Provisions of The CBN Consumer Protection Guidelines on Transparency and Disclosure

Pursuant to the powers conferred on the Central Bank of Nigeria (CBN) by the relevant provisions of Central Bank of Nigeria Act & the Banks and Other Financial Institutions Act (BOFIA), it issued its Guidelines on Disclosure and Transparency, hereinafter referred to as “the Guidelines” to give effect to the Disclosure and Transparency Principle contained in the Consumer Protection Framework (CPF) for institutions regulated by the CBN.

The Guidelines provide minimum Disclosure and Transparency requirements for Financial Institutions under the regulatory purview of the CBN to ensure they provide consumers with all material and relevant information regarding their business relationship in a clear and transparent manner. 

The notable provisions  of these guidelines are what will constitute the focus of this article going forward.

What is the objective of the guidelines?

The objective of the Guidelines is to protect consumers against the provision of inadequate, misleading or failure to disclose material and relevant information and generally guard against lack of transparency by Financial Institutions in their dealings with consumers. 

The Guidelines therefore set out the minimum standards expected from Financial Institutions on consumer protection disclosure and transparency. 

What is the scope/applicability of the guidelines on transparency and disclosure?

The Guidelines shall apply to all transactions by financial  institutions(FIs) licensed and regulated by the Central Bank of Nigeria and their agents, subsidiaries and associates. 

What are some of the notable general provisions of the guidelines?

Some of the general conditions of the guidelines on disclosure and transparency include the following :-

Contracts, offer letters, statements of account, notices and other documents (hereinafter referred to as the “document”) provided or made available to consumers shall:

-Be written in clear, legible and simple English language and in a minimum font size of 10.

– State the name, contact details of the Financial Institution and the consumer.

-Contain a statement that the Financial Institution is regulated by the Central Bank of Nigeria.

– The overall impression of the document must not be misleading or deceptive.

– Provide a copy of the document to the consumer in a durable medium for future reference.

What are the disclosure requirements of the guidelines on advertisement?

Financial Institutions shall comply with the following disclosure requirements on all advertisements and promotional materials: 

-The content of advertisements shall be factual and unambiguous, expressed in clear and simple language and shall not be offensive, misleading, deceptive, injurious, or exaggerate the benefits of the products or services being advertised.

-The overall impression of advertisements shall not emphasize benefits of a product or service while de-emphasizing its associated risks or important disclosure information. 

– Details of the cost of a product or services, including all fees and other charges shall be clearly disclosed.

– All interest rates in advertisements shall be disclosed on an annual basis and not for a shorter period.

– Where an advertisement refers to, or is linked to other value adding benefits, the nature and value of such benefits shall be fully disclosed.

What are the requirements of the guidelines on pre-contractual disclosures?

FIs are required to :

-Disclose to consumers all terms and conditions of a product or service on offer, as well as the features, inherent risks, benefits, fees and other associated charges.

-Disclose in contract documents, the possibility of variations in rate of interest or foreign exchange due to changes in market conditions.

– Disclose to consumers all available similar or competing products and services for the purpose of comparison and making informed choices.

-Provide a Key Fact Statements (KFS) in a format attached as Annexure A1 stating a summary of key information on loans to consumers. 

What are the requirements of the guidelines regarding contractual disclosures?

FIs are required to:-

–  Notify consumers of any transaction on their account immediately it is made. At a minimum, the notification shall include the amount, date and the account balance.

– Ensure that transaction narrations in account statements and transaction notifications are clear; stating the nature of the transaction, date, payer or payee, transaction channel and location.

-Ensure that, at a minimum, any proposed and final contract prominently contains the following information: 

• Key features and risks of the financial product or service;

• Tenor of the contract (if any);

 The nature, amount and method of calculation of any interest, fee or charge and when it is payable; 

• The applicable Annual Percentage Rate to be calculated using the formula stated in Annexure B1 and B2 of the guidelines.

What are the provisions of the guidelines regarding specific products disclosure?

FIs shall ensure that they comply with the following additional disclosure requirements for specific product types in any proposed contract, letter of offer or final contract: 

For credit facilities:

• a) Name and contact details of borrower;

• b) type of credit, purpose of credit;

• c) collateral pledged and its estimated value;

• d) the amount of credit or applicable credit limit; 

• e) conditions precedent to drawdown; 

• f) debt recovery process;

• g) moratorium (where applicable); 

• h) insurance requirements (where applicable);

• i) details of lending fees; 

• j) variable rate information (where applicable)

For deposit products: 

• a) minimum balance requirement and other limit on account balances or transactions where applicable; 
• b) monthly maintenance fee, any applicable tenor for a term deposit and any penalty for terminating a term deposit early;
• c) savings withdrawal options; and

• d) any reason(s) and timeline within which the account could become inactive or dormant.

 For products or instruments used as store of value such as e-wallet accounts and cards: 

• a) minimum balance and any other limit on account balances and transactions (if applicable); 
• b) types of payments for which the instrument may not be used; 
• c) applicable agent network.

What are the provisions of the guidelines on disclosures on default?

On the due date of the loan repayment, the consumer shall be notified within 3 days, through the agreed medium that a default charge would be applied on the account after 7 days from the date the obligation becomes due.

What are the compliance requirements prescribed by the guidelines?

Financial Institutions(FIs) shall have in place a policy approved by their Boards of Directors which documents the processes, procedures and systems designed to ensure compliance with the provisions of the Guidelines.

What is the effect of failure to comply with these guidelines?

Failure to comply with the provisions of the Guidelines shall attract regulatory sanctions provided for by the CBN Act, the BOFIA, other laws and regulations.