Who are bank customers?
Generally, a customer of a bank is someone who has an account with a bank, or without having an account the relationship of banker and customer exists. In the latter case, some money transaction must connect the banker and the customer but must arise from the nature of a contract. See, Union Bank of Nigeria Plc. V. Integrated Timber & Plywood Producers Ltd. (2000) 12 NWLR (pt. 680) 99 (CA).
A bank customer is any person having an account with a bank or for whom a bank has agreed to collect items and includes a bank carrying an account with another bank as to letters of credit, a buyer or other person who causes an issuer to issue credit or a bank which procures issuance or confirmation on behalf of that bank's customer. See, Inland Bank (Nig) Plc v. Ruhanti (Nig) Ent Ltd &Ors(2010) LPELR-4324(CA)
What is the relationship between a bank and its customer?
The relationship between a banker and its customer is founded on simple contract. It is a settled principle of banking law that any money paid into a bank belongs to the banker from the moment of such payment. Thus, creating as between the banker and the customer a debtor/customer relationship. When money is paid by a customer into the bank, there is a contract between the banker and the customer in which the banker receives the money as a loan from the customer against the promise by the banker to honour the customer's cheque or other orders of the customer. The law of contract clearly requires that both parties to a contract must fulfill their contractual obligations.
A bank has a duty under its contract with its customer to exercise reasonable care and skill in carrying out its part with regard to the operations within its contracts with its customers. This duty extends to the whole range of banking business within the contract with the customer. This duty applies to interpreting, ascertaining, and acting in accordance with the instructions of the customer.
A banker and customer relationship is also one rooted in trust and
confidence and this is the only reason a person would confidently
entrust his hard-earned money to a bank in the belief that the
money will be safe and well managed in the bank. It is based on
this trust and confidence that a fiduciary relationship exists
between the bank and the customer.
A fiduciary relationship arises whenever confidence is reposed on one side, and domination and influence result on the other, the relation can be legal, social, domestic, or merely personal. The banker/customer relationship places the bank in the position of a fiduciary to the customer and the bank therefore owes the customer a duty to exercise a high standard of care in managing the customer's money.
It is settled in the law and practice of banking, that the relationship between a bank and its customer is contractual. See, GTB PLC v. MOBCOM TECHNOLOGIES LTD (2023) LPELR-60658(CA)
What are the rights of bank customers?
Bank customers in Nigeria have a number of rights protected by law, regulations, and conventions. These rights are aimed to protect customers' interests and guarantee that banks treat them fairly. These rights include but not limited to the following:
Right to be informed: Bank customers have the right to complete, relevant, and true information regarding the products and services supplied by the bank. This includes the right to understand contractual terms and charges prior to entering into any agreement or contract. The bank is required to clarify these terms in a way that the consumer understands, allowing them to make sound decisions.
The Right to Choose: Customers have the right to choose from the variety of products and services provided by the bank at competitive rates. Banks are prevented from limiting consumers' options or forcing them to accept goods or services that do not meet their demands. If a customer is dissatisfied with the bank's service delivery, they have the right to terminate the contract or even the banking relationships, provided that all outstanding commitments have been met.
The Right to Safety: Banks must provide a safe and comfortable banking environment for all customers, free of dangers to their safety and health. This covers protection from accidents on the bank's facilities as well as the negative impacts of pollution.
Right to privacy and confidentiality: Bank customers have the right to secure their account information from disclosure and unlawful access by third parties. There are some exceptions to this right, such as when the bank is required by law to make a disclosure or when the customer agrees to the disclosure.
The Right of Redress: Banks must provide a way for clients to communicate their complaints or dissatisfaction. This system should be free, open, transparent, timely, and convenient. Customers have the right to be kept informed about the resolution process and can request a review of the decision by the bank, the Central Bank of Nigeria (CBN), or a court if they are displeased.
The Right to Good Service: Banks and their staff must treat customers with respect and dignity to ensure they receive value for their money. Banks must respond appropriately to customer demands and complaints.
The Right to Equality: Customers deserve to be treated equally, regardless of financial status, physical ability, age, gender, race, or creed. Banks cannot give preferential treatment to certain customers at the expense of others, while they can distinguish between consumers based on the nature of the products or services purchased.
Right to a Free Monthly Statement of Account: Banks are mandated to give customers free monthly statement of account, although exceptional requests may incur fees. These rights are vital to ensure that bank customers in Nigeria are treated fairly and respectfully. They are intended to increase accountability, transparency, and consumer happiness in the banking industry.
Does a customer have a duty to the bank?
Yes, the duties that bank customers owe to banks in Nigeria are vital elements of the bank-customer relationship. Here are some fundamental duties that consumers are expected to perform.
Duty of Knowledge and Understanding: Customers must obtain relevant information and understand the terms and circumstances of their banking activities. This duty entails being informed about the bank's products and services, as well as the related charges and contractual terms.
Duty of Care: Customers are to act with care and prudence throughout contacts with the bank. This duty involves delivering correct information, adhering to security measures, and behaving in good faith throughout transactions.
Duty of Honesty: Customers have a duty to provide accurate information to the bank and to conduct honestly in their transactions. This duty contributes to the integrity of the banking system and promotes transparency in financial transactions.
Duty to Comply with Instructions: Customers must follow the bank's guidelines and policies while making transactions. This duty helps to optimize banking procedures and ensure smooth service delivery.
Duty to Report Issues: Customers must promptly report any anomalies, frauds, errors, or difficulties that arise during their banking activities. Timely reporting helps the bank address and resolve problems efficiently.
Duty to Maintain Security: Customers are responsible for the protection of their banking information, such as passwords, PINs, and account numbers. This duty prevents fraud and unauthorized access to accounts.
Duty to Cooperate: Customers are expected to comply with the bank during investigations, verifications, and compliance procedures. Cooperation helps resolve disagreements and guarantee regulatory compliance.
Duty of financial obligation: Customers must repay credit facilities and pay agreed-upon interest on loans and financial services provided by their banks on time. Banks are responsible for providing loans and financial services to customers, thus this is one of the customer's main obligations. Customers must make timely payments to their bank to avoid default charges and penalties.
What are the possible remedies readily available to a bank customer?
There are numerous legal remedies accessible to bank customers in Nigeria who have been exploited or had problems with their banks:
Litigation: Customers may sue their bank in court for concerns such as unreasonable fees, unjustified deductions, fraud, negligence, breach of contract, etc. The relevant court depends on the amount involved: Magistrate Court for claims under ₦10 million in Lagos, and High Court for claims over ₦10 million.
Damages: Customers can pursue monetary damages from the bank in court for losses suffered owing to the bank's negligence, violation of contract, or other unlawful acts. Damages may include amounts improperly deducted or not paid out by the bank, consequential losses for missing business chances and penalties, general damages for inconvenience and mental distress.
Where the banker fails to perform his duty of care and professional diligence in his dealings with the customer, he may be held liable for breach of contract, and the customer may be able to recover damages.
Specific Performance: A court may order the bank to fulfill its contractual responsibilities, such as paying genuine claims or correcting erroneous debits. This remedy is useful when the damages alone are insufficient.
Injunction: A court may grant an injunction to prevent the bank from conducting specific acts, such as closing a customer's account without notice or exposing sensitive information. Injunctions are temporary remedies that maintain the status quo until the lawsuit is determined.
Restitution: The court may order the bank to pay back any unjust enrichment received at the customer's expense, such as excessive fees and interest. Restitution seeks to rectify the bank's wrongful profits.
Debt Recovery: If a bank makes an error in transferring funds to a customer's account, they must return the money. If they refuse, the bank may acquire a court order to debit the account or reclaim the funds through legal action.
Complaint to the Central Bank of Nigeria (CBN): The CBN has set up a Consumer Protection Department to handle customer complaints against banks. Customers can make complaints using the CBN's official website, email, or postal mail. The CBN will investigate the allegation and urge the bank to address it.
Arbitration: Banks need to establish an internal dispute settlement procedure. If a customer is dissatisfied with the bank's response, they can escalate their complaint to the Bankers' Committee for resolution. If the case remains unresolved, it may be referred to the Chartered Institute of Bankers of Nigeria (CIBN) for arbitration.
Regulatory Enforcement: The CBN and the Federal Competition and Consumer Protection Commission (FCCPC) have the authority to initiate enforcement action against banks that violate consumer protection laws. This involves issuing fines, suspending licenses, and barring erring bank staff.
Finally, bank consumers in Nigeria have several legal options for seeking restitution and compelling institutions to meet their duties. Each case's individual circumstances determine the proper treatment. Seeking expert legal counsel is advised to identify the best course of action.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.