Electronic Banking And The Rights Of The Customer In Nigeria

By Oyetola Muyiwa Atoyebi, SAN, FCIArb. (UK).

Electronic banking plays a very vital role due to the fact that it’s the cheapest way of providing banking services. Using various electronic banking channels, there is a swift movement of funds domestically and internationally.

INTRODUCTION

In the last two decades, the world has metamorphosed into the digital age. There is hardly anything that is done without the use of technology. The banking sector is at the forefront of exploring these technological innovations due to the nature of their business.

Electronic banking is one of the most laudable innovations ever made. This stress-free invention does not come without its disadvantages. Customers ought to have the highest level of protection in terms of their data and their funds.

In this article, we will be examining the concept of electronic banking, the laws that regulate electronic banking in Nigeria, the rights of the customer and also answer some pertinent questions in relation to electronic banking.

WHAT IS ELECTRONIC BANKING?

Electronic banking is a blanket term used to indicate a process, through which a customer is allowed to carry out personal or commercial banking transactions, and obtain information on financial products and services through a public or private network, using electronic and telecommunication means. Electronic banking plays a very vital role due to the fact that it’s the cheapest way of providing banking services. Using various electronic banking channels, there is a swift movement of funds domestically and internationally.

WHO IS A CUSTOMER?

In this context, a ‘customer’ is any person who subscribes to or uses the services of a banking or financial institution. Such services may include deposit, savings, credit, debit, money transfer, or electronic banking and payment services.[1]

The customer is less knowledgeable than the banker as regards the concept of banking. Thus, it is the duty of the banker or financial institution to protect the customer. The banks must ensure that the customers’ basic rights are protected from acts such as unauthorized electronic access to their accounts, or personal financial information by either service providers or unauthorized third parties, and that service providers and liable third parties will be held to account where such rights and security requirements are breached.

LAWS AND INSTITUTIONS THAT REGULATE ELECTRONIC BANKING IN NIGERIA

The electronic banking system in Nigeria has one of its greatest challenges as the non-existence of a legislation or statute enabling it. There is neither an act of the National Assembly nor law of the House of Assembly enabling it. However, there are several enacted laws that seem to regulate electronic banking but were not enacted purposely for it, yet have an indirect impact on electronic banking in one way or the other, such as;

1. Central Bank of Nigeria Act 2010.
2. Banks and other Financial Institutions Act 2020.
3. The Bill of Exchange 1990.
4. Nigerian Deposit Insurance Corporation Act 2006.
5. The Cybercrimes Act 2015.
6. The Evidence Act 2011.
7. Federal Competition and Consumer Protection Act 2018.
8. National Information and Technology Development Agency Regulation (NITDA Regulation) etc.

Efforts have been made by the Central Bank of Nigeria to regulate the electronic banking system, hence these regulations and guidelines;

1. The Central Bank of Nigeria Guidelines on Electronic Banking in Nigeria, 2003.
2. The Central Bank of Nigeria guidelines on Operations of Electronic Payment Channels in Nigeria, 2020.
3. The Central Bank of Nigeria Operational Guidelines for Open Banking in Nigeria, 2022.

Institutions that regulate electronic banking are but are not limited to:

1. The Central Bank of Nigeria.
2. Federal Competition and Consumer Protection Commission.
3. National Information and Technology Development Agency (NITDA).
4. Nigerian Deposit Insurance Corporation.

RIGHTS OF THE CUSTOMER

There are rights that must be taken away from the customer, these rights include but are not limited to;

1. The Right to be informed

Customers have a right to disclosure of information from the bank on goods and services offered by the bank. The information provided must be complete, relevant and truthful. The bank must explain to the customers’ understanding, all contractual terms and charges prior to the consummation of any agreement or contract. This right enables customers to have relevant information in order to make rational choices. It amounts to a breach of this right if the bank fails to provide this information or deliberately misleads the customer in any way.

2. 2. The Right to choose

The customer has a right to select from the range of products and services made available by the bank at competitive prices. This means that customers at all times can decide on the product or service to accept/purchase and the ones to decline. It is wrong for a bank to restrict choices or compel customers to accept/purchase products or services that are ill-suited for their needs. Where the service is unsatisfactory, the customer has the right to end the contract or even the banking relationship provided all outstanding commitments are settled by the customer.

