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The Nigerian First Published: May 1980

Journal of The Chartered Institute of Bankers of Nigeria, April - June, 2015 ISSN 0197-6679 N500.00

PRACTICAL ISSUES FOR STAKEHOLDERS

Characteristics of the

Financial Ombudsman Services

Implementing Office of the Nigerian FinancialOmbudsman: Challenges and Way Forward

An Appraisal of the Proposed Officeof the Nigerian Financial Ombudsman Services

Financial Conflict Resolution in Nigeria:Existing Platforms and the New Ombudsman Office

Financial Ombudsman Services in Nigeria:Facilitating an Ethical Business Environment

Through an ICPC/Banking Industry Initiative


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Federalism and National Building; T h e

Nigerian Banker, Vol. 1 No. 1, June, Lagos.

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are liable thereon.

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The Editor: The Nigerian BankerThe Chartered Institute of Bankers of Nigeria, PC 19, Adeola Hopewell Street

P O Box 72273, Victoria Island, Lagos

Tel. 2617674, 4617925, 4617924 Website: www.cibng.org E-mail:[email protected]


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Characteristic of theFinancial Ombudsman ServicesBy Muhammed Dele Belgore, SAN, FCIArb

Contents

Implementing Officeof the

Nigerian Financial Ombudsman:

Challenges and Way Forward

By A.A. Adeleke, HCIB

ditorial Team

Seye Awojobi, FCIB

Chairman

Rukayat Yusuf

Editor

Ben Igbokwe

Assistant Editor

Izundu Chukwuekere

Member

Muideen Isiaka, PhD

Secretary

The Nigerian Banker

(ISSN:0189-6679)

Published by

The Chartered Institute of Bankers of Nigeria

Letters to the Editor should be sent to:

The Nigerian Banker,

Bankers House,

PC 19, Adeola Hopewell Street,

P.O. Box 72273

Victoria Island, Lagos, Nigeria.

Tel: 4617924, 4617925, 4617926

Telefax: 4618930E-mail: [email protected]

Copyright Control

All rights reserved. Reproduction in any

form, in whole or part without

permission, is forbidden.

Opinions expressed in the Journal

are not necessary those of the Institute,

its Council or Management.

Cover Design & Layout

The CIBN Press Ltd

Printed byThe CIBN Press Limited

7, Turton Street, Sabo-Yaba, Lagos.

E-Mail: [email protected]

The Nigerian Banker, April - June 2015 | 1

An Appraisal of the Proposed Officeof the Nigerian Financial Ombudsman Services

Financial Ombudsman Services in Nigeria:Facilitating an Ethical Business EnvironmentThrough an ICPC/Banking Industry Initiative

4

11

Page 23

Financial Conflict Resolution in Nigeria:Existing Platforms and the New Ombudsman Office

Page 26

Page 17


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(May 2014 - May 2016)Office Holders

Rep. of Body of Past Presidents

Other Elected Members

Co-opted Members

Branch Representatives

Regulatory Institutional Representatives

Academics Institutional Representatives

Banks' Representatives

Sectoral Associations' Representatives

Executive Management

Otunba (Mrs.) 'Debola Osibogun, FCIB - President/Chairman of CouncilDeacon Segun Ajibola, Ph.D, FCIB - 1st Vice President

Uche M. Olowu, Ph.D, FCIB - 2nd Vice PresidentMr. Bayo Olugbemi, FCIB - National Treasurer

Dr. Segun Aina, OFR, FCIBMr. 'Laoye Jaiyeola, FCIB

Aare Rahmon Adewale Adeyemi. FCIBMr. Pius Oladeji Olanrewaju, FCIBMrs. Tinuola A. Thompson-Ajayi, FCIBGabriel Obia Chinedum Okenwa, MON, Ph.D, ACIBMr. Kenneth Opara, FCIBMr. Dele Alabi, FCIB

Mrs. Ibiye Ekong, HCIBMrs. Yvonne Isichei, HCIBDr. Suleyman A. Ndanusa, OON, HCIBSenator Isa M. Galaudu, FCIBHon. Bode Ayorinde, Ph.D, B.L, FCIB

Mr. Chukwuka Boniface Chukwuma, ACIBMr. Amity Ijuwo, FCIBChief M. Olu Aborisade, FCIBSir. Stephen Nwaduiko, FCIB

