CBN Urges Banks To Notify Customers Before Debt Recovery Procedures

In a recent directive, the Central Bank of Nigeria (CBN) has instructed financial institutions under its regulation to adhere to a protocol of issuing notices to customers regarding outstanding debts prior to initiating any debt collection measures.

The aim behind this directive is to ensure that the process of debt recovery is conducted in a manner that is transparent, respectful, and equitable.

This directive was outlined in a document titled “Revised Consumer Protection Regulations,” which was published on Thursday on the CBN’s official website. The document emphasizes the importance of financial institutions adhering to consumer protection principles.

Among the regulations set forth in the document are provisions detailing consumer rights and striving for improved outcomes and accessibility to financial services.

According to the document, the initiation of foreclosure proceedings should only occur as a last resort, following the exhaustion of other viable options for debt recovery.

Foreclosure, the legal process through which ownership of a property is transferred to the bank or lender due to non-payment by the borrower, must be preceded by offering customers the option of a private sale. This option must be provided within a 30-day timeframe, unless waived by the customer.

Additionally, financial service providers are obligated to utilize the net proceeds from foreclosure to offset the loan balance and must inform customers of any remaining debt.

Furthermore, banks are mandated to furnish customers with a comprehensive report detailing the sale of collateral, including the processes involved, associated expenses, and net proceeds. The CBN underscores that banks bear responsibility for the actions of debt collection agents.

The document also imposes restrictions on loan providers concerning their communication with individuals associated with the customer. Providers are prohibited from contacting friends, employers, relatives, or neighbors for any purpose beyond verifying employment status, telephone numbers, or addresses, except in cases where the individual has provided consent or guaranteed the loan.

Moreover, financial institutions are required to implement measures to safeguard customer assets and mitigate losses resulting from security breaches. This includes testing products with consumers to identify and rectify potential vulnerabilities, as well as implementing authentication protocols to enhance transaction security.

Additionally, providers must educate customers about common fraud schemes and threats and establish clear procedures for reporting suspicious or unauthorized transactions, lost or stolen payment instruments, or compromised authentication information.

To enhance the security and usability of digital financial services, banks are mandated to provide secure and intuitive user interfaces, with measures in place to prevent errors and duplicate transactions.

The CBN also emphasizes the importance of safeguarding consumer data privacy and confidentiality, requiring financial institutions to incorporate data protection measures into their product designs and obtain explicit consent from consumers for collecting and processing personal data.

Overall, the CBN asserts that the revision of the 2019 Consumer Protection Regulations is aimed at safeguarding consumer interests and enhancing protection within the dynamic landscape of financial services.