3. The Right to safety

This right requires the bank to guarantee all its customers a secure and conducive banking environment devoid of threats to their safety and health. The customer must be reasonably protected from accidents while on the premises of the bank. The customer also has the right to be protected from the negative effects of pollution of any kind whether arising from the bank’s operations or other sources. The bank is obligated to adhere strictly to applicable safety laws and directives to ensure that the safety and wellbeing of the customers are adequately guaranteed while on the premises of the bank.

4. The Right to privacy and confidentiality

Customers have the right to freedom from the disclosure of their account details by the bank, as well as intrusion into accounts by third parties. In other words, banks must not divulge account information to a third party, the bank must also protect all information from unauthorized access by a third party. This is the rule of DATA PROTECTION.

There are, however, exceptions to this right as follows:

1. Where the bank is required by law to make disclosure; and
2. Where the customer consents to the disclosure.

5. The Right to redress

A bank must provide its customers with a redress mechanism to express their displeasure or grievance. The mechanism must be free, accessible, transparent, timely and convenient. Customers have a right to an efficient complaints management system through which they can lodge complaints against their bank. They also have the right to be kept abreast of the resolution process (acknowledgement, feedback, updates, and explanation) and ultimately, the basis of the decision. Where they are not satisfied with the decision of the bank, customers have the right of review either by the bank, the CBN or the Court.

6. The Right to good service

All customers have a right to value for their money which involves the right to be treated with respect and dignity by banks and their representatives. The hallmark of banking is customer satisfaction and as such banks must offer quality and value-adding services to the customer. Part of this right includes the banks providing appropriate responses to the needs and complaints of the customer.

7. The Right to equality

This right requires that a customer is treated equally as other customers regardless of differences in financial standing/deposit balance, physical ability, age, gender, ethnicity or creed. It is wrong for a bank to offer preferential treatment to some customers at the expense of other similar kind of customers. However, banks may decide to differentiate customers on account of the nature of products customers purchase or subscribe to. In this case, some customers may benefit from certain privileges which are features of specific products or services.

8. The Right to free monthly statement of account

The provision of the Revised Guide to Bank Charges is that banks are required to provide their customers with free statement of account on a monthly basis. This means that customers have a right to get their monthly statement of account from their bank at no cost. It should be noted, however, that the Guide provides that any special request attracts a fee of N50 per page.

WHO IS RESPONSIBLE FOR THE (MIS) DOCUMENTATION OF ELECTRONIC FUNDS?

Electronic banking involves man-to-machine interaction. As a result, the documentation of electronic funds transfers is very important. The bank customer is entitled to receive at the end of the transaction confirmation of a valid transaction duly authorized by him. This is done by way of a terminal receipt which clearly certifies:

1. The amount of the transfer;
2. The calendar date;
3. The consumer who initiated the transfer;
4. The time; and
5. The balance in the consumer’s account.

Documentation of electronic funds transfer largely remains statutorily unregulated in Nigeria. The bank’s obligation to provide a terminal receipt (advice slip), is an implied term of the contract between the cardholder and them.

As a matter of practice, the recurrence of a bank statement is a matter of agreement between the parties in Nigeria. This then raises the legal question, where there is a (mis) documentation of such electronic funds transfer, who is responsible? Is it the bank? Is it the customer?

This legal puzzle has been resolved in favour of the bank customer. The courts have categorically held in a plethora of cases, that the bank owes its customer a legal duty to exercise reasonable care and skill in carrying out its customers’ instructions. It was held further that the duty of care a banker owes to its customer extends over the whole range of banking business within the bank’s contracts with its customer[2]. This has been settled in the case of First Bank of Nigeria Ltd Vs African Petroleum Ltd[3] and UBA Vs Folarin[4] etc.

WHO BEARS LIABILITY FOR UNAUTHORIZED TRANSACTIONS?

Electronic funds transfer made with the access device of the customer to whom it was issued or by another person acting under the customer’s authority, is authorized transfer.