Mrs Silifat Taiwo Ige, FCIB

Mrs. Agnes Martins, HCIB - Director, Banking Supervision, CBNAlh. Umaru Ibrahim, mni, FCIB - Managing Director/Chief Executive, NDIC

Prof. Julius A. Okojie - National Universities CommissionMr. Jamil Shehu Nakwarai - Federal Ministry of EducationDr. Masa'udu Adamu Kazaure, mni - National Board for Technical Education

Mr. Oladipo Balogun, FCIB - First City Monument Bank Plc

Mr. Michael Larbie - Rand Merchant Bank LtdMr. Ifie Sekibo, HCIB - Heritage Bank LtdMr. Segun Agbaje, HCIB - Guaranty Trust Bank PlcMr. Bisi Onasanya, FCIB - First Bank of Nigeria LimitedMr. Segun Oloketuyi, FCIB - Wema Bank Plc

Femi Johnson, Ph.D, HCIB - Mortgage Banking Association of NigeriaMr. Gimba Ya'u Kumo - Association of Development Finance InstitutionsMr. Valentine Whensu, MCIB, FCIB - National Association of Microfinance Bank

Mr. Seye Awojobi, FCIB - Registrar/Chief Executive

Mr. Segun Shonubi - Group Head, Membership Services/Finance & Corporate ServicesMr. Akin Morakinyo - Group Head, Capacity Building/Certification/CCPD & E-LearningMrs. Rukayat J. Yusuf - Group Head, Learning & Development/CIBNCFSMr. Festus M. Anyanwu, FCIB - Group Head, Ethics and Professionalism

The Governing Council



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From The

Editors Desk

Effective and efficient resolutions of disputes in financialtransactions between customers and financial services providers

are critical for a healthy financial system. More importantly, an

out-of-court complaints' management platform reposes consumers'

confidence in their providers and promotes a win-win situation for the

two parties. While this is the ideal, the reality in most cases is that

customers and providers rarely find a common ground in settling their

differences without the need for a recourse to litigation.

However, the bureaucratic bottlenecks and the attendant high cost of

litigation discourage consumers, particularly those on the lower rungs ofthe social ladder, to seek redress through lawsuit. The impact of suchreluctance in lodging financial malpractices and maltreatment through thechannel of litigation has been a drag to the much desired inclusiveness inthe financial sector. Most financial services consumers now become abank unto themselves because of previous financial services providers'reluctance to address their complaints. Hence, they are deprived of thenumerous advantages derivable from patronizing accredited financialinstitutions.

To address the aforementioned challenges, most countries now haveAlternative Dispute Resolution (ADR) channels to resolving disputes outof court. Although these ADRs have operated for donkey years in some

jurisdictions, albeit in a less formal form, it has now gained a wideracceptance and has become a veritable dispute resolution platform withgovernments' support. Prominent among these ADRs is the FinancialOmbudsman Service that has gained currency in virtually all thecontinents of the world. Nigeria recently joined the list with the passage ofthe Bill on the Office of the Nigerian Financial Ombudsman by its

th7 Legislative Assembly.

While the passed Bill is yet to be signed by the President, there areheightened concerns on its prospects and challenges. Questions have been

raised on how to ensure that there are no duplication of functions betweenthe new Office, if the Bill is eventually signed, and similar existingagencies/departments like the Consumer Protection Council of thecountry, the Central Bank of Nigeria's Consumer Protection Departmentand the CIBN/Bankers Committee Sub-Committee on Ethics andProfessionalism. Also at the front burner of the concerns are thequalifications of the Ombudsmen and the funding of the Office.

These challenges, notwithstanding, Nigeria would do well to take a leaffrom countries that have successfully managed their FinancialOmbudsmen Services without neglecting the peculiarities of the country's

system. This would afford us the opportunity to effectively deal with thelegitimate worries of the various stakeholders.

Rukayat Yusuf

The Nigerian Banker, | 3April - June 2015


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Implementing Officeof the

Nigerian Financial Ombudsman:

Challenges and Way Forward

By A.A. Adeleke, HCIB

1.0 INTRODUCTION

financial architecture is incompletew i t h o u t a n e f f e c t i v e

Aconfl ict/complaint resolution

mechanism. Like in all aspects of humanendeavour where there is regulareconomic and/or social intercourse,conflicts and complaints are bound tooccur from time to time in the financialspace between providers and consumersof financial services or even betweenprov ide rs o f f i nanc ia l se rv i cesthemselves.

