Fidelity Bank admits to cheating customer N21million

The single minded crusade against Nigerian banks’ alleged excess charges … continues here.

ZAIN dragged before NCC for Exploitation and Cheating

Click here to read.

FINBANK VS AQUITANE

Ori Adeyemo

Ori Adeyemo

Finbank and Aquitane have taken their battle over excess bank charges to the court of law. Aquitane which conducted a private placement last year was reported to have had some of its transactions funded by Finbank especially as the oil company endeavoured to look good in the public space during its private placement exercise.

Months after the conclusion of the private placement, Finbank informed the management of Aquitane of the need to pay the sum of N7billion being debt owed to the bank. Aquitane, we were informed took issue with the bank. It invited a forensic accountant, Ori Adeyemo, to audit its transactions with Finbank. At the end of the review and auditing, Aquitane demanded a claim of N2.5billion being refund of excess charges to Aquitane.

The two parties wait patiently for the court to adjudicate on the matter.

Expert Decries Bank Charges On Returned Cheques As Illegal

As published in the Oct 13, Issue 38. ULD by ol’Victor Ojelabi

Mr. Ori Adeyemo, a forensic accountant and crusader for streamlined bank charges, has decried bank charges on returned cheques and described the fee deducted from accounts in consequence of returned cheques as illegal.

“It is trite that by virtue of Section 10, subsection of the defunct Central Bank of Nigeria (CBN) Bankers’ Tariff, a bank is allowed to charge N1,000 for a returned corporate cheque whilst debiting N300 for a returned individual cheque (to be borne by the drawer),” Adeyemo said.

“It is also true that by the provision of Section 11, subsection 6 of the subsisting CBN Guide To Bank Charges effective January 01, 2004, a returned cheque attracts 0.5 per cent of amount, maximum N5,000 (to be borne by the drawer).

“In both cases,” Adeyemo argued, “the CBN guidelines stipulate that only the drawer of a cheque should be penalised for a returned cheque and not the supposed beneficiary (who never took value for consideration anyway.) Unfortunately, we all know that this situation is not true in Nigeria as banks whimsically charge both the drawer and drawee for a returned cheque, thereby amounting to double-jeopardy especially for the drawee who never took any benefit.”

Affirming the contradiction in the statutes relating to fees sanctions as a result of returned chques, Adeyemo said: “I must emphasise that the CBN is wrong to have inserted returned cheque fee into the defunct Bankers’ Tariff as well as the subsisting CBN Guide To Bank Charges being in crass breach of the Dishonoured Cheque (Offences) Act of May 20, 1977, which makes it a nullity for the following reasons:

a. That a returned cheque is a criminal offence and not a civil offence.

b. That only the injured party (that is, the supposed beneficiary) has a right to complain about a returned cheque to the Nigeria Police or better still, the Economic & Financial Crimes Commission (EFCC) and definitely not a bank.

c. Returned Cheque Fee is a penalty which only a court of competent jurisdiction can impose on a citizen of the country.

d. No party to a contract can impose any form of penalty/fine on other parties to a contract as doing so is repugnant to natural justice.

e. That a bank has no special or pecuniary interest in a returned cheque being just a clearing vehicle for a deposited cheque.

f. That Section 9 of the subsisting CBN Guide to Bank Charges, clearing of cheque or draft in Nigeria is free. Moreover, no bank can charge any fee for collecting any deposit in Nigeria.

g. That according to the Dishonoured Cheque (Offences) Act of May 20, 1977, upon conviction; an individual is liable to two-year jail term without an option of fine while for a body corporate a penalty/fine of not less than N5,000.

h. Only the Attorney-General of a state (without excluding the Attorney-General of the Federation) has a right of criminal prosecution of a defaulter and definitely not a bank.

i. That Section 25 of the Interpretation Act (which provides that a person shall not be punished twice when guilty of an offence under more than one enactment) shall apply in respect of offences under this act.

j. Since this Section 11.6 of the subsisting CBN Guide to Bank Charges as it relates to a bank charging its customer Returned Cheque Fee is in breach of the Dishonoured Cheques (Offences) Act being a legislation of the National Assembly, the Dishonoured Cheques (Offences) Act will prevail.

“In simple language, I am saying that since a bank is not a party to a returned cheque, then such bank cannot lay claim to it. We should cast our mind to the law of privities of contract wherein it is clearly stated that only parties to a contract can sue for the enforcement of a contract and not even those in whose interest the contract was made,” Adeyemo insisted.

“You will agree with me that the initial beneficiary of a clearing cheque is the bank that went to clear the cheque that should have taken custody value for the drawee but that alone does not give room for the bank to lay any claim on the money since the bank is not the real beneficiary of the fund but just a mere custodian.

“Therefore, I cannot but submit that the present CBN Guide to Bank Charges, is fraught with illegalities to the crass detriment of bank customers thereby allowing banks to smile away at all times, leaving the customers short-changed. In fact, this was one of the issues I had wanted to address in May 2008 at the House of Representatives’ probe of the banking industry until it was fraudulently compromised by the banking cabal working in concert with the then leadership of the House Committee on Banking & Currency.”

Adeyemo argued that on account of the subsisting convention of fee sanctioning for returned cheques, he had been demanding a review of the CBN Guide to Bank Charges: “I cannot but request for a thorough review of the CBN Guide to Bank Charges wherein the opinion of every stakeholder in the industry will be accommodated as against the present one which was drafted by Mr. Jim Ovia, the Zenith Bank Plc Managing Director and so wholesomely adopted by the CBN without any input from the bank customers, thereby skewing the graph in favour of the banking industry.

