The Central Bank of Nigeria has warned the banks from compelling
borrowers to patronise specific underwriting companies to buy
insurance covers that are mandatory to access some loans.
The apex bank gave this order in its consumer protection
guidelines on ‘Responsible business conduct.’
Part of the guidelines read, “Financial institutions shall not
compel a consumer to buy a product or service, such as insurance or
valuation service from a particular provider as a pre-condition for
the grant of a credit facility.”
Banks usually ask borrowers to take insurance covers to protect
the loans they planned to obtain, against unforeseen circumstances
that may hinder their ability to repay the loans.
Such circumstance could be permanent disability, death or other
forms of losses.
Some banks operating in the country presently have insurance
subsidiaries or close relationship with some of the firms.
To ensure that consumers’ capability to repay credits were
efficiently assessed, the CBN stated that financial institutions
must comply with its specific requirements.
It stated that the requirements were described in credit risk
assessment procedures, the type and circumstances for which a
credit would be suitable, as well as clear lines of authority for
approving the product.
The requirements also assessed the capability of customers to
repay a credit in a sustainable manner, taking into consideration
the customers’ financial circumstances.
It also set clear policies and procedures on consumer loans to
ensure that customers who were unable to meet their repayment
obligations due to ill health, unemployment or other disabilities
were treated fairly and with due consideration.
As part of the banks’ regular monitoring of loan performance and
upon early detection of signs of repayment difficulties, the CBN
said they must inform consumers of the importance of timely
engagement with the financial institutions to discuss alternative
repayment measures.
It said they should make reasonable efforts to offer an
alternative repayment plan that was appropriate to the customer’s
changed circumstances and financial situation.
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