Thus, an effective conflict/complaint

resolution mechanism in the financialservices sector becomes imperative tosmoothen the relationship between theproviders and consumers of financialservices. A smooth relationship amongstplayers in the financial domain is expectedto have some positive rub-offs on thesector and, by extension, the economy atlarge, given the established high positivecorrelation between the fortunes of thesector and the health of the economy.

F o r i n s t a n c e , a n e f f e c t i v econflict/complaint resolution mechanismis expected to deepen financial inclusion.This is especially so in a country likeNigeria where a large percentage of thecitizens are still unbanked. It is expectedthat more of the unbanked citizens will beencouraged to imbibe the banking cultureand also patronise other financial servicesonce they are aware that the alreadybanked regularly have their complaintsspeedi ly reso lved. An ef fect ive

conflict/complaint resolution mechanismin the financial domain is also expected topromote financial literacy because of theopportunities thus provided for both the

providers and consumers of financialservices to assert their rights.

It is noteworthy that regulators of the

Nigerian financial sector, particularly theCBN, have, in collaboration with otherstakeholders under the Bankers'Committee and the Financial ServicesRegulation Co-ordinating Committee(FSRCC), been actively promotingalternative effective conflict/complaintresolution mechanism in the financialsector outside the formal legal system.

Apart from being in tandem with practicesall over the world, the promotion of an

alternative effective conflict/complaintresolution mechanism by the CBN andother regulators is also informed by theneed to make the cost of conflict resolutionless expensive and complaint turnaroundtime faster, all in the bid to expand thefrontiers of financial inclusion and financialliteracy. In this regard, we can point ata l t e r n a t i v e c o n f l i c t r e s o l u t i o narrangements like: The Ethics andProfessionalism Sub -Committee of theBankers' Committee and the Consumer

Protection Department of the CBN.

Perhaps, a more recent initiative to furtherpromote an alternative effectiveconflict/complaint resolution mechanismin the Nigerian financial space was theattempt to set up the FinancialOmbudsman Services. Already, a billentitled: 'Office of the Nigerian FinancialOmbudsman, 2010', had been passed by

ththe 7 National Assembly.

The rest of the paper is structured into foursections. Section two examines the natureof financial ombudsman services, theirorigin and their modus operandi. In

section three, we give highlights of theFinancial Services Ombudsman Draft Bill,2010, while in section four, we examinethe l ike ly pract ica l issues that

stakeholders might have to contend withwhen the Office of Financial Ombudsmaneventually takes off in Nigeria. Thereafter,we propose the way forward foraddressing the likely issues. The lastsection of the paper contains ourconcluding remarks.

2.0 FINANCIAL OMBUDSMAN: ORIGIN

AND MODUS OPERANDI

2.1 Origin and Definitionsinancial Ombudsman' was derivedf r o m t h e S w e d i s h t e r m :F'Ombudsman' whose origin could

be traced to the nineteenth century. Theterm is now used worldwide to refer to animpartial and independent officer whoreceives inquiries and concerns frompeople and work to achieve fair solutions.Financial Ombudsman, as a variant ofOmbudsman, is a financial expert whosettles complaints between consumers

and providers of financial services orbetween the producers of financialservices themselves.

Although the Bill that was recently passedby the National assembly in Nigeria seeksto establish the 'Office of the NigerianFinancial Ombudsman,' what obtains in ajurisdiction like Malaysia, is 'the FinancialOmbudsman Scheme', and in jurisdictionslike the United Kingdom and the UnitedStates of America, is the 'Financial

Ombudsman Services' . Whether'Financial Ombudsman', 'FinancialOmbudsman Scheme' or 'FinancialOmbudsman Services', the main objective



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is the resolution of complaints ofconsumers of financial services againstthe providers of financial services orcomplaints of a producer of financialservices against (a) fellow producer(s) .

2.2 Features of Financial OmbudsmanThe establishment of a financialOmbudsman should adhere to thefollowing six underlying principles:

Independence: The scheme

should be established by an Act

of Parliament and should be

independent. To guarantee its

independence, the scheme

s h o u l d a l s o h a v e a n

independent governing bodywhile the enabling Act should

f u r t h e r g u a r a n t e e t h e

i n d e p e n d e n c e o f t h e

O m b u d s m a n t h r o u g h

appointment, re- appointment

and remuneration.

Fairness and Impartiality: The

procedures that govern the

investigation work of theOmbudsman must ensure

commitment to the fundamental

requirements of procedural

fairness of right to be heard.

