CFTC alerts financial service providers of complaints being received from consumers

The few who honoured the invite together with some members of the media

* Suspected collusive conduct, through uniform pricing of interest rates

* Non-disclosure of material information especially when marketing loan packages

* Where the terms & conditions are indicated that they shall apply but are usually in very unreadable small print fonts

* Frequent inaccessibility of e-financial services that include poor access to ATMs and electronic payments services due to network problems

By Duncan Mlanjira

In its soft compliance enforcement through advocacy to nip in the bud unfair trade practices, the Competition & Fair Trading Commission (CFTC) has alerted financial service providers of complaints being received from consumers.

Taking advantage of this year’s International Trade Fair at Chichiri in Blantyre, where CFTC also has a pavilion, the Commission invited the financial sector — commercial banks, insurance companies, mobile money service providers and micro finance institutions — to a business session but just a few pitched up; notably Britam Insurance, NICO, NBS, FDH, Reunion Insurance, FINCA and non from the mobile money service providers.

The competition and consumer issues in financial service sector that CFTC’s Executive Director, Lloyds Vincent Nkhoma alerted the business guests that pitched up included suspected collusive conduct, through uniform pricing of interest rates; deposit rates, lending rates and interest rate spread, saying it appear there are some tacit collusion.

He also highlighted financial scams/fraud; dubious Sim-swaps and account hacking; customers’ money fraudulently transferred from bank accounts; and weak security parameters for electronic funds transfers platforms.

Also being complained of is non-disclosure of material information especially when marketing loan packages where the terms & conditions are indicated that they shall apply but are usually in very unreadable small print fonts.

There is also frequent inaccessibility of e-financial services that include poor access to ATMs and electronic payments services due to network problems and also concerns on management of dormant customers’ accounts in which there is continued charges on dormant accounts without any cut-off point where the customer is not paying premiums;

Consumers are also complaining of being charged for failed transactions where cash is not dispensed on other banks’ ATMs and that inter-bank ATM withdrawal fee is usually not refunded.

There is also delayed reversals on failed transactions or mistaken transactions that can take up to 5 days for commercial banks  and 2 days for mobile money — and sometimes no refunds for failed transactions on inter-bank ATM withdrawals.

High interest rates on loans was also raised, where there are gaps in huge interest for commercial banks while micro-finance institutions’ interest rates are also high and charged monthly.

Some of the promotions the financial services flighted were reported to be misleading and deceptive advertising and that offer prizes with no intention of supplying them and that prizes may not be awarded in a transparent manner.

They are also weak and ineffective complaints handling mechanisms that include failure to timely and effectively redress complaints.

Thus Nkhoma — while emphasizing that their mandate include soft enforcement through advocacy like the business session with the financial service sector as well as through public awareness — warned that the consequences of failing to comply with Competition and Consumer Protection Law are serious.

They include fines imprisonment for up to 5 years; civil actions by third parties and reputation damage — that can lead to collapse of business while also advising that all businesses should ensure that they have adequate policies and procedures in place to provide early detection and address the danger areas.

He informed the business sector that the Competition & Fair Trading Act (CFTA) has been amended and is undergoing review by the government legal experts and the proposed areas of reform made by the Commission include revision of fines and penalties to be charged at percentage of turnover.

Currently, the fines are at K500,000, which was high then when the CFTC was enacted in 1998, which today companies can readily honour but continue their unfair trade practices.

There will also be mandatory merger application; introduction of on-spot fines; CFTC to replace Consumer Council under Consumer Protection Act (CPA) as well as commitment and settlement procedures.

Currently, CFTC is engaging the business sector to indulge in compliance programme which shall inform the company boards, management and employees on how to conduct their tasks without exposing the company to regulatory risk.

It will also help the company to correct competition and consumer related violations and assist them to avoid future transgressions through constant monitoring and feedback.

The way to go includes creating compliance awareness in the organization about CFTA and CPA; ensuring internal monitoring mechanism to detect and report on any suspected breach of the CFTA or CPA.

This can be easily be made possible by appointment a compliance Team led by a legal expert and conducting competition law training on appropriate practices under competition and consumer protection law — which CFTC is readily available to facilitate.

The trainings shall open eyes on businesses on how their firm relates with other competitors i.e. horizontal agreements in order to put in place rules/procedures that prevent members of staff from participating in practices/conducts that would constitute collusion.

The firms shall also relate with downstream players — customers, suppliers and avoid agreements that undermine other suppliers or exploit customers and consumers.

The firm will also relate well with consumers since they will put in place rules/procedures that prevent the company from engaging in conduct that violates consumer welfare

On mergers and acquisitions, the business is being asked to always notify the Commission well in advance to seek guidance.

Nkhoma also appraised the business sector that they are aware that once a firm receives a notice of inquiry from the CFTC, the companies opt for private settlement with the complainant.

He indicated that while this private settlement is not covered under the CPA, once the Commission has issued a notice of inquiry on any complaint received, the respondent has the right to contact the Commission and offer to enter into a discussion with the complainant with the view to settle the matter informally.

“Such informal settlements are key in avoiding bad publicity that could be costly to a company,” he said. “The Commission benefits from such settlements by focusing on more pressing matters thus ensuring an efficient allocation of resources.

“What is required for companies is to have a compliance officer who is alert to all the complaints received against the company and quickly engage the complainants before the matter reaches the decision stage of the Commission.”