implication for customers.

A THREAD!

The Key highlights of the new guidelines are:

1. GENERAL PROVISIONS

- Contracts, offer letters, statements of account, notices and other documents provided to consumers shall be written in CLEAR, LEGIBLE and SIMPLE English language. It must not be MISLEADING or DECEPTIVE.

- ON REQUEST, the documents provided to the consumer must be explained orally in a language he/she understands or if it's obvious he/she is illiterate, blind or can't understand the document.

*The implication is that if the customer complain of not understanding the doc signed..

.... on the basis of illiteracy or lack of understanding, the regulator may rule the contract null and void and sanction the org. I have a problem with this. How does the org determine a customer can't understand the document? Or how do you establish what is a valid Request?

- Disclose to the consumer IN WRITING, all Terms and Conditions of a transaction agreement and ensure that the disclaimer “Terms & Condition Apply” shall only be used if they've been disclosed in the contract document or other medium accessible by the customer.

2. ADVERTISEMENT

The following disclosure requirements shall be on ALL advertisements and promotional materials:

- The content of advertisements shall be factual and unambiguous, and shall not be offensive, misleading, deceptive, injurious, or exaggerate benefits of the product

- The overall impression of advertisements shall not emphasize benefits of a product or service while de-emphasizing its associated risks.

- 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.

*What this means is that instead of advertising a loan at say 5% per month, the financial institution must advertise it on an annual basis which is 60%.

3. PRE-CONTRACTUAL DISCLOSURES

- Disclose to consumers all terms and conditions of a product or service on offer, as well as the features, inherent risks, benefits, fees and other associated charges. Also disclose possibility of variation in rates or FX rate.

- Provide a Key Fact Statements (KFS) in a format attached as attached.

- Allow consumers a minimum of two (2) working days to review draft contract documents before execution.

- Allow a cooling-off period of 3 working days immediately after signing an agreement within which the consumer may cancel the transaction without paying penalty or charges.

* This means that within 3 working days the customer can walk away from a signed agreement without charge

- Where the cooling-off option is exercised after a loan draw-down for credit contract, the bank is entitled to recover amount drawn, applicable interest and a fee of 0.25% of the amount drawn. For fixed deposit contract, the customer is entitled to payment of applicable interest

4. SANCTIONS

Failure to comply with the provisions of these Guidelines shall attract regulatory sanctions provided for by the CBN Act, the BOFIA, other laws and regulations. This includes fines or the withdrawal of the financial institutions licence.

For most DMB, these guidelines are no big deal. They are already implementing them. But for Micro-Finance banks, payment solution providers and mobile money agents, this requires some adjustments

You can download the guidelines here to read the details.

cbn.gov.ng/Out/2019/CCD/D…

For those asking why Banks and Micro-Finance institutions are still advertising rates in monthly terms & not annual in violation of these guidelines, please note that this is still an "Exposure Draft". Last date for feedback was 13 Aug. Effective date will be subsequently advised