March 25, 2019

Oppressive Bank Charges: When silence is not golden

Oppressive Bank Charges: When silence is not golden

Emefiele CBN Governor

The role of money, when properly managed, arguably, galvanizes the critical factors of production and wealth creation in every nation; therefore, the provision of banking services, is pivotal to appropriately, manage the flow of money, between all parties to sustain growth in every modern economy.


Ordinarily, the requirement for banking services would grow in tandem with the volume of transactions generated, through trade and other payment obligations. In retrospect, however, prior to the advent of internet services and the Cashless Policy, banking halls were often choked, like the popular Oyingbo market, by the deluge of customer activity, and it was not unusual to spend hours to complete a single transaction, for even very modest sums; ultimately, in an attempt at crowd control, customers would receive ‘tally numbers’, on arrival, irrespective of the size or nature of their transactions.

The increasing volume of transactions and rapidly expanding customer base, invariably meant about three days to clear local cheques, while out of town payments took much longer.  Furthermore, the existing Settlements system also involved the frequent movement of large volumes of cash, in bullion trucks which would bulldoze right of way, with blaring sirens through traffic. Predictably, the prevailing structure and content of banking operations also compelled sustaining an expanding Labour force, with an oppressive wages bill.

Nonetheless, despite the evidently shabby services and extended payments settlement, some critics may argue that the slow velocity of the settlement, helped to hold back inflation even though, it also delayed prompt receipt and turnover of the owner’s use of funds.

Nevertheless, the burden of bank charges on transactions still did not attract too much condemnation from customers. However, with the introduction of the Cashless Policy and internet banking services, the usual rowdy market place ambience disappeared from banking halls; consequently, banks were able to significantly reduce their workforce and the related burden of bloated salaries, by adopting the services of external Contract Staff to reduce the cost of operations.

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Ultimately, however, even after customers began to express concern with the introduction of the Cashless Policy, on perceived excessive and arbitrary deductions/charges on their deposits, the Banking sector soon became the most profitable investment in the market. The subsisting bank charges, which include ATM Card maintenance charge, may attract over N50 monthly from millions of customers; furthermore, banks would summarily also deduct charges such as Account Maintenance fees, which may vary with the volume of transactions, while an SMS notification fee of about N200/month and Token maintenance fees may also be charged on each account; furthermore, Corporate customers would also pay stamp duty charges, which may exceed N1000 monthly. Indeed, media reports suggest that similarly over 60 Naira is deducted, often without notice, from a bank balance of N2000 with every ATM transaction with another bank! Thus, in addition to the traditional humongous interest on their mainstay loans, banks may also earn well over N600bn from such questionable charges annually.

Indeed, in the Nation Newspaper report of 24th October 2018, one Tawa Yakubu, a fashion designer shared her experience. She said, “there was a day someone sent me N2000. It was not even up to a minute before my bank sent an alert that my balance is N1950. I could not cry because I actually needed the exact amount the person sent me.” Incidentally, according to the same report, a Senate resolution which called on “CBN to suspend the ATM Card maintenance charges” seems to have been ignored.

However, in July 2018, in deference to customer appeals, CBN directed that banks should pay a ‘slap on the wrist’ punishment of 0.25% interest per annum on bank ‘overcharges’ to customers, even when the respective bank may actually be already charging near 20% interest on its own loans to the same customers! Conversely, more customers insist that it would be more equitable, if these excess charges are returned, at the offending bank’s maximum lending rate, plus at least a flat penalty rate of 1% per month, so as to mitigate the loss of use of funds and also punish the bank perpetrators of excess charges. Evidently, CBN’s Consumer Protection Department still needs to do, much more, to be seen as active and credible, by more customers, so as to facilitate increasing inclusion and financial patronage of banking services. Notably, however, in July 2018, not surprisingly the CBN reported that the rate of financial inclusion seems to be on the decline.

Similarly, in August 2018, in an Editorial comment, titled “Ending Excessive Bank Charges”, the Leadership Newspapers noted as follows: “But there are multiplicities of other over-charges by banks that no one is petitioning against because of the size of the amount, logistics and cost that will be involved in following them through. In the majority, these are small amounts ranging from say 50k for stamp duty to N4 telephone alert messages and ATM transaction-related charges that banks collect multiples times without justification. Banks do this because they know that no customer will leave other important things to be chasing an insignificant amount of money in a bank.”

Furthermore, according to the paper, “it is such generally unauthorised levies that often deplete balances on savings accounts until they are thrown into debt, especially if the amount realised from the low rate of interest paid by banks on such accounts is also inadequate to cover the charges. Invariably, these charges also reduce credit and exacerbate existing debt balances in customers’ current accounts.”

On a personal level, this writer also recalls that a trading account, which was left dormant for well over 7 years with a balance of about N10,000, was ultimately brought into debt of over N20,000, by several spurious bank charges. Invariably, this writer ignored all entreaties and the intimidation, from the bank, to clear the debt. Ultimately, however, the bank itself reversed the debit and later called to encourage ‘their customer’ to reactivate the account. The question is if you were me would you listen? Conversely, however, the 200 pounds also left dormant, in a UK bank account, has remained, without any deduction whatsoever, as £200 after 10 years!

The irony is that the cost of adopting modern technology has steadily declined with mass applications, so it is worrying that these excess bank charges on deposits still subsist, despite the more modest costs from the significant reduction in cash handling and the adoption of a less expensive contract Labour force, with vastly improved smart banking transactions Apps and infrastructure. Regrettably, nonetheless, banks seem to still perceive customer deposits as a burden which must be taxed rather than the actual base in relation to CBN’s Cash Reserve Ratio, on which their total lending and ultimate profitability are actually predicated.