Nigeria’s mid tier lender, First City Monument Bank (FCMB) to refund, has been ordered by The Consumer Protection Council (CPC) to within 30 days, refund the sum of N1.54 billion it deducted from the Bauchi State Government’s loan account as interest charges.
According to an article from Thisday, the CPC accused the bank of illegally deducting the amount from the State Government explaining that the refund was an excess interest and other charges debited to the bank for loans granted by First Inland Bank (now acquired by FCMB).
The bank was said to have given the loan at an interest rate of 13% only for the bank to increase it to above 20%. Banks in Nigeria typically include a clause in their offer letter informing borrowers that interest rates are based on market conditions suggesting that they can be increased ‘without notice’.
The CPC in its ruling however believes that an increase in interest rates for the bank should have been communicated to the State Government and since that wasn’t done, it was null and void thus warranting a refund.
Before now, the Bankers Committee settled cases between customers and the banks especially over excessive charges and interest payments. With this latest CPC ruling, commercial banks now stand the risk of dealing with the deluge of complaints about excessive charges which could cost banks billions of Naira in expenses.
As increased regulations increase, corporate governance and financial risk management are critical aspect of banking operations that are now taking seriously by most banks. Losses due to fines and penalties have been on an increase in the financial sector costing banks and shareholders billions of naira that could have been paid as dividends or reinvested into the business.
FCMB’s first quarter profits was down about 61% to N2.2 billion. FCMB share price is currently down 17% year to date.
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