How Nigerian Banks Rip off Customers


A banking hall with customers on a queue A banking hall with customers on a queue

In a bid to meet revenue projections, some Nigerian banks allegedly fleece their customers by deducting illegal charges and fees from their accounts

As a young graduate of Computer Science, Emmanuel Anaba was filled with ambition and dreams of how to be independent. Left to cater for himself at 19, he hoped for the best and prepared for the worst even as he squats with five of his friends in a room along Ekenna Avenue, Aba, Abia State. Though, after a stint as a mobile phone repairer, the 25-year-old secured a job in a computer-assembling firm in Aba. But elated as he was, Anaba understood early that his future lies solely on the sacrifices he could make at the early stage of his life; thus he chose to avoid some pleasures and save about 70 per cent of his income in one of the first generation banks. Such culture was supposed to guarantee him a self-contained apartment in Aba.



However, the poor orphan has drifted away from his goal, no thanks to his banker. The bank dashed his hope of securing an accommodation last April when it sent a text message to notify him that the sum of N20,000 has been deducted from his savings account for an insurance scheme the financial institution claimed he subscribed to earlier. “I was stunned to receive such alert because I never subscribed to any insurance scheme with any firm. Is it not someone that has money in abundance that would consider subscribing to insurance?” he inquired. Three months after, all efforts to have the illegal deduction reversed have not yielded any success. After several visits to his Aba/Owerri Road branch of the bank, the front desk officer told him, “We are sorry for the inconvenience, they are working on the reversal from our head office in Lagos. Please bear with us; it will soon be rectified.”



Anaba is not alone. Many bank customers across the country complain of illegal deductions by their banks on a regular basis. While some are able to get the illegal deductions reversed after registering their complaints, many others are not so lucky. Akinwole Omole, a depositor with a new generation bank, belongs to the former category as he was lucky to get an illegal deduction from his account reversed within six days. The bank had sent a short message service, SMS, alert notifying him of a N10,000 withdrawal from the automated teller machine, ATM, of another bank in Ikotun, Lagos, which he never made. According to him, he stormed his Ikeja, Lagos Plaza branch of the bank immediately and reported the illegal deduction to the branch manager who promised the deduction would be reversed within a week. “I intentionally restricted myself from making any withdrawal from the account for about six months because I needed to use the money to meet a particular need later in the year”, he said. Though his account has been credited, Omole is not convinced it was a mistake. “Whoever did that must have noticed that there was no transaction on the account for six months and thought the owner had died,” he said, adding that but for the SMS alert, he would not have known about the deduction.



Like Omole, Joy Eni was also a victim of illegal deduction. Eni had withdrawn some cash from an ATM at the Ogba-Ijaiye, Lagos branch of her bank, an old generation bank only to discover that the machine dispensed only half of the cash requested. “I punched N20,000 on the keypad and the machine dispensed new currency immediately. I also received an alert that indicated I had withdrawn N20,000 from that branch. I left for my office thinking everything was in order. But when I counted the money, I found that I had been shortchanged by N10,000.,” she said. The next day, she requested for the intervention of the branch manager via a letter narrating her ordeal. Her letter was not even acknowledged. Eni had to post another letter on the complaint section of the bank’s website but there was no response. She did not relent until the illegal deduction was eventually reversed, almost one month after. “If I had not taken those steps, I would have been shortchanged. Imagine the number of people who would have been shortchanged by these machines without them knowing since most people are under the illusion that ATMs don’t make mistakes so they usually don’t count money withdrawn from them”, she said.



Some bank customers allegedly receive notifications on ATM charges even when the purported transactions never took place. “Last June, I received an alert notifying me that the sum of N100 was deducted from my account as ATM fee and I have not even picked the ATM card from the bank since I opened the account in May 2012,” Modupe Lawal, another customer recalled. Kehinde Ajayeoba, managing director, Shalom Scan and X-ray Centre, complained that her company’s statement of account is often riddled with phantom charges. She recalled that at a time, her business account with a popular bank was surcharged for maintenance and management fees, and when she inquired, the customer service personnel of the bank had no explanation to offer. Titi Ogundele, another customer of a new generation bank, revealed that her bank deducts $60 every time her daughter based in Canada credits her account. Ogundele who described the act as throat cutting, alleged that “the bank charges several fees excluding commission paid by my daughter, withdrawal charges and account handling fees. Things have changed drastically because it was not like this few years back,” she lamented.



