CBK will spy on lenders who defy consumer rights


CBK will spy on lenders who defy consumer rights


Central Bank of Kenya. PHOTO PHOTO | NMG

The Central Bank of Kenya (CBK) is seeking a consultant to spy on commercial banks and microfinance lenders in an attempt to expose consumer offenses such as hidden fees, false advertising, reckless lending and bribery.

The consultant is expected to carry out covert operations in the bank hall while posing as a customer in search of practices that violate CBK’s guidelines for consumer protection.

Banks that break the rules risk the withdrawal of licenses, the postponement of directors and a fine of DKK 5 million.

The survey intends to conduct a mystery shopping survey to confirm banks’ compliance with consumer protection guidelines. The advice will be limited to a period of three months from the start date, ”says CBK.

“(The Consultant will) conduct mystery shopping visits to various institutions approved under the Banking Act.”

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Mystery shopping is an activity where one pretends to be a customer while being hired by a third party to check a company’s products or services.

CBK checks are intended to offer greater protection to bank customers who have suffered from arbitrary increases in fees and interest rates on loans as well as several fees hidden in small print.

The Consumer Protection Guidelines prevent banks from engaging in unfair or misleading practices such as false advertising or humiliation of a consumer.

It requires banks to provide full disclosure of their fees and interest rates and to show the cost of their service prominently on branches, product promotions and websites.

Lenders are restricted from reckless lending and are required to follow up on borrowers and ensure that they have used borrowed funds for the intended purposes.

The rules, which are now supported by a data protection law, set limits on how personally identifiable data collected by banks is to be handled, stored and shared.

CBK places security responsibilities on banks in the midst of the unprecedented wave of online banking fraud, mainly through fraud.

Banks are required to advise consumers on how to protect their accounts, checkbooks, bank cards, PINs or other documents as well as account information.

“An institution must provide consumers with one or more dedicated telephone lines so that consumers can report a lost or stolen card, checkbook or bank book or a suspicious transaction,” says CBK.

Despite pressure from the regulator to instill transparency in banking sector pricing, previous studies by the Financial Sector Deepening (FSD) Kenya have raised a red flag over hidden costs imposed on unsuspecting consumers.

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The report found that banks submit information that does not fully respect the tariff situation.

“Although banks are required by the Central Bank of Kenya (CBK) to publish” tariff guides “with all their fees and charges, the FSD survey found that many were either outdated, incomplete or lacked account-specific information,” the FSD said in a study if results put the regulator in place in order not to protect consumers.

“Despite visiting over 30 bank branches and consulting rate guides, customer care representatives, banking websites, inquiries from colleagues and friends, over several weeks in 2015 and 2016, we still could not obtain consistent pricing information,” the FSD said in the survey.

The report outlines the results of a two-year study conducted by FSD Kenya, a UK-funded NGO, to understand the cost of banking services in Kenya.

It says two rounds of mystery shopping surveys were completed in October and November 2015 and 2016 to build a database and measure the cost of basic bundles of transactions such as opening, operating and closing bank accounts.

However, while the survey was conducted, the report says it became clear that bank price data is difficult to obtain and that market information is still opaque.

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To collect data, researchers visited several bank branches that pretended to be customers, as well as customer service calls and web searches to collect data.

The researchers said some data were difficult to obtain and validate, even from different branches of the same bank.

Now CBK is looking to complete its own fresh mystery shopping exercise. Last year, it marked nine unnamed banks for non-compliance with various supervisory guidelines and rules compared to 13 in 2020.

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