No More High Interest Rates as CBN Moves to Stop Predatory Lending, Illegal Bank Charges


Central Bank of Nigeria CBN is set to introduce new rules that will prevent bank customers from unfair interest rates, illegal charges and other manipulations deemed out by bank officials when lending in banks.

The rules are reportedly being reviewed by relevant stakeholders.

According to the new rules, “CBN shall ensure that operators (banks) establish structures to prohibit predatory lending and hence support a positive credit culture in the industry.

“Credit counselling facilities are available in Nigerian banks and accessible to all customers especially for customers that are most in need of this service or consumers that request this service.

“Customers shall be made aware of such services and shall be encouraged to take advantage of such facilities provided by the operators.

“Bank operators must provide detailed information on the terms and conditions of a loan agreement to consumers prior to executing the loan agreement. Such information must at a minimum include the pricing, repayment schedule, repayment amount, tenure and opt out options”.

“The CBN shall set guidelines for ethical debt collection practices in the industry. These guidelines shall be based on dialogue, respect for the consumers’ privacy and longevity of consumer-operator relationships amongst others.

“In the event that consumers fail to meet their financial obligations, financial operators shall be encouraged to adopt ethical debt recovery practices such as recovery processes must be courteous, fair and non-coercive. Operators shall ensure that personnel assigned to recover debts are properly trained. Consumers shall be informed in advance before a recovery process is initiated.”

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The new rules also stipulate that “Sales promotions or related activities shall be conducted professionally and ethically. In a bid to generate increased business volumes or attract new customers, financial operators shall provide factual information and shall not seek to mislead consumers. Financial operators shall also not take advantage of consumers’ inexperience, gullibility or lack of understanding.

“ Financial operators shall be required to meet the demands of promotional offers. In addition, before the launch of any sales promotion, operators must provide the CBN with evidence of capability to manage the influx of customers without diminishing service quality.”

“The CBN shall issue guidelines to set the minimum disclosure requirements for products and services in contract agreements between financial operators and consumers of financial products and services. These guidelines at a minimum shall cover areas such as: fees and charges; penalties (prepayment costs and default charges); interests (payable or receivable); and payment and termination modalities

“All fees, charges or payments to be made by a consumer for a product or service must be documented. Financial operators shall also proactively inform consumers of the possibility of variations in terms and conditions of contracts should the condition upon which contract terms were reached change.

“Within a minimum timeline specified by the CBN, financial operators shall notify consumers about changes to terms and conditions of contracts prior to the implementation of such changes. Notice to consumers on variations to terms and conditions must at a minimum contain the following details: changes in rates / charges (existing rate and new rate that is being introduced); rationale for variation; commencement date of new terms and conditions; options available to the consumer.

“Variation notice must be at no cost to the consumer and there must be evidence of receipt of notice by the consumer. Operators shall provide periodic updates to consumers on outstanding obligations. Operators shall respond to requests for waivers, concession or other variations on credit facilities within specified timelines, failing which such requests would be deemed to have been accepted.

“Financial operators must be truthful and clear in all communication (including advertisements) with consumers. Communications/ advertisements on financial products and services must at a minimum: Not be misleading; Be clear and explicitly state the features of the products/services; Not seek to misrepresent or exaggerate the benefits of the products/services.”


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