The Bank of Ghana (BoG) has directed banks and Specialized Deposit-Taking Institutions to abolish unfair fees, charges and other practices in the banking sector.
This is in accordance with the Bank of Ghana’s mandate to deal with unfair practices of banks and Specialized Deposit-Taking Institutions (SDIs) under Section 3 of the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930), and to ensure that the interest of customers is adequately protected.
The Bank of Ghana in a statement noted 7 charges which it deemed unfair, inappropriate, and detrimental to the interest of consumers and the financial inclusion agenda.
The Unfair fees and charges which are abolished
1. Over the counter (OTC) withdrawal charges
2. Maintenance fees on Savings Account
3. Change of ownership of collateral documents
4. Application of interest on penal charges
5. Quotation of monthly interest rates on credit facilities
6. Third-party deposit/withdrawal violations
7. Credit Insurance Premium Overcharges
“The Bank of Ghana has observed with concern, a trend where some Banks and Specialized Deposit-Taking Institutions (SDIs) impose certain fees and charges on customers. These practices are deemed to be unfair, inappropriate, and detrimental to the financial inclusion agenda and the protection of customers’ interest,” BoG said in a statement.
Over the counter (OTC) withdrawal charges
Most banks and SDIs, with the aim to encourage customers to use their digital platforms charge customers who withdraw their funds from banking halls with an over-the-counter withdrawal booklet. Though BoG recognizes these efforts of the digitization agenda, it also recognizes that such charges deter customers (particularly those opposed to digital technology) from opening and operating accounts.
The BoG has therefore directed banks and SDIs to desist from levying penalties on customers who withdraw their funds below certain thresholds from the banking halls.
Maintenace fees on Savings Account
Citing the maintenance fees on Savings Accounts as an example, the Bank of Ghana (BoG) noted that the application of such fees has driven several savings accounts into debit and in so doing, eroded the deposits of vulnerable depositors who would generally expect their savings accounts to earn interest.
“This practice is detrimental to financial inclusion and negates the gains of the financial literacy programmes geared towards promoting personal savings. Banks and SDIs are directed to desist from charging account Maintenance fees on savings accounts. This ban, however, does not include charges for services provided by banks and SDIs with the explicit prior subscription by customers,” it further said.
Interest on penal charges
Concerning interest on penal charges, the Bank of Ghana said it has observed the practice where penal interest rates levied against defaulting loan customers, are made to accrue interest. This practice it says results in high outstanding loan balances that customers are unable to pay.
To resolve the situation, the Bank of Ghana per section 55(3) of the Borrowers and Lenders Act, 2020 (Act 1052) said penal charges shall only be applied on the amount of the delayed interest or principal payment and not on the total outstanding loan amount.
Change of ownership of collateral documents
Contrary to section 7 of the Borrowers and Lenders Act, 2020 (Act 1052), the Bank of Ghana noted that some banks and SDIs require borrowers who secure credit facilities with movable assets (production machines, cars, equipment, or materials), to transfer ownership of such assets into the joint names of the borrower and the bank involved. BoG is therefore barring banks and SDIs from changing ownership of collaterals presented by borrowers to secure credit facilities from the borrower to the bank or SDI.
Quotations of monthly interest rates on credit facilities
Bank of Ghana has cautioned banks and SDIs to desist from the quotation of monthly interest rates on all credit facilities. Instead, banks and SDIs shall impose an interest rate that is calculated on an Annual Basis only in all credit agreements.
Also, BoG said banks and SDIs are not to disclose the Annualized Percentage Rate (APR) related to every credit facility.
Third-party deposit/withdrawal violations
The Bank of Ghana has called on banks and SDIs to comply with its requirement regarding third-person deposit and withdrawal. BoG said it has noted that deposit slips in some banks have no provision for depositors’ signatures. BoG is therefore calling on banks to rectify the situation.
Credit Insurance Premium Overcharges
BoG in its statement noted that several banks and SDIs as part of credit underwriting policies, require borrowers to hold credit insurance against eventualities such as permanent disability and death. Though BoG said it recognizes the importance of this practice as a loss mitigating norm in credit management, most banks leverage that to overprice the premiums charged to customers, resulting in the increased cost of borrowing.
To remedy the situation, BoG is directing banks and SDIs to apply the same premium charged by the underwriting company to borrowers. In addition, banks and SDIs are not allowed to withhold insurance premiums collected from customers to implement an internal insurance policy except commissions for Bancassurance arrangements.