The Central Bank of Tanzania has finally issued the Consumer Protection Regulations known as the Bank of Tanzania (Financial Consumer Protection) Regulations 2019 GN No. 884 of 2019 (“the Regulations”). The Regulations set the mandatory requirements for all banking and Financial Institutions (Financial Service Providers) operating in Tanzania to have in place a Consumer Protection governance mechanism. The Regulations expressly define Financial Consumer protection to include laws, institutions, practices and policies to safeguard consumer rights, enable consumers to make informed financial decisions and ensure fairness in the provision of products and services by financial service providers regulated by the Central Bank. Among others, Financial Institutions regulated by the Central Bank includes all Banks, Microfinance Institutions and Bureau de Change, among others. This update reviews the Regulation to highlight the important regulatory and compliance features as well as provide necessary general legal information to our clients.
A. Consumer protection Governance Framework
Board of Directors: The Regulations have bestowed responsibilities to the Board of Directors and Senior Management of the Financial Service Provider to ensure effective Consumer Protection. According to regulation 5, the Board of Directors is charged with responsibilities among others:-
to ensure it approves and oversee policies on financial consumer protection;
to ensure appropriate systems and processes are in place for effective implementation of financial consumer protection policy;
to oversee senior management and ensure it has adequate processes for providing information necessary for monitoring and evaluation of consumer protection initiatives; and
to employ or appoint staff who have sufficient knowledge and expertise in carrying out consumer protection activities.
Senior Management: The Regulations also tasks the Senior Management of financial service providers with administrative responsibilities on the actual implementation of the Consumer Protection. Regulation 6 specifically requires Senior Management among others:
To establish and monitor functional consumer protection coordination and collaboration mechanisms among business units and prepare reports;
To provide consumer protection compliance guidance, products, and marketing materials;
To identifying financial products and services that carry consumer protection compliance risk as well as conducting research and analysis on the patterns and trends associated with complaints from consumers;
to deploy courteous and experienced personnel to handle consumers complaints; and
to provide relevant training and supervision for the employees, agents and third parties on the requirements of Consumer Protection and these Regulations.
Policies and Procedures: In addition to the responsibilities upon the Board of Directors and Senior Management, Financial Service Provider is required to have in place relevant and appropriate financial consumer protection policies and procedures to put into operation the process and safeguards in handling consumer protection. It is thus the requirement that the policies must provide for specific roles for consumer protection at each level of operations, lay down the procedures that aim to protect consumers’ deposits and other assets against internal or external fraud or misuse and more importantly, lay down the procedures to resolve cases of suspected fraud or misuse regarding consumers’ accounts. As a matter of compliance, The Consumer protection policies and procedures must be reviewed annually and submitted to the Central Bank indicating all changes made therein.
B. Fair and Equitable Treatment of Consumers
The Regulations have laid down the required standards that must be adhered to by any Financial Institutions in Tanzania including:-
Non Discrimination of customers -based on social status, physical ability, marital status, race, gender, age, religion or tribe.
Prohibition of Unfair Business Practices -such as unsolicited loan offers; abusive debt recovery practices; applying new higher interest penalty rates to the existing balance including past purchases made at a lower interest rate; requiring payment of un-accrued interest on credit facility; automatically increasing credit limits without prior consent by the consumer; continuing to charge maintenance fees on dormant accounts or an account with balance less than maintenance fees; granting automatic overdraft facilities and imposing fees and charges without prior opt-in consent by the consumer; using opt-in clauses for facilities that auto-deduct payments and fees when loans are tied to deposit account; and bundling and tying practices on products or services.
Adhere to ethical and professional sales practices that do not apply aggressive practices or discriminate during the sales process or mis-sell or misrepresent customers. The regulations also require the Financial Institutions to disclose the potential conflict of interest, where applicable.
Ensure suitable products and Services are offered by designing and offering financial products or services that are appropriate to the varying needs, risk profile and interests of different types of consumers. More importantly, the Regulations puts a requirement to Financial Institutions to offer market-based prices for financial products and services.
Guarantee Consumer Mobility by allowing and providing the Consumer with the opportunity to cancel or transfer the financial product to another service provider within 30days upon receipt of the Consumer notice.
Use of Fair Contract Terms and Language that is understandable to Consumer and avoids unnecessary technical terminologies. The Regulations have restricted the use of English or Kiswahili as accepted contract language.
