The Central Bank of Nigeria (CBN) on Monday directed all financial institutions under its supervision to evaluate customers ‘credit history before issuing a loan.
The order, according to the apex bank, is contained in its consumer protection guidelines on “Responsible Business Conduct.”
All financial institutions licensed and regulated by the CBN are expected to follow the guideline before issuing a loan.
These banks include commercial banks, merchant banks, specialized banks, micro-finance banks, Development Finance Institutions, finance companies, Bureaux-de Change, Primary Mortgage Banks, credit bureaux, and Payment Service Banks, switching companies, Payment Solution Service Providers, payment terminal service providers, non-bank acquirer, super agents, Mobile Money Operators, and other licensed providers of digital financial services.
“Obtain the credit history of consumers from the Credit Risk Management System, Credit Bureaux and other sources of credit reference to ascertain consumers’ outstanding debt obligations and repayment history before advancing credits,” a section of the guideline said.
This order from CBN is to ensure that debt recovery processes from these financial institutions are followed in order to devoid undue pressure, intimidation, harassment, humiliation or threat.
The CBN further noted that the institution giving out loans must inform customers of debt recovery procedures in loan contracts.
“They should also educate the customer of their expected obligations within the period of the loan.
” Banks must give customers a minimum period of six months from the date of notice of foreclosure, the option of a private sale before commencing foreclosure except where the customer waived the right and ensure that the entire debt collection process was transparent and with the active participation of the customer including the foreclosure.
“Financial institutions must also provide customers a report of sale of the asset, stating the process, proceeds, incidental expenses, and the net proceeds.
“It must also ensure that the net proceeds were immediately applied to the loan account and customers informed of any balance and be liable for the actions of their agents engaged for the purpose of debt collection,” the apex bank added.