Published by Jessy L. Kalinjuna
This Article elaborates various avenues that the financial services provider should adopt in order to protect their customers from various risks associated with the use of their banking services as prescribed under the Bank of Tanzania (Financial Consumer Protection) Regulations 2019 (herein referred to as “the Regulations”).
To whom do the Regulations apply?
Financial service providers include all institutions licensed, regulated, and supervised by the Bank of Tanzania (herein referred to as 'BOT') such as Banks, Financial Institutions, and Microfinance Services Providers (SACCOS and other community microfinance groups regulated and licensed by the BOT)
The Financial Consumer Protection Regulations require all financial services providers to adhere to the following basic standards: -
a. Disclosure and Transparency;
Financial services providers are required to observe transparency and disclose all important information regarding their products and services to consumers, and the same information shall be communicated to the consumer in a simple, plain, and clear written language. The information shall include the methods of computing interest rates paid by or charged to the consumer, any relevant non-interest charges or fees related to the product offered to the consumer, and any service charges.
Every financial service provider is required to provide to its consumer a periodic statement of the consumer’s account(s) free of charge, and in addition, the financial service provider must provide periodic financial statements at the beginning of each month by electronic means which shall be free of charge or at a charge if it is not by electronic means and requested by the consumer at any other time.
Whenever the financial service provider changes the terms and or conditions which the consumer signed up for, notification of change must be given to the consumer in writing or electronic form, in which such notification shall be given prior to changes in the interest rates, any charge on a consumer’s account, and any other key product feature.
b. Equitable Treatment of Consumers;
Financial service providers are prohibited from discriminating consumers based on their social status, physical ability, race, gender, religion, tribe, or any basis whatsoever. In the same context, financial service providers are prohibited from threatening, intimidating, humiliating, deceiving, and unfairly inducing consumers. The Regulations lists a number of practices that are unfair and thus prohibited, prohibited practices include; abusive debt recovery practices, requiring payment of un accrued interest on the credit facilities, charging maintenance fees on dormant accounts, raising of interest to existing balances, bundling practices on products or services (the sale of two or more financial services or products as one combined product), and imposing fees and charges on services without opt-in consent by the consumer.
Regulation 13 of the Regulations requires financial services providers to ensure that consumer’s ability to cancel a product or service is not unduly limited. To ensure that a service provider has to have in place comprehensive information about cancellation and portability procedures. However, the financial service provider is allowed to charge reasonable cancellation fees or penalties.
On the other hand, the contract of financial service must be constituted with fair terms. In that regard, the language shall not include technical terminologies, and where used shall be explained to the consumer. Terms of the contract shall be considered unfair if there is an imbalance in terms of rights to one party to the detriment of the other. In that regard the terms of the financial service contract shall not; limit the financial service provider’s liability in the event of non-performance of contractual obligations, it shall not bind the consumer while the corresponding liability on the service provider is conditional. The contract must not in any manner limit the consumer’s right to take legal action against the service provider. This leaves a big room for consumers to test and question terms of financial services contracts on regulatory avenues before commercial ones.
c. Financial Service Providers to have a Consumer Complaints Handling Mechanism;
The financial service provider should have a consumer complaint handling mechanism. The mechanism shall be free, fair, accessible, timely, transparent, and independently capable of acknowledging complaints, giving feedback, and keep records of such complaints. Such mechanisms shall be made known to the consumers in detail. The mechanism shall ensure fair redress and compensation to aggrieved consumers.
Furthermore, the Regulations allow a consumer to file a complaint with the BOT in case the consumer has not received a response from the financial service provider, or if he is not satisfied with the decision of the financial service provider. In this essence, the BOT will act as an appellate forum for consumer's complaints which have not been satisfactorily handled by the specified financial service provider, and the BOT may determine the complaint and issue an award which shall be enforceable against the financial service provider. The BOT has a supervisory mandate of enforcing its award and this includes the imposition of Tanzanian shillings One Million (1,000,000) per day under Regulation 50 to 55 of the Regulations, as a penalty for a financial service provider who fails to comply with its award.
d. Protection of Consumers Assets and Information;
Any asset of the consumer which is administered by the financial service provider shall be protected from fraud, misappropriation, or misuse, under Regulation 35 If such happens the financial service provider is required to take disciplinary action against the responsible employee and further report the same to the BOT. Also, for any loss occurring as a result of misappropriation, misuse, or fraud the consumer shall be refunded promptly, under regulation 36 and 37, in terms of the protection of consumer’s data and information, financial services providers are required to have in place appropriate security measures to protect the same.
The financial service provider must treat with confidentiality and integrity, all consumer’s data regarding the following: - personal information, accounts records, deposits records, transactions, and deposited properties. In case the financial service provider needs to use such information, it must obtain a prior consent of the consumer in writing. To ensure consumer's protection. Financial service providers are required to have in place data protection measures, and training of staff to prevent unauthorized access, alteration, disclosure, and loss of consumer data. Financial services providers must monitor their agents and representatives to ensure confidentiality as they shall be held liable for their agents’ liabilities.
There are several implications for failure to comply with the law. Financial Consumer Protection Regulations provides for a list of sanctions in case of non-compliance of the same. The BOT may impose any of the following sanctions:-
a. Suspension from operations for a period not exceeding one year;
b. Suspension of management staff;
c. Conditions, restrictions or cancellation of registration or license provided; and
d. Imposition of fines, and any other sanction as the Bank of Tanzania may deem fit.