“In simple words, I submit that it is totally illegal for any Nigerian bank to penalize a customer for a returned cheque, as doing so will translate to the fact that the banks have become laws unto themselves, having illegitimately taken over the job of the judiciary,” Adeyemo submitted.

BANK MDs TROOP TO FIRST BANK FOR BAIL-OUT…FINANCIAL INSTITUTIONS REJECT SHARES AND PROPERTY AS COLLATERAL

First Bank of Nigeria might have become the unofficial lender of last resort for many banks currently experiencing liquidity problems. A bank is said to experience liquidity crisis when it can not support its short term obligation to its customers by itself. Thus to continue to serve the needs of its customers, the bank may have a recourse to another commercial bank which may lend it the short term fund, usually for a period of between seven days and 90 days.

Traditionally, the Central Bank of Nigeria is supposed to be the lender of last resort for banks and other financial institutions, but FORTUNE&CLASS cross checks in the banking industry showed that rather than many commercial banks approach the CBN to augment their liquidity position, most of the banks managing directors opted to seek the support of the management of First Bank to provide short term funding support for their operations.

“I can tell you that most of the banks managing directors, these even include so called first tier (banks that are supposed to have more than a billion dollar capital base) troop to First Bank to negotiate funding support.” A banking industry insider said.

The option of adopting First Bank in the rather unusual role of a lender of last resort might not be unconnected with many commercial banks efforts to shy away from the official channel of funding provided by the CBN so as not to be labeled as desperate to survive and consequently provide ammunition for the de-marketing campaigners that are going around the sector, insinuating the parlous state of health of some banks on account of their liquidity position.

“It is easy for bankers to know who is applying for what with the CBN.” A senior banker said. “But negotiating and securing funds from a colleague banking institution has all the trappings of confidentiality and utmost secrecy. So, I think, these other banks would rather prefer to relate with First Bank on the inter-bank lending platform. At least, there is nothing illegal about that and as far as they are concerned, other practitioners and the public are not privy to these negotiations.” The banker explained.

Though the inter-bank lending platform is an organic relationship channel in the banking industry, however, concerned members of the board of directors of the bank are becoming quite uneasy with the load of demands from other banks.

A source in First Bank informed that the bank is becoming more serious with risks control measures.

“This is not a recent development. First Bank has been experiencing a deluge of demands for lending from other banks over the last six to seven months. I think that at one of the board of directors meeting, board members directed the management team to be more circumspect about their lending to these other banks.” A First Bank insider revealed.

The irony of banks seeking out bridging funds for their operations is not limited to beseeching First Bank, the industry is already abuzzed with banks chasing after deposits from the banking public in preference to approaching the CBN. The unofficial explanation for this action has the same texture with the one given by insiders for the First Bank option. Banks, industry sources said, would rather prefer to go after deposits in the public domain than to approach the CBN where data of their application for funding could be used against them when the CBN make public such data.

On the whole, nerves are gradually getting on the edge in the banking industry as interest rates and other related data show an escalation that are, increasingly becoming alarming signals.

“Even the illiterate can read the signs.” Ori Adeyemo, a forensic accountant said. “These banks are chasing after deposits with tempting offers beyond the market rate, they are not bothered with the implication for the cost of funds both to their operations and to the borrowers. Of course, we know that they are only interested in making their liquidity position look good as their different year end draw to a close. Despite the figures the CBN make public, you won’t believe that interest rate and other charges for loan in many banks are adding to about 34 percent of the loan offered. And that is where the borrower is lucky to get a bank to provide the loan. The simple truth is that lending activities have reduced significantly. That is a fact.” Ori argued.

The general impact on the liquidity position may have been further indicated with the considerable increase in the Nigerian Inter Bank Offer Rate (NIBOR) (the NIBOR is the rate at which banks lend short term funds to each other) CBN data on the NIBOR as at the preceding week, released last week, showed that the 7-day NIBOR at the inter bank market transactions increased by 123 basis point to close at 18.14 percent from the week before figure of 16.92 percent.

The 90-day NIBOR also closed higher in the same period from 17.42 percent to 17.96 percent.

“Is it not clear that there is a situation in the banking industry if banks are lending to themselves at these high rates? You can imagine what rate they will lend to their customers. Even at that, it is becoming increasingly difficult for some banks to secure funds from the inter-bank lending platform because the strong banks are considering exposures to them as highly risky.” Bisi Iyaniwura, a lawyer with specialized practice in banking and corporate law said.

Meanwhile, it has been revealed that some financial institutions now reject collaterals in the form of shares and property and even treasury bills as securities for loans.

“FORTUNE&CLASS gathered that a second tier bank had approached a discount seeking its (discount house) assistance to secure a N150 million short term fund for its operations. However, after the discount house which is a subsidiary of a another first tier bank sought the position of its principal, the first tier bank rejected all the traditional forms of securities like shares, treasury bills and property the fund seeking bank was willing to provide.

“This, ultimately, foreclosed the funding negotiation.” A source privy to the negotiation informed that the discount house demanded for trading securities.

“They said they would prefer collateral that can be easily turned to cash like goods in warehouses and some other strange stuffs.” The source informed.