C. Financial Education and Awareness
Under the new Regulations, Financial Institutions are required to develop financial education programs to Consumers based on geographical location, gender, level of education, physical and mental ability and occupation of the consumers. The Financial education Programs envisaged by Regulations entail educations that empower consumers on important aspects of their financial lives particularly budgeting, financial planning, savings, investing, borrowing, retirement plans and self-protection against fraud.
D. Disclosure and Transparency
Disclosure of Information on Financial Products: Regulation 22 requires Financial Institutions to maintain transparency by ensuring it provides complete and accurate information in advertisements and marketing of financial products and services in a simple, plain and comprehensible language. The disclosure envisaged by the Regulations requires Financial Institutions communication to be legible, and in language that is understood and/or preferred by Consumers of the particular geographical location.
Other required Disclosures and key facts statements –
Disclosure of Fees and charges -The Regulations further imposes obligations to Financial institutions to disclose information on fees and charges applicable, the functionality of accounts, procedures for account opening and closing
Disclosure of Credit facilities on the applicable fees and costs, installment payments, interest applicable and transfer of credit facilities.
Disclosure of Statements -It is important to note that, regulation 28 imposes an obligation to Financial Institutions to provide a periodic written statement to the consumer free of charge but such service shall be provided commensurate with the type of financial product or service, its term and the type of clientele.
E. Discharge of Collateral -Regulation 29 imposes obligations to Financial Institutions to issue the customer upon full payment of its loan/obligation with a written declaration indicating the full settlement of the loan/obligation. Further, such requirement extends as well to Financial Institution to discharge and handover to the customer any property that was held as collateral within 30 days upon full settlement of the loan/obligation.
F. Protection of Consumer Assets and Information
The Regulations impose liability upon Financial institutions on the loss resulting from fraud, misappropriation or misuse involving consumer assets held, administered or controlled by the financial institution (Regulation 35). In this regard, the Regulations impose a duty upon the financial institution to refund the customer for such loss occasioned.
Further, the Regulations also requires financial institutions to protect consumer financial and personal information and never share with the third party except by express written consent of the Consumer (regulation 36 and 39). In this regard, regulation 38 requires financial institutions to formulate policies that ensure the confidentiality and security of Consumer data and establish different levels of permissible access to consumers’ data depending on the role of the employees within the organization.
G. Complaint Handling Management and Redress mechanism
The Regulations establish a requirement for the Financial Institutions to provide for a mechanism for handling consumer complaints including the manner of receiving, processing and determining consumer complaints.
Depending on the nature of the Complaint the Regulations provides for the specified time frame between 6hours to 24 hours for Financial institution to respond to a customer on the receipt of the complaint (Regulation 46). If such a complaint cannot be resolved within the time specified, the same shall be referred to the Central Bank (regulation 51) for determination (Regulation 53). It is important to note that, a complaint can be entertained by Central Bank only where the Customer has suffered loss, the complaint has not been subjected to court proceedings or where the Complaint has been finally dealt with the satisfaction of the Consumer (Regulation 52).
On the resolution of such a complaint between the Financial Institution and Consumer, the Regulations require Financial Institution and the Customer to sign a Complaint Resolution Declaration form specifically provided for under the Regulations (regulation 48).
In the event the matter has been referred to the Central Bank for determination, the Central Bank shall issue and Award. If any party is dissatisfied by the Central Bank Award, it may appeal to the Central Bank Governor within 7 days for revision of which the Central Bank governor must make a determination within 21 days (regulation 55). In the event there is further dissatisfaction, the complainant or financial institution may apply for judicial review to the Court (regulation 56).
H. Conclusion
The Financial Consumer Protection Regulations have generally set new standards on Consumer Protection in Tanzania. Although the regulations covers specifically “Financial Aspect” of Consumer Protection, but it is a right direction towards consumer protection in Tanzania. Importantly, the Regulations impose responsibilities on the Board of Directors and Senior Management of Financial service providers in Tanzania to critically prioritize consumer protection. Therefore, the Regulations require Financial institutions to deploy appropriate internal control systems, policies, procedures for effective consumer protection but also ensure sufficient reports are made to the Central Bank for supervision and regulatory purposes.
Download the English Version: FIN & LAW -Client Update- Banking Law -Financial Consumer Protection Regulation now Issued
Pakua Makala ya Kiswahili: FIN & LAW -Dondoo za Sheria- Sheria za Benki -Kanuni za Kulinda Wateja wa Mabenki na Taasisi za Kifedha
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