CBN Tells Banks to Notify Customers Before Debt Recovery Moves

THE Central Bank of Nigeria has directed regulated entities to inform customers about outstanding obligations before initiating debt collection.

This is to guarantee a transparent, courteous, and equitable debt recovery process. The directive was issued in a document titled “Revised Consumer Protection Regulations” released on the CBN’s website.

The purpose of these regulations is to ensure that financial institutions adhere to consumer protection principles, outlining consumer rights and aiming for improved outcomes and access to financial services.

The regulations specify that foreclosures should only be pursued as a last resort after other recovery options have been exhausted.

Furthermore, customers should be given the opportunity for a private sale before foreclosure, with a 30-day window for exercising this right, unless waived by the customer.

Financial service providers are mandated to apply the net proceeds from foreclosures to the loan account and inform customers of the remaining balance. Additionally, banks must provide customers with a report on the collateral sale, detailing the process, expenses, and net proceeds, and are accountable for the actions of debt collection agents.

The document also outlines restrictions for loan providers regarding contacting individuals associated with a customer, specifying that providers are not permitted to contact friends, employers, relatives, or neighbors for any information beyond employment status, telephone numbers, or address, except in cases where the individual has guaranteed the loan or given consent to be contacted.

Moreover, financial service providers are required to safeguard customers’ assets and bear responsibility for losses due to control breaches. They must also test products with consumers, modify them to reduce fraud and errors, and implement measures and authentication for transactions. Providers are mandated to install automated transaction monitoring, alert functions, and behavioral monitoring to detect and prevent fraud, as well as educate customers on fraud threats or scams.

The document further stipulates that providers must communicate procedures for reporting suspicious, unauthorized, fraudulent, lost, or stolen payment instruments and/or authentication information to consumers periodically. Financial institutions are required to offer secure and user-friendly interfaces for digital financial services to prevent errors and double transactions, protect consumer data privacy and confidentiality from unauthorized access, and be liable for any acts or omissions in this regard.

Providers are also required to integrate personal data protection into their product or system designs, obtain written consent from consumers to collect and process their personal data for specific purposes, allow them to withdraw their consent at any time, and refrain from sharing consumers’ personal data with third parties without their express consent. They must also provide clear and simple “Opt-in” and “Opt-Out” options for data sharing.

The CBN emphasized that the review of the 2019 Consumer Protection Regulations was necessary to safeguard the interests of consumers and ensure greater protection in the evolving financial services landscape.