CBN Mandates Transparent Debt Collection Practices

The Central Bank of Nigeria (CBN) has issued new directives to regulated entities, requiring them to furnish customers with notices of outstanding obligations before commencing debt collection procedures. This move aims to uphold transparency, courtesy, and fairness throughout the debt recovery process.

Outlined in a document titled “Revised Consumer Protection Regulations,” released on Thursday via the CBN’s website, the instructions emphasize adherence to consumer protection principles within the financial sector.

The regulations articulate consumer rights while striving for improved outcomes and enhanced access to financial services. Notably, the document stipulates that foreclosures should be a measure of last resort, only pursued after exhausting alternative avenues of debt recovery.

Foreclosure, the legal process whereby ownership transfers to the lender or bank due to debtor default, necessitates prior consideration of customer options. According to the document, customers must be presented with the opportunity for a private sale before foreclosure, exercisable within a 30-day window unless explicitly waived by the customer.

Furthermore, the CBN mandates financial service providers to allocate the net proceeds from foreclosures to the respective loan accounts and to notify customers of any remaining balances. Banks are also required to furnish customers with comprehensive reports on collateral sales, detailing processes, expenses, and net proceeds, with accountability for actions taken by debt collection agents.

The regulatory framework imposes restrictions on loan providers concerning communication with individuals associated with a customer. Providers are prohibited from contacting friends, employers, relatives, or neighbors for information beyond employment status, telephone numbers, or addresses, except in cases where the individual has guaranteed the loan or provided consent for contact.

In addition to these measures, banks must safeguard customers’ assets and assume responsibility for losses resulting from control breaches. They are mandated to test products with consumers to minimize fraud and errors, implement transaction monitoring, alert functions, and behavioral analysis to detect and prevent fraudulent activities.

Consumer education on fraud threats and scams is emphasized, with financial service providers tasked with communicating procedures for reporting suspicious, unauthorized, fraudulent, lost, or stolen payment instruments or authentication information periodically.

The CBN underscores the importance of secure and user-friendly interfaces for digital financial services to prevent errors and duplicate transactions. Privacy and confidentiality of consumer data are prioritized, with financial institutions held accountable for any unauthorized access. Providers must integrate personal data protection into their product designs, obtain written consent from consumers for data processing, and refrain from sharing personal data with third parties without explicit consent.

In concluding the announcement, the CBN emphasized the necessity of reviewing consumer protection regulations to safeguard consumer interests amidst the evolving financial services landscape.

Kindly share this story: