Nigerian banks brandishing sticks



Most Nigerians are furious with their banks for several reasons: risky behavior of bank managers who have given unsecured huge loans (small customer’s monies) to the Nation’s fat cats and their businesses which have gone belly up, lack of lending to hard working small and medium scale entrepreneurs, non-refund of government bail-outs to the banks, huge bonuses to the CEOs and lastly the introduction of stamp duties and other sundry charges to their customers.

Banks are fiddling with all kinds of fees and charges to shore up their dwindling resources in a weak economic climate. The TSA and other Federal Government belt-tightening measures have pushed the banks into a corner; the customers are left bearing the brunt of the mop-up of excess liquidity in the system.

Some consumer rights groups and civil society bodies advocated a no banking day on the first day of this month, March 1st, for consumers to boycott banking services across the country.

Reports show that most Nigerians did not heed the call, not because they were happy with the multiple charges banks impose on them but as a result of the harsh economic climate.

The introduction of the stamp duty on deposits was one charge too many. The Central Bank, which is the regulator of the sector and indeed the referee to ensure that the banks uphold the best practices, would seem to have jettisoned its role and become a player in the field and bank customers have been left at the mercy of the banks.

Consumers need to become savvier in their dealings with their banks. Experts predict that banks will continue to experiment with increased fees and charges. Boycotting them will not force them to change their ways, it is customers who need to compare and contrast the charges and levies of different banks. Most of the major banks charge higher fees for small transactions as it costs them money to maintain these accounts.
Common excess bank charges schemes

• Overcharged debit/Overdraft/Loan interest
• Overcharged fees on facilities granted
• Overcharged Commission on turnover (COT) and VAT on COT
• Charging VAT on non-VAT transactions
• Inappropriate management of Commercial Papers and Bankers Acceptance
• Foreign Exchange (Forex) sales, bidding and rates
• Charging undue default fees
• Under-credit of interest on interest yielding investments
• Unauthorised and unusual debits to customers’ accounts
• Unremitted Withholding Taxes
• Inclusion of unknown cheques in your accounts.

Customers need to ask questions when shopping for a new bank. A critical one is finding out what the minimum balance requirements are for savings and checking accounts? Is it cheaper to maintain an online account as opposed to writing cheques, which you get charged for every time you write one.

Understanding the strengths of the bank, according to the type of services they offer, and the needs of the customer is important. Avoiding overdraft fees, when the customer spends more money than he has in the account, and finding out if you can tie your savings account to a checking account are also crucial. If it drops below a certain amount, money can be automatically transferred to cover the gap. Even in the same bank. There are different services and choosing one with fewer charges might prove to be a better option.

If you receive a charge that in unfair, walk into your nearest branch and speak with the customer relations personnel. It costs banks money to attract new customers. As such, most of them will not want to lose customers with solid credit over some charge, which they may waive to retain your business.

If talking to the customer representatives does not do the magic, you might consider asking to speak with someone with the clout to remove the charges. In some cases a written complaint backed up with documentation might prove more effective.

Banks compete with another, among themselves, on a daily basis. This form of competitiveness results in a wide variety of services offered to the customer. You might consider switching to a bank with lesser charges to staying put with a bank assailing you with tougher fees.

• The easiest way to avoid bank fees is the most obvious: keep careful track of every kobo coming in and going out of your account and do not spend against the future! You may have a direct deposit going in every other Friday, so you write a cheque on Tuesday, depending upon the “float time” it takes for it to hit the CBN before coming back to your bank for payment. You are thinking your direct deposit will be in by then, right? Hopefully, you know by now that cheques are being processed in most places electronically and can be submitted for payment the same day you write them.

• Keep track of your deposits and withdrawals daily. Banks are not non-profit organisations: they depend upon core deposits to meet their own loan obligations, and they need fees income to cover the basic expenses of any business. If a customer is less than diligent about keeping track of his account balance and consistently overdraws the account, but continues to make deposits that bring the account into the positive, the bank will happily accommodate him by paying the cheques but charging the overdraft fees. There is no deception involved here at all.

• Read the fine print and ask questions. When an account is opened at any financial institution, every bit of this information is openly disclosed to the customer. Free overdraft protection is offered, which is like a consumer loan with a hefty rate that is also disclosed. A customer may or may not qualify for it, but in the event that he does not he has the option of using a savings account for overdraft transfers.

• Be frugal and pay attention to your account activity. Do not write cheques for funds not immediately available to cover your withdrawals. Otherwise understand that banks do have the right to charge overdraft fees according to their policies and will continue to do so if you are not scrupulous in watching your fund balances. Avoid these unnecessary overdraft fees by not spending money that is not yet available to you.

• Ask questions. You always have every right to question any charges to your account and a bank will happily reverse any error she may have made. Simply ask to speak with an account representative to go over your questions, rather than attempt to resolve a dispute with a teller who may not be trained to handle extensive account enquiries.

You may also question any bank’s cheque holding policies, which are put in place to protect the customer as well as the bank.
Tips and warnings

• Despite the fact that some banks may have more monetary appeal with lower fees and loan rates, customer service should really be the best measuring stick for choosing a financial institution.

• I highly recommend keeping your accounts in one institution. Banks are always competing. Each one has different appealing products and services to benefit you. However, sticking to one place becomes an advantage in the long run, when banks seek to reward those they may consider loyal customers with higher CD rates which are not available to just anyone that only wants the CD and nothing else.

• Be informed. Ask how much overdraft fees are at the time of account opening. Ask your bank if fees increase daily while your account is still overdrawn, or if the fee is a one-time flat rate.

• It costs banks nothing to provide you with free services, such as a debit card, online banking and overdraft protection. Do not be deceived into paying for them.
No more fees

• After you have found ways to avoid monthly and annual fees for your checking account, eliminating all other possible bank fees means you will have to pay close attention to your accounts and how the rules and fees change over time. Use the following tips to help avoid those additional charges:

• Know the rules and fees for your account. It may seem like a boring read, but take time to highlight or underline any rules or fees you might find challenging to avoid.

• When the bank notifies you of changes to your account, make sure you know how those changes affect you.

• Keep an eye on your account balance each day, and know how much you’ll have left after the bank processes any outstanding cheques or debits.

• Don’t make any payments unless you know they will be covered.

• Non-sufficient funds (NSF) fees and overdraft fees are some of the more expensive charges you can receive.

•If you have designated a savings account as an overdraft account, stay ahead of the bank and make any necessary transfers when your checking account balance is low. If you transfer the money yourself, you can avoid the bank’s overdraft protection fee.

• If you need to maintain a minimum balance to avoid a monthly fee, make sure you always have at least that amount in your account.

• Don’t get stuck using other banks’ ATMs to withdraw cash, since you’ll pay ATM fees at both ends of the transaction. No matter how high these fees go, they are completely avoidable. Just be sure to use an ATM that’s owned by your bank or that’s part of its network.

• Don’t lose your ATM card. You may be charged for each replacement card.

• Use the Internet instead of the phone for customer service. Some banks charge a fee for customer service by phone. Look for a Web form or e-mail address instead.

• If you have a good history with your bank, shop around and then negotiate comparable, or better, rates and features with your bank. They may be willing to strike a deal to keep your business.

The Central Bank needs to set up a Financial Ombudsman service to investigate complaints against banks in a timely fashion, and where the banks have erred ensure that appropriate sanctions are meted to them and the customer compensated.

CBN should encourage the growth of non-profit driven banks, either brick and mortar or online.

A system where customers can get cash bank while using their debit cards for transactions should also be encouraged.

CBN should mandate banks to adopt a one page easy to read disclosure form of all their charges, terms and conditions so customers can make comparisons with other banks. This should also be posted on their web sites, making it easy for customers to check for the best deals.

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