Furthermore, there should be

no conflict with either the

consumer or the provider of

financial services, and there

should be clear procedures to

inform all parties of the decisionarrived at and the reasons for

the decision.

Accessibility: The procedures

for adjudication by the Financial

O m b u d s m a n s h o u l d b e

straightforward, clear and easy

to understand by all parties.

Accountability: The Office ofthe Ombudsman and its

governing body should be

accountable for their decisions

and actions, including the

stewardship of funds.

Transparency: Information on

the activities and modus

operandi of the Ombudsman

should be freely available. The

decisions and the rationale for

t h e d e c i s i o n s o f a n

O m b u d s m a n s h o u l d b e

communicated to all parties

while jurisdictions, powers and

a p p o i n t m e n t o f t h e

Ombudsman must be publicly

available.

Effectiveness: To ensure

effectiveness of the Financial

Ombudsman, the adequacy of

the scheme's coverage and

available remedies must be

guaranteed. The Ombudsman

should also have sufficient

powers to resolve disputes

w i t h o u t i n t e r f e r e n c e .

Furthermore, there should be

compliance with the scheme's

decisions and there should be a

reasonable time frame to

resolve disputes.

2.3 Modus Operandi A Financial Ombudsman is expected to

h a v e w e l l - d e f i n e d o p e r a t i o n a lprocedures. Although there could be slightvariations in the procedures acrossjurisdictions, the common process can besummarised as follows : A consumer orproducer of a financial service lodges acomplaint with the Financial Ombudsmanafter having lodged the same complaintwith the affected financial institution andthe complaint is not resolved by thefinancial institution within a specifiednumber of days of receipt of the complaint

or, alternatively, if the complaint had beenrejected or handled unsatisfactorily by the

institution in question.

However, the Financial Ombudsman mayreject or refuse to inquire into such acomplaint if, in the opinion of theOmbudsman, the complaint is frivolous,

vexatious, or is made in bad faith or iswithout suf f ic ient cause or thecomplainant has not pursued thecomplaint with due diligence or there wasno real loss or damage or inconvenienceto the complainant.

If the Ombudsman is convinced that thecomplaint is worthy of investigation, then itmay request for all the necessaryinformation and documents from thecomplainant and the affected financial

institution. Thereafter, the Ombudsmanwill summon the parties or any otherrelevant person to appear before it.

Conventionally, the office of the FinancialOmbudsman may award compensation,interest or cost to a successfulcomplainant or give direction in respect ofany complaint. The award or direction isalways binding on the parties involved.

3.0 THE FINANCIAL OMBUDSMAN

SERVICES ACT OF 2010

e understand that The Office oft h e N i g e r i a n F i n a n c i a lWOmbudsman Bill, 2010 had

thbeen passed by the 7 National Assemblyand is at the time of writing awaitingpresidential assent. However, The DraftBill seeks to establish the Office of theNigerian Financial Ombudsman, as anindependent body charged with the

responsibility for resolving financial andrelated disputes in the Nigerian financialservices sector and for related matters.

The draft bill has twenty-five sectionswhich are arranged in five parts. The billcontains provisions on matters like: theestablishment, appointment, resignation,removal from office, functions and powersof the Nigerian Ombudsman andAdjudicators as well as complaints'procedure and award of remedies and

enforcement of rewards, etc.



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Given that we are not privy to the details ofthe passed Bill, we would not be able to doan objective review of it by benchmarkingits provisions against the key universallyacceptable principles of a FinancialOmbudsman highlighted above.

4 . 0 F I N A N C I A L O M B U D S M A N

S E R V I C E S I N N I G E R I A :

P R A C T I C A L I S S U E S F O R

STAKEHOLDERS

lthough the office of the FinancialOmbudsman is yet to take off inANigeria, it is in order for us to be

proactive by identifying the practicalissues that stakeholders may have to

contend with from time to time when theoffice is eventually established. But beforecontextualising the likely issues that couldbecome prominent when the schemetakes off in Nigeria, we should first identifythe stakeholders.

4.1 StakeholdersA guide to the identification of thestakeholders in the provision of FinancialOmbudsman services in Nigeria is givenby section 3 of the Draft Bill which provides

that the Office of the FinancialOmbudsman in Nigeria is empowered toinquire into and settle any complaint ordispute between: individual or corporateentities, financial institutions, regulators inthe financial services sector, and financialinstitutions and regulators in the financialservices sector. Another guide is providedby section 4 of the Bill.

