Financial consumer protection regulation

Home / Regulatory Digest & Market Consultation / Regulatory digest / Financial consumer protection regulation

REGULATORY DIGEST ON THE REGULATION N° 55/2022 OF 27/10/2022 RELATING TO FINANCIAL SERVICE CONSUMER PROTECTION

Background

A strong consumer protection regime is key to ensuring that expanded access to financial services benefits consumers, enabling them to make well-informed decisions on how best to use financial services, building trust in the formal financial sector, and contributing to healthy and competitive financial markets (WB, 2020 report).

It is in that context that the National Bank of Rwanda has issued a new the regulation n° 55/2022 of 27/10/2022 relating to Financial Service Consumer (FSC) protection, This Regulation aims at protecting a FSC and preventing businesses from engaging infraud or specified unfair practices in order to gain an advantage over competitors or to mislead consumers.

Regulatory Key Highlights

A financial service provider shall accommodate consumer protection in its corporate culture to enable consumer centric decisions at all levels of decision making in the organization and shall have in place a structure of governance that ensures effective implementation of consumer protection requirements in accordance with the provisions of the law No. 017/2021 of 03/03/2021 relating to financial service consumer protection and this regulation.

The regulation specifies that financial service provider shall define the responsibilities related to financial service consumer protection to all hierarchical levels of the organization from lower staff to senior management.

This regulation also requires all financial service providers to publish information related to their products and services as well as accessibility or application requirements by each type of product and service offered.

The regulation prohibits a financial service provider to charge any penalty to the borrower who pays early his/her loan except as provided in this regulation and avoiding any form of unfair practices.

Further, this regulation provides and clarifies means of communication with financial service consumer that shall be in one of the following: official letter; e-mail; electronic message; phone call in a language that a financial service consumer is conversant with.

Other important provisions include the following:

  1.  Financial service provider shall put in place risk management framework clearly indicating how the financial service consumer protection risks are identified, measured, monitored and mitigated.

  2.  The internal policies and procedures guiding the implementation of financial service consumer protection requirements and fair treatment of consumers;

  3.  The internal control systems providing effective assurance for financial service consumer protection;

  4.  Prohibition of discrimination in service delivery.

  5.  In case of repayment default by a financial service consumer, the interest and penalties cannot exceed the outstanding principal debt;

  6.  A financial service provider shall not be allowed to charge penalty to the overdue outstanding amount on a loan that was written off;

  7.  Prohibited fees (account opening fees, account closing fees, cash deposit fees on own account:

  8.  Flat method for computing interest on loans is only used where interest is charged once on the disbursed amount not on every instalment amount;

  9.  The financial service consumer has the option of a private sale of his property 30 days before commencing foreclosure;

  10.  A financial service consumer must be provided with a report of the sale of the collateral;

  11.  In case of planned maintenance service, financial service consumers shall be notified before the maintenance;

  12.  The insurer shall pay the indemnity for the admitted claims within 30 days of admitting the liability;

  13.  Not debiting financial consumer account without him/her being notified and in case it was erroneously debited, it shall be refunded in a period not exceeding six (6) hours;

  14.  A financial service provider shall put place a whistleblowing policy and strictly prohibit the solicitation of bribes from a financial services consumer.

Important deadlines

A financial service provider shall submit the financial service consumer protection related policies to the Supervisory Authority within fifteen (15) days after their approval by the board of directors.

Implications for concerned stakeholders

The main implications of the current regulation on financial service provider:

  1.  To conduct an internal audit in all areas of consumer protection and report the weaknesses noted to the board of directors;

  2.  To provide a complete, clear written financial information in a language that a financial service consumer is conversant with;

  3.  Publication of fees and tariffs by a financial service provider and upload them in the comparator system using modalities provided in the directive;

  4.  Prohibiting the use of vague contract clause for any contract and give the FSC a cooling off period;

  5.  Prohibit any Changes to the contract without consumer consent.

Click here for more details:

https://www.bnr.rw/laws-and-regulations/financial-consumer-protection/laws-and-regulations/