The central bank has abolished seven nuisance fees and charges as well as other practices in the banking sector, in a bid to ensure that the interests of customers of banks and Specialised Deposit-Taking Institutions (SDIs) are adequately protected.
In a release issued last week, the Bank of Ghana said it has observed with concern a trend wherein some banks and SDIs impose certain unfair fees and charges on customers which, in effect, impede efforts toward financial inclusion.
These nuisance fees and charges include: credit insurance premium overcharges; maintenance fees on savings accounts; over the counter (OTC) withdrawal charges; as well as change of ownership of collateral documents; application of interest on penal charges; quotation of monthly interest rates on credit facilities; and third-party deposit/withdrawal violations.
According to the central bank, a number of banks and SDIs – as part of their credit underwriting policies, require borrowers to hold credit insurance against eventualities such as death, permanent disability and termination of employment. However, these banks and SDIs take advantage to overprice the premiums charged to customers, resulting in increased cost of borrowing.
“Banks and SDIs which opt to use their pre-determined insurance companies to underwrite borrowers’ loans shall apply the same premium charged by the underwriting company to borrowers,” the Bank said.
Again, the release adds that these institutions are not permitted to retain insurance premiums collected from customers with the intention of implementing an internal insurance policy. However, this excludes commissions for bancassurance arrangements.
BoG noted that the application of account maintenance fees has driven a number of 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, the Bank says, is detrimental to financial inclusion and negates the gains of its financial literacy programmes geared toward promoting personal savings. The ban, however, does not include charges for services provided by banks and SDIs with explicit prior subscription by customers.
Some banks and SDIs impose penal charges on customers who withdraw their own funds from their banking halls, in order to encourage customers to use digital platforms – although these platforms are not free. This, the BoG indicates, deters some customers – especially those who are averse to the use of digital platforms – from opening and operating accounts; thereby negatively affecting the financial inclusion drive of the central bank.
Banks and SDIs have also been barred from engaging in the practice of changing ownership of collaterals presented by borrowers to secure credit facilities from the borrower to the bank or SDI.
The Bank of Ghana also observed a practice among some banks and SDIs whereby penal interest rates levied against defaulting loan customers are made to accrue interest. In effect, interest is computed on penal charges in addition to interest on the outstanding loan amount.
This practice, BoG said, results in high outstanding loan balances which customers are unable to pay – resulting in high non-performing loans. “The practice is detrimental to the credit market. Banks and SDIs are directed to desist from the application of interest on penal charges,” BoG stated.
Furthermore, banks and SDIs are directed to desist from the quotation of monthly interest rates on all credit facilities and associated fees, which is contrary to section 55 (2) of the Borrowers and Lenders Act, 2020 (Act 1052).
In addition to the interest rate, the BoG has directed a disclosure of the Annualised Percentage Rate (APR) related to every credit facility – in accordance with the Disclosure and Product Transparency Rules for Credit Products and Services.
The central bank noted with concern the lack of compliance with the requirement for banks and SDIs to obtain full personal detail of a person who makes a deposit into or withdrawal from an account on behalf of another person.