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Financial Consumer Protection Directive No. 91/2020

National Bank Of Ethiopia91/2020

Summary

This directive, issued by the National Bank of Ethiopia, establishes comprehensive financial consumer protection regulations to ensure fair, responsible, and transparent financial transactions. It covers aspects like fair treatment, transparency, product design, data protection, complaint handling, and good governance for financial service providers.

Who's affected

Financial service providers including banks, insurers, microfinance institutions, and other similar institutions operating in Ethiopia.

Action required

Financial service providers must review their policies and procedures to ensure compliance with this directive within six months of its issue date and implement necessary changes.

Key points

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  • Establishes comprehensive financial consumer protection regulations.
  • Mandates fair treatment, transparency, and responsible product design.
  • Details requirements for data protection and complaint handling.
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    • Outlines specific disclosure requirements for various financial products.
    • Sets standards for responsible lending and debt collection practices.
    • Requires financial service providers to implement robust governance and compliance measures.
    • Imposes penalties for non-compliance.
    • Directive becomes effective six months from the issue date (August 25, 2020).

Requirements

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  • Financial service providers must treat all financial consumers equitably, respectfully, honestly, and fairly.
  • Providers must not discriminate against financial consumers based on personal characteristics or affiliations.
  • Providers must give special attention to vulnerable and marginalized consumer groups.
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    • Accurate, simple, clear, and timely information about financial products and services must be provided to consumers.
    • Financial products must be designed, marketed, and distributed with due regard to the target market's financial objectives, needs, capacity, and behaviors.
    • Providers must protect consumer data confidentiality and security.
    • Providers must offer transparent, effective, prompt, and free internal complaint handling processes.
    • Providers must disclose Key Facts Statements (KFS) for various financial products.
    • Contractual documents must clearly disclose all relevant information, including fees, risks, and responsibilities.
    • Specific additional disclosures are required for consumer credit contracts, deposit accounts, payment/funds transfer products, and insurance policies.
    • Providers must have documented policies and procedures for product suitability and responsible lending.
    • Providers must implement data protection policies and procedures.
    • Providers must establish and maintain effective internal complaint handling arrangements.
    • The board of directors must approve policies and procedures for directive implementation within three months.
    • Senior management is responsible for the effective implementation of the directive.
    • Employees, agents, and third parties must be adequately trained on the directive's provisions.
    • Providers must retain records for 10 years.

Rights and permissions

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  • Financial consumers have the right to be treated equitably, respectfully, honestly, and fairly.
  • Financial consumers have the right to receive accurate, simple, clear, and timely information.
  • Financial consumers have the right to access to a transparent, effective, prompt, and free internal complaint handling process.
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    • Financial consumers have the right to be informed of available external dispute resolution mechanisms.
    • 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 receive a copy of the final contract document free of charge.
    • Financial consumers have the right to receive a statement of account upon request.
    • Financial consumers have the right to select the method for receiving periodic statements.
    • 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 payment receipt as soon as reasonably practicable.
    • Financial consumers have the right to receive verbal explanations of product features, risks, terms, and costs if needed.
    • Financial consumers have the right to not be charged undisclosed or prohibited fees.
    • Financial consumers have the right to repay loans early with permitted fees.
    • Financial consumers have the right to receive a statement of loan details upon request.
    • Financial consumers have the right to receive notice of default before enforcement of a contract.
    • Financial consumers have the right to not be subjected to harassment or abusive conduct during debt collection.
    • Financial consumers have the right to be compensated fully for losses from unauthorized transactions, except in cases of fraud or gross negligence.
    • Financial consumers have the right to receive assistance to recover mistakenly transferred funds.
    • Financial consumers have the right to receive Key Fact Statements (KFS) for financial products.
    • Financial consumers have the right to receive a copy of the full loan contract before signing.
    • Financial consumers have the right to contact the National Bank of Ethiopia if unsatisfied with complaint handling.

Restrictions

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  • Financial service providers are prohibited from including or enforcing unfair terms in standard form contracts.
  • Financial service providers are prohibited from charging undisclosed or prohibited fees.
  • Financial service providers are prohibited from charging fees for early repayment of a credit contract that exceed reasonable administrative costs.
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    • Financial service providers are prohibited from charging fees exceeding reasonable administrative costs to close an account.
    • Financial service providers are prohibited from charging fees exceeding reasonable enforcement expenses.
    • Financial service providers are prohibited from charging for recovering amounts owed to a third party that exceed the amount actually owed.
    • Financial service providers are prohibited from requiring consumers to acquire insurance unless specific conditions are met.
    • Financial service providers are prohibited from requiring consumers to take out an insurance policy with a particular insurer.
    • Financial service providers are prohibited from charging interest in advance on consumer credit.
    • Financial service providers are prohibited from harassing or engaging in unfair or abusive conduct during debt collection.
    • Financial service providers are prohibited from breaching data security that results in consumer losses.
    • Financial service providers are prohibited from debiting accounts with new charges after account closure.
    • Financial service providers are prohibited from making changes to contracts that increase consumer obligations or reduce provider obligations without prior notice and consent.
    • Financial service providers are prohibited from entering into or enforcing contracts unless they are in writing, signed, or electronically verified, and provided a reasonable time before signing.
    • Financial service providers are prohibited from sending unsolicited, pre-approved offers of credit or credit limit increases.
    • Financial service providers must not use or disclose consumer data for purposes other than those agreed upon or permitted by law.
    • Standard form contracts are presumed to be standard form contracts unless proven otherwise by the financial service provider.
    • Contractual terms allowing providers to change contracts without sufficient notice or description of circumstances are null and void.

Penalties

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  • 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 take any other measures it considers necessary in addition to the monetary penalty.

Objectives

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  • Promote financial inclusion, healthy financial transactions, and stimulate growth, stability, ethical innovation, and efficiency in the financial system.
  • Mitigate risks and challenges faced by low-income and less experienced financial consumers.
  • 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

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  • National Bank of Ethiopia

Legal references

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  • 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 (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-91-2020/
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