The Central Bank of Nigeria (CBN) has directed regulated entities to issue notices of outstanding obligations to customers before initiating debt collection activities. The aim is to foster transparency, courtesy, and fairness in the debt recovery process. The instructions were detailed in a document titled “Revised Consumer Protection Regulations,” released on Thursday on the CBN’s website.
The document emphasizes the importance of adhering to consumer protection principles and outlines consumer rights for better outcomes and enhanced access to financial services. According to the regulations, foreclosures should only be considered as a last resort after exhausting other recovery options. Foreclosure, the legal process transferring ownership to the bank or lender in case of loan default, should involve offering customers the option of a private sale before initiating foreclosure, with a 30-day window unless the customer waives this right.
Additionally, the CBN mandates that financial service providers (FSPs) must apply the net proceeds from foreclosures to the loan account and inform customers of the remaining balance. Banks are also required to provide customers with a report on collateral sales, including details on processes, expenses, and net proceeds. The apex bank holds banks responsible for the actions of debt collection agents.
The document establishes restrictions for loan providers concerning the contact of individuals related to a customer. Providers are prohibited from contacting friends, employers, relatives, or neighbors for information, except for employment status, telephone numbers, or address. Exceptions are made if the person guaranteed the loan or gave consent to be contacted.
Other mandates include safeguarding customer assets, addressing losses due to control breaches, testing products with consumers, implementing measures to reduce fraud/errors, and educating customers on fraud threats or scams. FSPs are required to install automated transaction monitoring and alert functions to detect and prevent fraud.
Moreover, the CBN insists on secure and user-friendly interfaces for digital financial services to prevent errors and double transactions. Banks are required to protect consumer data privacy and confidentiality, incorporating personal data protection into their product or system designs. Obtaining written consent from consumers for data collection and processing, allowing withdrawal of consent at any time, and prohibiting the sharing of personal data with third parties without express consent are also outlined in the regulations.
The overarching goal of these regulations, as stated by the CBN, is to safeguard the interests of consumers in the evolving financial services landscape, necessitating the review of the 2019 Consumer Protection Regulations.