An unauthorized electronic funds transfer is one initiated by a person, other than the customer, without actual authority to initiate the transfer and from which the customer receives no benefit.

In dealing with liability from electronic funds transfer, a distinction is drawn between authorized and unauthorized transfers. In Nigeria, the customer’s liability for unauthorized transfers is subject to debate, depending on whether it was caused by negligence or by fraud.

An unauthorized electronic funds transfer may be prompted by a customer’s negligence, where the customer writes his Personal Identification Number on the card or a piece of paper kept with the card, and the person stealing the card with the PIN obtains full control of the access device. In that instance, the bank shall not be liable for any loss arising therefrom.

Unauthorized transfer by fraud may arise where, for example, an ATM cardholder is forced by thieves to withdraw funds from his accounts through a public access terminal. Here, the bank’s liability will be depended on whether the bank has exercised reasonable care in providing security and putting other necessary facilities in place as may be required by law. Section 33 of Cybercrime (Prohibition, Prevention etc) Act 2015 provides severe criminal sanctions against anybody who steals, counterfeits, fraudulently obtained or uses without authorization any access device belonging to another person. The punishment ranges between 3 years to 7 years imprisonment and/or payment of fine ranging between N1, 000, 000 to N7, 000, 000, as well as the compulsory refund of the money obtained from the fraud to the owner[5].

CONCLUSION

Electronic banking has fundamentally changed the business of banking by providing immense ease and opportunities to its customers. Globally, it has strongly impacted the strategic business considerations for banks by significantly cutting down costs of delivery and transactions. Presently, majority of the customers are accepting online banking transactions because of its many favorable factors. It is borderless which permits anytime and anywhere banking to its customers. On the other hand, it also aggravates the use of traditional banking channels. There is a significant relationship between electronic banking and customer satisfaction.

Despite the Pros, many customers still think that it is not easy to use online banking systems as people want their money to be safe and secure. To overcome this issue, the banks must first educate their customers and provide measures to make online transactions safer and secure for the customers.

Finally, banks must provide proper and continuous training for their employees, and create deep awareness about internet banking technology to the community.

The government should also enforce different policies and enact new laws that would cover this dynamic area in the banking sector.

AUTHOR: Oyetola Muyiwa Atoyebi, SAN, FCIArb. (UK).

Mr. Oyetola Muyiwa Atoyebi, SAN is the Managing Partner of O. M. Atoyebi, S.A.N & Partners (OMAPLEX Law Firm) where he doubles as the Team Lead of the Firm’s Emerging Areas of Law Practice.

Mr. Atoyebi has expertise in Technology, Media and Telecommunications Law and this has seen him advise and represent his vast clientele in a myriad of high level transactions.  He holds the honour of being the youngest lawyer in Nigeria’s history to be conferred with the rank of a Senior Advocate of Nigeria.

He can be reached at atoyebi@omaplex.com.ng

CONTRIBUTOR: Efe Iseghohime.

Efe is a member of the Corporate and Commercial Team at OMAPLEX Law Firm. She also holds commendable legal expertise in Data Protection and Privacy.

She can be reached at efe.iseghohime@omaplex.com.ng.

[1] Uchenna Jerome Orji, ‘Protecting Consumers from Cybercrime in the Banking and Financial Sector: An Analysis of the Legal Response in Nigeria’ (2019) 24(1) Tilburg Law Review file:///C:/Users/EFE/Downloads/ELECTRONIC%20BANKING%20GIST.pdf

[2] Chimezie Christian Onwudiwe, ‘Legal Aspects of Eletronic Banking in Nigeria: An Overview’ < http://eprints.covenantuniversity.edu.ng/10272/1/Legal%20Aspect%20of%20Electronic%20Banking%202017%201.pdf>

[3] (1996) 4NWLR (PT443) 438

[4] (2003)7 NWLR (PT 818) 18

[5] Chimezie Christian Onwudiwe, ‘Legal Aspects of Eletronic Banking in Nigeria: An Overview’ < http://eprints.covenantuniversity.edu.ng/10272/1/Legal%20Aspect%20of%20Electronic%20Banking%202017%201.pdf>