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Financial Consumer Protection (Directive No. 292/2021)

Aug 25, 2020National Bank Of Ethiopia292/2021

Summary

This directive establishes regulations for financial consumer protection, aiming to foster trust, confidence, and ethical conduct within the financial system. It details requirements for fair treatment, transparency, product design, data protection, and complaint handling mechanisms for financial service providers.

Who's affected

Financial service providers, including banks, insurers, microfinance institutions, and other similar institutions, as well as their financial consumers and security providers.

Action required

Financial service providers must review and implement the requirements of this directive, including updating policies and procedures, training staff, and ensuring compliance with disclosure and conduct standards.

Key points

Establishes comprehensive financial consumer protection regulations.
Mandates fair treatment, transparency, and ethical conduct for financial service providers.
Requires clear disclosure of product features, risks, and costs.

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Sets standards for data protection and privacy.
Defines robust complaint handling and dispute resolution mechanisms.
Prohibits unfair contractual terms, fees, and credit-related practices.
Includes specific provisions for advertising, KFS, contract contents, and periodic statements.
Outlines requirements for product suitability and responsible lending assessments.
Specifies penalties for non-compliance, including financial penalties and other measures by the National Bank.
Directive is effective six months from the issue date (August 25, 2020).

Requirements

Financial service providers must treat all financial consumers equitably, respectfully, honestly, and fairly.
Financial service providers shall not discriminate against financial consumers based on personal characteristics or affiliations.
Financial service providers must give special attention to the needs of vulnerable and marginalized consumer groups.

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Information about financial products and services must be accurate, simple, clear, and timely.
Financial products and services must be designed, marketed, and distributed with regard to the likely financial objectives, needs, capacity, and behaviors of target consumers.
Financial service providers must ensure data confidentiality and security.
Financial service providers must provide easy access to a transparent, effective, prompt, and free internal complaints process.
Financial service providers must make financial consumers aware of available External Dispute Resolution mechanisms.
Financial service providers are prohibited from including or enforcing unfair contractual terms in standard form contracts.
Financial service providers shall not charge undisclosed or prohibited fees and charges.
Financial service providers must process requests to close deposit accounts promptly and assist consumers with cancellations of recurring payments.
Financial service providers shall not require consumers to acquire or pay for insurance unless it meets specific criteria.
Financial services providers are prohibited from charging interest in advance and must base interest on an annual percentage applied to the unpaid balance of the loan.
Financial service providers must accept partial early repayment of loans and allow full repayment at any time with disclosed fees.
Financial service providers must not harass or engage in unfair or abusive conduct during debt collection.
Financial service providers must effectively disclose situations constituting fraud or unauthorized transactions, their obligations, and liability limitations.
Financial service providers must ensure advertising and promotional materials are accurate, simple, clear, and not misleading.
Information, contracts, and notices must be easily legible, simple, clearly expressed, in a minimum font size of 12, and available in Amharic, English, and regional working languages.
Financial service providers must publish and display standard terms and conditions, including itemized fees and annual percentage rates.
Financial service providers must provide Key Fact Statements (KFS) for various financial products.
Contract terms and conditions must clearly disclose provider details, product features, risks, responsibilities, fees, data usage, dispute resolution contacts, and other prescribed information.
Consumer credit contracts require additional disclosures regarding credit amount, deductions, interest, repayments, prepayment rights, security, insurance, purpose, and enforcement expenses.
Deposit account or stored value products require additional disclosures on interest, minimum balance, early termination costs, and withdrawal options.
Payment or funds transfer products require additional disclosures on transaction limits, procedures for unauthorized transactions, and consumer responsibilities.
Insurance policies require additional disclosures on type, risks, premiums, exclusions, cover amount, period, insured person, property, and claims procedures.
Final contracts must be in writing or electronically verifiable, provided to consumers a reasonable time before signing, and a copy furnished promptly.
Financial service providers shall furnish periodic statements of account upon request.
Financial service providers shall not make changes to a contract that increase consumer obligations or reduce provider obligations without prior notice and consent.
Financial service providers must provide receipts for any payment promptly.
Financial service providers must explain features, risks, terms, and costs in a language the consumer understands, if necessary.
Financial service providers must have documented policies and procedures for product design, marketing, and distribution to minimize consumer harm.
Financial service providers must have written policies and procedures to determine if a financial product meets a consumer's financial objectives, needs, and capacity.
Financial service providers must undertake a reasonable assessment of a consumer's ability to repay credit without substantial hardship before providing credit.
Financial service providers must implement policies and procedures for data confidentiality and security and inform consumers about their data policies.
Financial service providers must implement measures to protect data against misuse, unauthorized disclosure, accidental loss, destruction, or damage.
Financial service providers must collect data using lawful and fair means for legitimate purposes.
Financial service providers shall only use and disclose data consistently with the original purpose of collection or with explicit consent.
Financial service providers must take steps to ensure third parties keep disclosed data confidential and secure.
Financial service providers must give consumers the right to access their data within a reasonable time and at no cost.
Financial service providers must correct inaccurate or incomplete data upon claim.
Financial service providers must have policies and procedures for a fair, accessible, transparent, free, and efficient internal complaints handling.
Financial service providers must establish an Internal Complaint Handling Unit.
Complainants must be able to make complaints in any language through various communication channels.
Financial service providers must investigate complaints promptly and advise the complainant of the outcome within a maximum of 10 business days.
Unresolved cases must be reported to the National Bank within two business days.
Financial service providers must keep up-to-date records of complaints and provide monthly reports to the National Bank.
Boards of directors must approve policies and procedures for directive implementation and compliance.
Senior management is responsible for the effective implementation of the directive.
Financial service providers must adequately train employees, agents, and third parties on the directive's provisions.
Financial service providers must report any information required by the National Bank.
Financial service providers shall retain copies of concluded contract documents, KFSs, and other records for 10 years.