The section identifies the transactions inwhich the office of the Financial

Ombudsman in Nigeria can adjudicate asrelating to: Banking, Mortgage, Insurance,Investment and Securities, CustomerCredit, Pensions and other non-bankingfinancial institutions.Given the two guides, we can identify thestakeholders in the provision of FinancialOmbudsman services in Nigeria ascomprising consumers of all financialservices, whether individual or corporate,financial institutions (the providers of theservices, whether individual or corporate),

the regulators of financial services and, ofcourse, the government.

4.2 Practical Issues involvedThe practical issues that stakeholders arelikely to contend with when theOmbudsman scheme takes off in Nigeriaare identified as follows:

Implementation of the ActPerhaps the first and most critical practicalissue that stakeholders are going tocontend with in the provision of FinancialOmbudsman services in Nigeria is theimplementation of the enabling Act itself.We are optimistic that the passed Bill willbe assented to by the President very soonto become law. But thereafter will comethe challenge of the actual implementationof the enabling law.

To begin with, a lot of efforts will go intogetting the office into an effective start. Inthis regard, the immediate issues willinclude: appointment of the FinancialOmbudsman and the determination of thenumber of adjudicators as the Draft Billdoes not specify a particular number ofadjudicators to be appointed.

For the office of Ombudsman and theadjudicators, how do we ensure, ass takeho lde rs , t ha t we ge t theappointments right? How do we get theright people with the relevant academicbackgrounds, appropriate practicalexperiences and temperament? How dowe, as stakeholders, assist the Office toset up its head office in Abuja and itsadditional offices possibly in the sixgeopolitical zones in the country as

provided by the Draft Bill? These arequestions that we must find appropriateanswers to, if we must ensure the smoothtake-off of the scheme in Nigeria.

FundingAnother crucial issue is funding. How dowe ensure that the scheme is adequatelyfunded at all times, given the centrality ofadequate funding to its independence?Although section 17 of the Draft Billprovides that the scheme will be funded by

an initial take-off grant by the FederalGovernment, case fees and yearly

contributions from donor agencies while20 per cent of its annual budget will also befinanced by the Federal Government, weare of the view that this funding strategymay not necessarily guarantee adequacy

of funding for the scheme. For instance,no indication is given as to how much theFederal Government is going to provideas the take-off grant for the scheme.

Again, we consider the financing of 20 percent of the annual budget estimate of thescheme by the Federal Government to betoo little. Furthermore, we do not expectthat the scheme will be able to attractmuch funds from the remaining specifiedsources of income, namely case fees,

yearly contributions by the private sectorand contributions from donor agencies, atleast in the short run.

Need for Extensive ConsultationsWe should also appreciate the fact that it isthe responsibility of the FinancialOmbudsman to make provisions, of

course in consultation with the Governorof the Central Bank, on issues like:

we considerthe financingof 20 per centof the annual

budgetestimate ofthe scheme

by the Federal

Government tobe too little



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proceedings and formation of quorum, aswell as appeal and complaint procedures.In practical terms, making theseregulations will involve extensiveconsultations not only with the Governorof Central Bank but other stakeholders as

well to guarantee their effectiveness.

What to do with the existing

Alternative Conflict Resolution

Mechanisms?When the scheme takes off, stakeholderswill have to decide on what to do with theexisting alternative conflict resolutionmechanisms like: the Ethics andProfessionalism SubCommittee of theBankers' Committee, the Consumer

Protection Department of the CBN and theComplaints Desk of The NDIC, etc. Are wegoing to retain these mechanisms andallow them to work side by side the Officeof the Financial Ombudsman because theBill does not expressly state that thesealternative conflict resolution mechanismsshould cease to exist once the schemetakes off? If we are going to retain them,how do we ensure that the mechanismsdo not work at cross-purposes with thescheme?

4.3 Addressing the Issues: The Way

ForwardThe practical issues that are likely toemerge upon the formal take-off of thescheme that we have raised, are by no

means exhaustive. Other issues willdefinitely come to the fore once the officetakes off. We cannot claim to have cure-allsolutions to the challenges that we haveidentified. However, we are of the viewthat the identified likely challenges and theothers yet unidentified will be effectivelyaddressed if all stakeholders resolve tomake the scheme work.

