Consumer Protection in Financial Services: A Bench Mark Comparison Among the AAIOB Member States

1. CONSUMER PROTECTION FOR THE FINANCIAL SERVICE CUSTOMERS – A BENCH MARK COMPARISON AMONG THE AAIOB MEMBER STATES Presented by: Usman Isiaka – MD/ CEO United Bank for Africa (T) Limited

2. PRESENTATION OUTLINE • Introduction/Definition of Terms • Objectives of Consumer Protection in Financial Service System & Why is it CRITICAL NOW! • Scope of a potent Consumer Protection System • Bench Mark Comparison in AAIOB Member States • Enforcement & Consequence Management Actions • Case Studies & Experience Sharing • Key Challenges & Way Forward

3. Introduction/Definition of Terms Given the increasingly digital environment for financial products and services and the potential for digitization to support greater financial inclusion and inclusive growth, the need for effective financial consumer protection in the Financial Service Industry is more important than ever. Before progressing, here are the contextual definition of some of the key terms in our topic of discussion:

4. Introduction/Definition of Terms Consumer protection addresses disparities found in the consumer-supplier relationship, which include bargaining power; knowledge; and resource.

5. Objectives of Consumer Protection

6. Objectives of Consumer Protection

7. Scope of a Potent Consumer Protection System • Strong Legal & Regulatory Framework • Clear Supervisory & Compliance Monitoring Structure • Focus on Responsible Business Conduct • Encourage Disclosure & Transparency • Provide for Consumer Financial Education • Fair Treatment Consideration

8. Scope of a Potent Consumer Protection System • Protection of Consumer Assets and Privacy • Complaint Handling/Redress & Supporting Platform • Alternative Dispute Resolution Mechanism • Encourage Competition & Free Market Principles • Enforcement/Consequence Management Action • Consumer Rights & Responsibilities!

9. Bench Mark Comparison in AAIOB Member States - NIGERIA LEGAL & REGULATORY FRAMEWORK • Constitution of the Federal Republic of Nigeria which recognizes consumer rights and their protection roles on Data/Privacy/Freedom of Choice • Central Bank of Nigeria Act of 2007 Section 2 (d) on promotion of sound financial system in Nigeria • Banks & Other Financial Institutions Act of 2007 • Consumer Protection Framework for Banks & Other Financial Institutions Regulated by CBN – Nov 2016 • CBN Guide to Bank Charges • Chartered Institute of Bankers of Nigeria (CIBN) Act 2007 • CIBN Code of Conduct in the Nigerian Banking Industry (Professional Code of Ethics & Business Conduct) 2014 • Consumer Protection Council Act No. 66 of 1992 • Public Complaint Commission Act 1975

10. Bench Mark Comparison in AAIOB Member States - NIGERIA

11. Bench Mark Comparison in AAIOB Member States - NIGERIA

12. Bench Mark Comparison in AAIOB Member States - TANZANIA LEGAL & REGULATORY FRAMEWORK • Consumer Protection is derived from Articles 11, 14 and 18 of the Constitution of United Republic of Tanzania 1977 which recognize consumer rights and their protection roles, • There are industry specific legislations enacted to serve various matters but also protect the consumers who may fall victim of consumer protection in those areas. • Financial Services are bound by the provisions of those regulations even where they are not Financial Institution Specific as far as it relates to any financial service consumer matter covered by the regulation

13. Bench Mark Comparison in AAIOB Member States - TANZANIA

14. Bench Mark Comparison in AAIOB Member States - TANZANIA TANZANIA • Despite the fact that the regulatory environment may not cover protection of customers in all areas, but efforts have been made by various Organizations to establish different initiatives that will protect their consumers. • Banks are required to establish internal mechanisms for handling customer complaints under the Bank of Tanzania’s Guidelines for Customer Complaints 2014. • Under this Guidelines customer complaints are required to be handled internally within 21 days, before escalation to Bank of Tanzania.

