CBS puts an end to many bank charges |01 March 2013

The CBS will also from now on be in a position to impose fines to banks breaking certain regulations, a move she said will help to immediately correct situations which could affect the economy if the former methods of dealing with errant banks through courts of law is followed as it often takes too long to resolve issues.

That option will, however, remain if the bank found to break the regulations does not agree to settle the matter out of court, “which would be a cheaper choice”.
“The CBS has issued two regulations, one on bank charges and fees and the other one on compounding of offences,” said Ms Abel.

She said the first has come as a result of complaints the CBS has been getting from bank clients and also from the central bank’s evaluation of the competitiveness of the financial system.

“The regulations aim to make it easier for clients to switch banks by eliminating what are called ‘exit fees’ which clients incur when they switch to another bank, namely account closure fees and loan prepayment fees,” she said, adding when it is easy for clients to switch banks, the banks are encouraged to compete with more favourable terms and conditions in order to keep clients from switching banks and also to attract other clients.

Also abolished are fees charged for: dormant accounts, depositing and withdrawal of cash over the counter, transfer of funds by a customer between accounts held by that customer with the bank, savings and loan account statements, automated teller machine withdrawal using a debit card – even when the withdrawal is from another bank and not that of the card issuer, failure to make monthly deposit into a customer’s account and loan amortisation schedules.

In a statement, the CBS said loan amortisation schedules are statements that detail principal and interest loan repayment over the life of a loan.
“Banks are not allowed to charge a fee for these statements when it is the first schedule that is being provided or when the bank has initiated a change in the terms and conditions, for example interest rates,” said Ms Abel.

“On this point, the Central Bank wishes to highlight that it encourages banks and clients to move towards electronic statement that is cost efficient and easily accessible for many clients,” she said, urging people to use e-mails to get bank statements as they are faster, more convenient and cheaper.

“In addition, the regulations set a maximum processing fee of 0.5% of loan amount for first time home buyers. They also prohibit the application of any fee during the application and disbursement process,” she said.

Banks are now required to publish their charges and fees on a quarterly basis in a daily newspaper and advise the public as and when there are changes in charges and fees.
“This requirement formalises the practice that is already being observed by banks and strengthens the requirement for banks to ensure the availability of accurate and up-to-date information in the public domain,” she said.

“Adequate disclosure in the public domain allows clients to make informed decisions by comparing charges and fees between banks and can potentially reinforce competitive pressures among banks.”
She said the regulations will hopefully encourage banks to serve clients more favourably and encourage them to give more credit to clients.

On the offences, the CBS statement said the new Financial Institutions Act (Compounding of Offences) Regulations allow the Central Bank to compound certain offences committed by banks, bureaux de change or any other person in relation to financial institutions in contravention to the Act.

“Compounding of offences allows for a party to be penalised without instituting legal proceedings in court, which is a relatively lengthier process.  The regulations provide for compounding of offences to be carried out upon agreement by the party and in consultation with the attorney general,” it said.