On
AELEX was a participant at the recently concluded 22nd National Seminar on Banking and Allied Matters for Judges, a two-day seminar organized by the
Discussions at the seminar highlighted the myriad of challenges plaguing the banking sector in
Bankers Orders
Prominent among the issues faced by banks is the practice of issuing 'Bankers Orders' by Magistrate courts on the application of police officers. This practice has lingered despite several judicial pronouncements on its inappropriateness1. Some of the rulings of the Courts on this point includes:
"The banker's order/order freezing and/or enabling the post-no-debit cannot be validly issued pursuant to a non-existent/repealed Bankers Order Act 1847 and any other irrelevant foreign law. "
"A magistrate lacks the powers to make bankers' orders and/or order freezing or enabling a post no debit on bank accounts pursuant to non-existent/repealed section 7 of the Banker's Order Act 1847."
According to the banks, the police officers relying on these orders pressure the banks to freeze a bank customer's account. This portends adverse consequences for banks as the banks are exposed to legal proceedings by the customers upon their accounts being frozen. The banks end up incurring litigation costs and, in some cases, damages in favour of their customers. This negatively affects the growth of the bank as well as depositors' funds.
Post-No-Debit
Similar to the above is the post-no-debit instruction given by some law enforcement agencies to banks on bank customers' accounts without the proper procedure of obtaining a court order as established by a plethora of judicial authorities. Banks in these scenarios are put in a precarious position as they are drawn between disobeying the post-no-debit instruction and facing litigations by customers if such instructions are obeyed. The law is clear on the point that where an account is frozen/restrained without a court order first sought and obtained, the fundamental right of the customer is deemed breached and both the authorizing authority and the bank, may be held liable for this as held in the case of
However, we note that there are instances where the EFFCC can direct a bank to effect a post-no debit on a customer's account without an order from the court. By virtue of section 7 of the Money Laundering (Prevention and Prohibition) Act, 2022, the EFCC is permitted to place a temporary stoppage on a suspicious transaction or account for a period not exceeding 72 hours prior to when a court order is obtained, and the bank is compelled by law to comply with such stop order.
Where no order of Court to block the account or transaction is obtained after the expiration of the temporary stoppage, the restriction on the account must be lifted and the transaction processed. This is in line with the
Also, in
Banks are encouraged only to comply with these post-no-debit instructions where such complies with the law.
Inappropriate Deployment of Garnishee Orders
Another challenge facing the banking sector is the inappropriate deployment of garnishee orders. In this case, a judgment creditor proceeds to obtain a garnishee order Nisi against all banks, whether the judgment debtor has an account with said banks or not. This exposes the banks to costs such as the appointment of a lawyer as well as costs involved in filing of documents in court. Further to this, where there is a delay by the bank to file the relevant affidavit, the banks in most cases, end up getting an absolute order against them for the payment of the full judgment debt, regardless of whether the judgment debtor maintains an account with them or not.
We note the difficulties faced by judgment creditors in ascertaining where a judgment debtors' funds are domiciled, hence the need to obtain an order nisi against virtually all the banks requiring them to file an affidavit showing cause. Banks are encouraged to ensure that the relevant affidavits are filed within time to avoid an order absolute been made against them for the entire judgment sum. To save cost, a retainer can be entered with a law firm to deal with such cases (on an annual basis) at a reasonable cost, rather than treating the cases separately.
Another challenge faced by the banking sector revolves around cyber-crimes and attacks on the banks. Recently, a telecommunications company in
Resolution of Disputes in the Banking Sector
We note that disputes/conflicts are bound to arise in business relationships; what is key is how these disputes are resolved. The disputes referred to may be between a bank and its customer, 2 (two) banks, or banks and a regulator. We note that while litigation may be an option/avenue for dispute resolution (including in the banking sector), there are other ways to resolve such disputes expediently. Some of the available options are the
Bankers Committee's sub committee on Ethics & Professionalism
We will briefly consider the Bankers Committee's sub committee on Ethics & Professionalism ("the subcommittee") particularly as an alternative dispute resolution body. The subcommittee was established on
An interesting point to note by stakeholders in the banking sector (including bank customers) (potential complainants) is that, where a bank is penalized but refuses or delays in paying the penalty, a deduction can be made from the bank's fund with the
- The complainant must ensure that the complaint contains the complainant's name and address as well as that of the bank. The complaint(s) should also be stated briefly and clearly.
- A complainant using the services of a consultant must issue a letter of authority to said consultant.
- Complaints are to be submitted to the Secretariat of the Subcommittee (CIBN). Such complaints must be submitted in duplicate.
- The complaint is to be acknowledged immediately with the letter of acknowledgement containing a clause prohibiting all parties to any issue before the Subcommittee from commenting on the matter in the mass media pending the resolution of the case or initiation of Court proceedings.
- The Secretariat will request for a response from the defendant as well as other parties mentioned in the complaint.
In
The department carries out three key functions:
- Complaints Management: Resolving consumer complaints against financial institutions under the CBN's oversight.
- Market Conduct & Development: Establishing fair and responsible conduct among financial institutions concerning their customers.
- Consumer Education/Financial Literacy: Promoting and disseminating financial education and awareness among consumers and potential consumers to enhance their economic well-being.
Rather than going to the Court as a first recourse, an attempt can be made to resolve disputes at the CPD. This will save time as well as cost for both the complainant and the bank.
Conclusion
In conclusion, the banking sector is a key sector in the Nigerian economy and as such its sustainability, growth and development is paramount to the development of our eco-system. The implementation of the proposed solutions to the challenges facing the banking sector, would go a long way in improving the financial architecture in
Footnotes
1 A plethora of judicial authorities exist where the Courts have expressly condemned this practice. Esiso v. Inspector General of Police & ors with suit number FHC/ABJ/CS/1635/2019
2 (2019) 5 NWLR @ pg. 30
3 (2021)LPELR 53173(CA)
4 (2022) LPELR-57973(CA)
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.
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