Regulatory Inertia vis-à-vis Predatory Banking Practices in Nigeria – Part 2

by Ikechukwu A. Ogu

ATM frauds have become incessant in Nigeria, as is worldwide, but the menace is more pronounced in our new generation banks. Users could compromise their ATM cards and PINs or lose same to skimming, spy cameras, phishing through the internet, false key pads on ATM boards, card trapping, etc. Sometimes, however, the circumstances that surround certain ATM frauds suggest the involvement of some staffers of banks and Interswitch who have access to depositors’ ATM information. Why is it that when these fraudulent withdrawals occur – mostly on weekends and public holidays – banks fail to alert the affected depositors through sms or email even where they subscribed for same?

So far, the banks have always absolved themselves of any liability while ascribing negligence to the hapless depositors. They also claim that the fact that the criminals mask their faces during the fraudulent withdrawals makes it difficult to trace them. I restate here suggestions made in my earlier write-up that ATMs be guarded round the clock by policemen who should disallow masked persons from using them, and be examined regularly for strange gadgets. The use of policemen may not translate to additional cost for banks since policemen already guard their branches. Regarding ATMs installed by banks outside their branches, what has the CBN done about its directive for their closure which they have ignored?

Sometime in 2008, a friend of mine, Oguni Anara, lost N789,200 from her UBA Plc account through a fraudulent electronic transfer to another UBA Plc account. The bank hastily absolved itself of liability and accused her of compromising her ATM card and PIN. Consequently, she has taken the bank to court. Two other Abuja-based friends of mine, Richard Ogunyamoju and Mikah Yildung (a security man), in 2009 and this year, lost N312,000 and N16,400 from their UBA Plc and Intercontinental Bank Plc accounts, respectively through fraudulent withdrawals from ATMs located in Lagos and Delta States. In both cases, the banks adjudged the depositors liable for “compromising” their ATM cards and secret numbers, and refused to refund them their moneys.

I learnt an office exists in CBN to handle customers’ complaints against their banks. Surprisingly, however, one of my said friends claims that when he petitioned CBN, its officials complained of helplessness after writing twice to the affected bank and got no response. But it is alarming to read a newspaper report which quoted the spokesman of CBN, Mallam Abdullahi Muhammad, as saying that the apex bank cannot do anything about the unwholesome ATM charges banks force down the throats of depositors because it does not regulate such fees? Check out Daily Trust newspaper of Thursday August 5, 2010 at page 17.

To rationalize CBN’s position by arguing that ATM charges are outside the Bankers’ Tariff and are fixed by the banks and Interswitch (which provides most ATMs in Nigeria) does not fly. The CBN regulates banks and also licensed Interswitch to provide ATMs in Nigeria. Although relatively new in Nigeria, ATMs are now part of the services rendered by our banks. By the tenor of BOFIA, all banking activities are under CBN’s regulation. Again, section 2(d) of the Central Bank of Nigeria Act (No. 7 of 2007) states that one of the objects of the apex bank is to “promote a sound financial system in Nigeria”. We see more enabling provisions in this regard under sections 42, 43, 44 and 47(2) of the CBN Act. Thus, one is hard put to justify CBN’s inaction and claim of helplessness over the unconscionable ATM charges and practices bank customers are subjected to in Nigeria. Is the CBN a victim of regulatory capture or are these complaints undeserving of its Olympian attention?

I believe ATM charges are part of the Electronic Banking charges found under the Guide to Bank Charges (Bankers’ Tariff). Interestingly, although the charges for current and future Electronic Banking products are stated therein to be negotiable, our banks impose whatever suits their whims and caprices. What is more, the footnotes to the Guide to Bank Charges enjoin banks to adhere strictly to its provisions and notify the Standing Sub-Committee on Bank Charges of any proposed new charges. It is not clear whether the Guide to Bank Charges is mandatory or discretionary for banks. However, it is certain that the Bankers’ Committee and its Standing Sub-Committee on Bank Charges – whoever constitutes them – are all subject to CBN’s regulation.

The regulatory duties of the CBN oblige it to address the concerns of bank customers over exploitative banking practices. Section 33(1)(a & b) of BOFIA empowers the CBN Governor to order a special examination of a bank if he is satisfied that, inter alia, (a) it is in the public interest to do so; or (b) the bank has been carrying on its businesses in a manner detrimental to the interest of its depositors and creditors. Are these unjustifiable bank charges and rapacious practices not detrimental to the interest of bank customers?

Mindful of the recurring cases of ATM-related frauds which are always resolved against depositors, the CBN should make the use of ATM cards optional for bank customers. Is it fair to “force” ATM cards on illiterate and blind persons who can only use them by proxy or with assistance? Now, the long queues may have disappeared from banking halls only to form around ATMs on Fridays, eves of public holidays and month ends, further exposing users to the risk of unknowingly revealing their PINs to fraudsters. The CBN, banks and Interswitch should enlighten the largely uninformed Nigerian citizenry about the antics of ATM fraudsters through the electronic media, using Pidgin English and the three main Nigerian languages of Igbo, Hausa and Yoruba.

Meanwhile, bank customers who can afford it may stop using the ATM card, just as I have done. This is a tough decision, but does it make any sense to acquire what may become a hostage to fortune? The ATM Help Desks which CBN reportedly directed banks to set up may not avail victims of ATM fraud because of the prejudicial mindset of the banks. It is commendable that the CBN has instructed banks to replace the Mac stripe cards with Verve cards by September this year. Yet, I have my reservations about the touted inviolability of the Verve card. If some staffers of banks and Interswitch are involved in these ATM frauds, then the Verve card would be as good as its predecessor.

What fate awaits hapless Nigerian bank customers in the face of CBN’s reported declaration of inability or unwillingness to protect them from predatory banking practices? Most of them cannot afford the services of lawyers to prosecute their claims in court. Come to think of it, should an aggrieved customer go to court to compel his bank to send him the free periodic statements of account when a regulatory directive would do?

My reading of the BOFIA is that it lacks adequate, pin-point safeguards against banking practices that exploit or defraud customers. Its amendment is, therefore, desirable to specifically enable CBN’s firm regulation of banker-customer relationship which is the core of banking. Banking practices that exploit or defraud customers should be pointedly prohibited with stiff sanctions, including suspension of banking licence, for violations thereof. Statutory provisions should mandate the CBN to ensure that customers who suffer losses as a result of such predatory banking practices get appropriate restitution from the guilty bank(s).

Should innocent customers bear the brunt of frantic efforts by Nigerian banks to profiteer or scale the hurdle of banking reforms and remain afloat? I expect a resounding and earne

st regulatory “NO” from the CBN, accompanied by decisive actions against such predatory banking practices. We should note that the much hyped banking reforms, including the idealistic FSS 2020, would be meaningless if Nigerian banks are at liberty to capriciously treat their customers as preys.

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