Last week, the House of Representatives mandated the Central Bank of Nigeria (CBN) to order Deposit Money Banks (DMBs) to refund all Commission On Turnover (COT) charges to customers or face severe penalties. The order was a consequence of the failure of banks to comply with the CBN’s directive on zero COT.
Apparently dismayed by the development, the House, which urged compliance within 30 days, further directed the CBN to ensure full implementation of the zero COT by commercial banks. The lawmakers also mandated its Committee on Banking and Currency to ensure compliance with the directive and report back to the chamber within four weeks.
The directive by the House of Representatives is timely. We recall that the Central Bank of Nigeria had on 27th March 2013 released the guidelines tagged “Guide to Bank Charges” which gradually phased out COT in Nigeria effective this year. The apex banking institution directed all banks to reduce COT from current rate of N3 to N2 by 2014, N1 by 2015 and to stop COT charges on current account transactions by 2016.
CBN had then explained that COT applied to customer-induced debit transactions on current account, even as it warned banks not to charge COT on “returned outward clearing cheques, reversal on transactions and all bank-induced debits.”The Guide to Bank charges, first issued in 2004, was meant to provide a standard for the application of charges in the banking industry, and to minimize conflicts between banks and their customers.
Over time, it was observed that the various charges in the guide had become out- of- tune with current realities in the market, and some provisions/terms in it allowed room for ambiguity and conflict. Regrettably, banks have refused to comply with the directive; but have continued to fleece customers using every name under the sun, COT inclusive.
Zero COT policy which is in tandem with international best practice is meant to alleviate the sufferings of citizens and boost the economy by encouraging transactions through the banks. And while we commend the lawmakers and the CBN for coming to the rescue of distraught bank customers, we urge them to go a step further by stopping other illegal charges by commercial banks and modernize other charges which have continued to multiply by the day and needed to be stopped as soon as possible.
It is common knowledge that aside COT, customers complain of other sundry charges levied on them by banks, which have continued unmitigated in spite of the apex financial regulator’s directive.
These charges usually come irrespective of whether a customer does a transaction in the bank or not. Some banks even charge customers very high for withdrawing money from their accounts. Other charges being complained of by customers include; ATM Card issuance fee, monthly and annual account maintenance fee, SMS charges and costs on letter of non-indebtedness, amongst others.
Illegal deductions such as these are now a common feature despite series of complaints from bank customers across the country. It is unfortunate that the laudable policy of Zero COT charge by the CBN, which was well received by the public at the time of introduction and which ought to have commenced implementation this year is being flagrantly ignored and undermined by commercial banks with attendant costs on ordinary citizens who are bank customers.
But if the reason adduced by banks for retention of COT charge is because the CBN has not issued any formal circular directing implementation of the zero COT, then, this is the time for the banking sector regulator to do so.