Rights and permissions

Financial consumers have the right to be treated equitably, respectfully, honestly, and fairly.
Financial consumers have the right to not be discriminated against based on personal characteristics or affiliations.
Financial consumers have the right to receive accurate, simple, clear, and timely information about financial products and services.

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Financial consumers have the right to access transparent, effective, prompt, and free internal complaints processes.
Financial consumers have the right to be made aware of available External Dispute Resolution mechanisms.
Financial consumers have the right to not be subjected to unfair contractual terms.
Financial consumers have the right to not be charged undisclosed or prohibited fees and charges.
Financial consumers have the right to have their deposit accounts closed promptly and to receive assistance with cancellations of recurring payments.
Financial consumers have the right to not be required to acquire or pay for certain types of insurance.
Financial consumers have the right to repay loans early.
Financial consumers have the right to not be subjected to harassment or unfair conduct during debt collection.
Financial consumers have the right to receive full compensation for losses from unauthorized transactions, except in cases of fraud or gross negligence.
Financial consumers have the right to receive timely and necessary assistance to recover mistakenly transferred funds.
Financial consumers have the right to receive advertising and promotional materials that are accurate, simple, clear, and not misleading.
Financial consumers have the right to receive information, contracts, and notices in easily legible, simple, and clearly expressed language, in appropriate font sizes and languages.
Financial consumers have the right to access standard terms and conditions, including itemized fees and annual percentage rates.
Financial consumers have the right to receive Key Fact Statements (KFS) for financial products.
Financial consumers have the right to clear and prominent disclosure of information in contract terms and conditions.
Financial consumers have the right to receive additional disclosures specific to consumer credit contracts, deposit accounts, payment products, and insurance policies.
Financial consumers have the right to receive a copy of the final contract a reasonable time before signing and immediately after becoming bound.
Financial consumers have the right to receive periodic statements of account upon request.
Financial consumers have the right to receive prior notice and consent for changes to their contracts that increase obligations or reduce provider obligations.
Financial consumers have the right to receive a receipt for any payment made.
Financial consumers have the right to receive verbal explanations of features, risks, terms, and costs if necessary.
Financial consumers have the right to have their data protected, kept confidential, and secure.
Financial consumers have the right to access their data.
Financial consumers have the right to request correction of inaccurate or incomplete data.
Financial consumers have the right to submit complaints to the National Bank if unsatisfied with the financial service provider's response.
Financial consumers have the right to have their complaints addressed in an equitable, objective, and timely manner.
Financial consumers have the right to receive written confirmation of the outcome of their complaint.
Financial consumers have the right to choose the method in which they receive statements (e.g., written or electronic).

