The Central Bank of Nigeria has ordered the lending institutions under its regulation to obtain the credit history of customers before giving out loans to them. The apex bank disclosed this order in its consumer protection guidelines on ‘Responsible business conduct.’ The guidelines apply to all transactions by financial institutions licensed and regulated by the CBN, the agents, subsidiaries and associates.
These include commercial banks, merchant banks, specialised banks, micro-finance banks, Development Finance Institutions, finance companies, Bureaux-de Change, Primary Mortgage Banks, credit bureaux, and Payment Service Banks. Others are switching companies, Payment Solution Service Providers, payment terminal service providers, non-bank acquirer, super agents, Mobile Money Operators, and other licensed providers of digital financial services. Part of the guidelines read, “Obtain the credit history of consumers from the Credit Risk Management System, Credit Bureaux and other sources of credit reference to ascertain consumers’ outstanding debt obligations and repayment history before advancing credits.”
To ensure that debt recovery processes were courteous and fair, devoid of undue pressure, intimidation, harassment, humiliation or threat, the CBN said that the financial institutions should follow its stated orders. The CBN said that the lenders must inform customers of the debt recovery procedures in loan contracts; proactively engage and give customers early notice of outstanding obligations prior to the beginning of debt collection process; and initiate foreclosures only when other reasonable attempts to reach a resolution had been unsuccessful.
It added that the banks must give customers a minimum period of six months from the date of notice of foreclosure, the option of a private sale before commencing foreclosure except where the customer waived the right and ensure that the entire debt collection process was transparent and with active participation of the customer including the foreclosure.
The apex bank said that financial institutions must provide customers a report of sale of the asset, stating the process, proceeds, incidental expenses and the net proceeds. It must also ensure that the net proceeds were immediately applied to the loan account and customers informed of any balance and be liable for the actions of their agents engaged for the purpose of debt collection.