On Thursday, Nigeria’s Central Bank shared new guidelines for banks and it immediately caused some criticism of the bank on social media.
So Alex took the task of trying to put the new guideline in context in this week’s edition of the BackEnd.
The what: According to guidelines from the Central Bank of Nigeria (CBN), customers will be required to pay either 1% of the value of a failed direct debit or ₦5,000 whichever is greater.
FYI: A direct debit is simply an instruction from you to your bank to make payments when they are due.
Issued in December 2019, the CBN’s Guide to Charges by Banks, etc says the charge will only apply to transactions that fail due to the account being unfunded. Your bank will take the fine whenever the account becomes sufficiently funded again.
The why: Although there’s no publicly available data, the thinking is that a number of customers give their banks direct debit orders and fail to fund their account. Until now, it’s been an inconvenience that the bank has had to deal with.
Grey areas? Will the new guidelines apply to your Netflix, Apple or ad payments on Facebook which are somewhat recurring payments? The clearest answer at this time is maybe.
Loopholes: Don’t get any bright ideas: if you choose to stop funding a particular account because you’re looking to dodge a fine, the long arm of Nigeria’s Global Standing Instruction will find you. Passed in August, GSI means that any debt you owe to any Nigerian bank can be collected from any other bank account you run that is funded.
Despite all of this, in the end, Alex’s question this week is simple: While it is a pesky thing to have direct debits on accounts that are not funded, is CBN’s fine a fair reaction?
Read the BackEnd here.