Restrictions

Financial service providers are prohibited from including or enforcing unfair contractual terms in standard form contracts.
Financial service providers shall not charge undisclosed or prohibited fees and charges.
Financial service providers are prohibited from requiring consumers to acquire or pay for certain types of insurance.

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Financial service providers are prohibited from charging a financial consumer an interest in advance.
Financial service providers are prohibited from harassing or engaging in unfair or abusive conduct during debt collection.
Financial service providers are prohibited from enforcing a financial consumer contract or security unless they have given a notice of default.
Financial service providers are prohibited from making misrepresentations in connection with a debt.
Financial service providers are prohibited from public shaming of debtors.
Financial service providers are prohibited from attending a person's place of employment to seek repayment.
Financial service providers are prohibited from threatening to harm or harming any person for debt recovery.
Financial service providers are prohibited from threatening to seize, or seizing, property not provided as collateral.
Financial service providers are prohibited from threatening to damage, or damaging, property for debt recovery.
Financial service providers are prohibited from debiting deposit accounts with new charges after account closure.
Financial service providers are prohibited from requiring consumers to take out an insurance policy with a particular insurer.
Financial service providers are prohibited from imposing unreasonable requirements regarding insurance.
Financial service providers are prohibited from charging fees for early repayment of a credit contract that exceed reasonable administrative costs.
Financial service providers are prohibited from charging fees that exceed their reasonable administrative costs to close an account.
Financial service providers are prohibited from charging fees that exceed their reasonable enforcement expenses.
Financial service providers are prohibited from charging fees for recovering amounts owed to a third party that exceed the amount actually owed.
Financial service providers are prohibited from making changes to a consumer's contract without describing the circumstances or requiring sufficient notice.
Financial service providers are prohibited from entering into, or seeking to enforce, any financial consumer contract or security contract unless specific conditions are met regarding writing, signing, electronic verification, and reasonable prior review time.
Financial service providers are prohibited from sending unsolicited, pre-approved offers of credit or credit limit increases to financial consumers.

Penalties

Financial institutions that fail to comply with the directive shall be subject to a penalty of Birr 10,000 for each violation.
The National Bank may, in addition to the penalty, take any other measures it considers necessary.

Objectives

Promote financial inclusion, healthy financial transactions, and growth in the financial system.
Mitigate risks and challenges faced by financial consumers, particularly those who are low-income or less experienced.
Establish clear and objective financial consumer protection, supervision, complaint handling, and dispute resolution mechanisms.

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Promote fair, responsible, and transparent financial transactions.
Shape professional conduct of financial services providers towards financial consumers.

Organizations

National Bank of Ethiopia

Legal references

Banking Business Proclamation No. 592/2008
Banking (Amendment) Proclamation No. 1159/2019
Insurance Business Proclamation No. 746/2012

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Insurance (Amendment) Proclamation No. 1163/2019
Micro-financing Business Proclamation No. 626/2009
Microfinance Business (Amendment) Proclamation No. 1164/2019
National Payment Proclamation No. 718/2011
Civil Code, Article 1710(2)
Proclamation No. 1147/2019 to provide for Movable Property Security Right
Establishment and Operation of Credit Reference Bureau Directive No. CRB/02/2019

Original sourcehttps://justice.gov.et/en/directives/financial-consumer-protection-directive-no-292-2021/

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