In order to meet revenue projections, some banks allegedly rip-off their customers, debiting their accounts with varied and indefinable charges and interests that basically ridicule the industry ethics. Some banks have been known to distort commission on turnover, COT, on a weekly or monthly interval. By so doing, the account holder is befuddled by the accounting process while the banks stash away tonnes of naira of customers’ cash. Statements of transactions between some customers and their banks reveal that most of the banks collect from their clients’ accounts, excess charges on COT, loans and facilities, bank drafts, returned cheques, collection and debit correction, as well as ATM transactions, among others. Some customers say they receive many SMS alerts for a single ATM transaction thus having a lot of money deducted from their airtime. Unfortunately many of the bank charges are not communicated to customers.



Financial experts have faulted the deduction of COT on certain bank services, stressing that COT on withdrawals is chargeable only on valid withdrawals. In other words, returned cheque debits, bank-generated charges and loan liquidation are transactions that should not attract COT. Industry experts are also of the view that reversals or mistakes made by the banks should not attract charges, alleging that some banks impose charges on mistakes committed by them on depositors. Ori Adeyemo, a forensic accountant, agrees with the claims of these customers, alleging that another prominent bank overcharged one of his clients to the tune of N64 million on a loan facility a few years back. According to him, the case and 400 others with other banks have been at the federal high court, Lagos, since January 2012.



According to Adeyemo, “Many banks manipulate the interest rates on facilities granted their customers. For instance, a customer will agree on 18 per cent per annum interest with a bank, but because the bank knows that most customers do not know how interest rates are computed, the bank will go behind and merge 45 per cent. They cash in on their customers’ ignorance. The banks believe the customers would not challenge them.” Knowing that the average bank customer does not scrutinise details of his or her account, Adeyemo said, “The common parlance in the banking sector today goes like ‘Hit the man first, if he complains, you refund.”



Giving insight into the activities of the banks, Akintunde Maberu, a financial analyst, said banks engage in several unorthodox practices to increase their profitability. For instance, he said each bank has a software that manages the accounts of customers and by the time they have one per cent management fee automatically deducted from all accounts, some of which have not been operated by their owners for a long time, they are likely to come up with a lot of money, which forms parts of the profits they declare periodically.



Peter Adebayo, a financial analyst and an accountant, explained that the provision of the Central Bank of Nigeria, CBN, guideline is that any charge, which is outside what is listed in the apex bank’s guide, is illegal, unless it is authorised by the customer, adding that banks are required to negotiate charges and interest rates with depositors. But most banks do not follow the guidelines in their dealings with their customers, a situation, which Ajayeoba said “could be a direct consequence of the pressure on bank managers to deliver curious profits to the head offices at the end of each month.”



However, Adebayo believes that the high incidence of fraudulent deductions and manipulations of customers’ accounts can be avoided if the management of the banks are committed to the task and with the use of appropriate technology. He explains that data analysis technology enables auditors and fraud examiners to analyse an organisation’s business data to gain insight into how well internal controls operate and also identify transactions that indicate fraudulent activity or the heightened risk of fraud. “It provides an effective way to be more proactive in the fight against fraud because the organisation can detect indicators of fraudulent activity much sooner and stop it before it becomes material and creates financial damage,” he said.



The CBN appears set to tackle the problem. In a recent circular to all banks, discount houses and other financial institutions, the apex bank noted an increase in the number of complaints from customers of financial institutions, especially deposit money banks. “The complaints range from allegation of excess charges, unauthorised deductions, excess commission-on-turnover, other frivolous charges, frauds, etc,” the CBN said, adding that “this situation is a clear indication of customer dissatisfaction with the quality of services offered by and the absence of proper redress mechanism within the financial institutions.”



The CBN is currently reviewing the guide to bank charges, which has been in use since 2004. “The review is intended to align the tariff regime in the banking industry with present economic realities and offer a platform for standard application of charges on different types of banking products and services,” says the apex bank. When the new guide comes on stream, it would stipulate the information banks are required to disclose to all customers prior to the consummation of every credit transaction. For Nigerians to fully embrace the banking culture and for banks to retain the loyalty and respect of their customers, industry stakeholders say the need for CBN to protect bank customers and enhance their financial literacy is imperative.


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