15. Bench Mark Comparison in AAIOB Member States - TANZANIA • Banks are required to establish policies and procedures for handling customer complaints. For Example UBA Tanzania has established the Customer Complaints Policy and Good faith policy all with the purpose to protecting the customers. • The Bank of Tanzania Guidelines for Customer Complaints 2014 establishes the Customer Complaint’s Resolution Desk at Bank of Tanzania for handling customer queries which are escalated by those customers who are not satisfied by decisions made by their respective banks. • Customers transacting under electronic platforms are protected under the Bank of Tanzania’s E-money Regulations 2015 and the National Payment Systems Act 2015

16. Bench Mark Comparison in AAIOB Member States - TANZANIA

17. Bench Mark Comparison in AAIOB Member States - KENYA LEGAL & REGULATORY FRAMEWORK • Article 46 of the Constitution of Kenya 2010 is providing for consumer protection requirements. • Other legislations include The Consumer Protection Act No.46 of 2012 (“CPA”) and • The Central Bank’s Prudential Guidelines on Consumer Protection – CBK/PG/22 January 2013 Following the enactment of the Consumer Protection Act, 2012 and in line with the new Central Banks’ Prudential Guidelines on consumer protection that have introduced regulations on how financial service providers should handle customer complaints and disputes, a relevant legal framework for consumer protection in the financial service industry can be said to exist in the country.

18. Bench Mark Comparison in AAIOB Member States - KENYA • The Kenya Bankers Association (KBA) developed an Alternative Dispute Resolution (ADR) Model which will see the industry improve customer relations while operating within the new laws and regulations • KBA recommends that banks revised their customer agreements to include a dispute resolution clause that promotes alternative dispute resolution methods, including third party mediation as ascribed by the KBA ADR model which seeks to uphold the bank-customer relationship.

19. Bench Mark Comparison in AAIOB Member States - KENYA Supervisory & Compliance Monitoring Structure • The Fair Competition Commission Act 2003 establishes the Consumer Council for protecting consumer interests • Central Bank of Kenya monitors compliance in the banking industry • Consumer Federation of Kenya (COFEK) is monitoring on behalf of consumers. Its mandate is to “to defend, promote, develop and pursue consumer rights as guided by Article 46 of the Constitution of Kenya 2010, the Consumer Protection Act, 2012 and the Competition Act, Cap 504 and make it possible for the consumers to get value for money.”

20. Enforcement & Consequence Management Action • Every legislation with consumer protection requirements has set its own sanctions for non compliance – Banking Acts, Prudential Guidelines & Central Bank Circulars, Consumer Protection Act etc... • The responsibility for enforcement lies with Supervisory Unit of the Regulatory Body • However, Under the Fair Competition Act 2003, among the sanctions imposed for non compliance includes imposition of a fine of not less than five percent of the entity’s annual turnover and not exceeding ten percent of annual turnover • For a body corporate, every person who, at the time of the commission of the offence, was a director, manager or officer of that body corporate may be charged jointly in the same proceedings with such body corporate • In general the legislations are providing for ‘unfair practices’ and proceeds to provide for radical sanctions against a supplier who engages in ‘unfair practices’

21. Case Studies & Experience Sharing Global Perspective: • Wells Fargo to pay $2.09billion fine for issuing mortgage loans it knew contained incorrect income information • EU fines 5 banks (Citi, JPMorgan, HSBC, Royal bank of Scotland and UBS) $1.7 billion over foreign exchange cartel – May 2019 • Google fined a record $5 billion by the EU for Android antitrust violations – July 2018 • Facebook expects to be fined up to $5 billion by Federal Trade Commission for privacy violation – April 2019 • Uber fined more than $1 million by UK and Dutch Authorities for a 2016 Data breach that exposed the personal details of millions of passengers - Nov 2018 • Uber fined $148m for failing to notify drivers they had been hacked – Sept 2018

22. Case Studies & Experience Sharing African Perspective: General Class Discussion with focus on the following Key areas of concern: • Digital Banking Fraud • Unprofessional Lending Practices • Excess Bank Charges • Data Protection & Breach of Customer Confidentiality • Unfair Contract Terms – Exclusivity & Disclaimer Clauses

23. The Challenges & Way Forward • Lack of Financial Service Sector Specific Consumer Protection Law & Organ • Advancement in technology without adequate regulations to protect consumers • Consumer Knowledge Gap & Lack of Structured Consumer Financial Education Programmes • Lack of Strong Corporate Governance around Consumer Protection in Financial Institutions • Professional & Ethical Standards of Financial Service Staff/Operators

24. The Challenges & Way Forward • Product/services awareness should be made mandatory requirement for Financial Institutions to issue brochure/train consumers on advantages and disadvantages of their products & services. • Institution of Country Wide Annual Financial Literacy Day (as part of Global Money Week in the month of March) • Consumer Complaint Management Application for effective tracking of resolution process/TAT • Self-Regulation & Improved Corporate Governance around Consumer Protection by Financial Institutions • Improved Compliance Monitoring & Consequence Management action by FIs and the Regulators • Institution of Bankers Reference Bureau /Centralized Database for Dismissed Staff of Financial Institutions on account of fraud and other unprofessional conducts