5.0 CONCLUSION

n this paper, we have examined thenature of financial ombudsmanIservices, the principles driving the

services and their modus operandi. Wealso provided highlights of the Office of theNigerian Financial Ombudsman Draft Bill,2010, and further examined the likelypractical issues which stakeholders mighthave to contend with when the schemeeventually takes off in Nigeria. We arguedthat these issues will have to be effectivelyaddressed, given their centrality to the

success of the scheme in Nigeria. Toachieve this, we have stated that the co-operation of all stakeholders is notoptional but mandatory.

References

- Check my file.com/Jargon

- CanaryClaims.co.uk/Financial

Glossary

- Ombuds.arizona.edu

- Consumer and Market Conduct

Department, Bank Negara, Malaysia

Financial Ombudsman Services.

- Office of the Nigerian Financial

Ombudsman Draft Bill, 2010.


Mr. Adeleke is a Director, Bank Examination Department, Nigeria Deposit Insurance Corporation (NDIC) and ChairmanInvestigative Panel, Sub-Committee on Ethics and Professionalism, CIBN


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1.0 BACKGROUND

he Ombudsman concept is ofSwedish origin. Naturally the wordTOmbudsman itself is also of

Swedish origin and it literally means a

person who has an ear to the people.The first known Ombudsman was createdin 1809 by the Riksdag (the SwedishParliament) at the time when Sweden wasruled by a king. Parliamentariansconsidered it necessary to have aninstitution that was independent of theexecutive (essentially the king) to ensurecompliance with the laws passed byparliament. The Swedish parliament hadnot just the autocratic rule of King GustavIII in mind, but was also inspired by

Montesquieu's concept of separation ofpowers. The first Ombudsman wasappointed in 1810 as a parliamentaryOmbudsman and it has operated more orless along the same principles ever sinceand the concept has now spread to morethan 125 countries.

Today, many persons and institutions callthemselves Ombudsman when they arenot, and many are not so called (they maygo by names such as Public or People's

Defender, Parliamentary Commissioner,M e d i a t o r , P u b l i c C o m p l a i n t s

Commissioner, Consumer ProtectionAdvocate, etc.), but they are in fact and bynature of their activities an Ombudsman.

2.0 DEFINITIONThe International Bar Association has

defined the Ombudsman as:an office provided for by theconstitution or by action of thelegislature or parliament andheaded by an independent high-level publ ic of f ic ia l who isresponsible to the legislature orp a r l i a m e n t , w h o r e c e i v e scomplaints from aggrieved personsagainst government agencies,officials and employees or who actson his own motion, and who has the

power to investigate, recommendcorrective action, and issue reports.

From this definition and based oninternational best practices, at the veryleast an Ombudsman system mustpossess four characteristics:

a) Independence;b) Impartiality and fairness;c) Credible review process; andd) Confidentiality.

We'll examine these characteristics andsee how The Office of the NigerianFinancial Ombudsman Bill, 2011 (the Bill)

Characteristic of theFinancial Ombudsman ServicesBy Muhammed Dele Belgore, SAN, FCIArb

measures up to international best practices

IndependenceThe credibility and effectiveness of theOmbudsman is underscored by the extentto which he is seen to be independent. The

stated objective of the Bill is contained in itsshort title

An Act to establish the Office of theNigerian Financial Ombudsman, AnIndependent Body charged withresponsibility for Resolving Financial andrelated disputes in the Nigerian FinancialSector and other related matters

What factors support or increaseindependence?

- An extant constitution or law creatingthe Ombudsman this is what the Billdoes.A fixed tenure of office - section 8 of the

Bill does this by providing for a term of 4years renewable for another 4 for theOmbudsman or an adjudicator.Removal can only be for cause by

virtue of section 9(2) removal can onlybe for gross incompetence orincapacity after due enquiry and afterhe has been informed of the reasons for

his removal and given an opportunity tobe heard in respect of those reasons.



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Remuneration for the office dealtwith by the financial provisions of theBill.Ombudsman must not be a political

appointee the requirements for whoqualifies for appointment under the Bill

ought to act as a safeguard to this.Control of its own staff and budget

this is covered by the financialprovisions of the Bill (sections 16 & 17)dealing with its handling of its take-offgrant from the Federal Government,case fees and maintaining its officesand staff.Immunity against civil and criminal

prosecution for Ombudsman the Billdoes not provide for this.Ombudsman is only accountable to

the court for his actions and the court'sreview ought to be very limited the Billis silent on this, but being a statutorycreation of law, the Ombudsman'sstatus is that of an inferior tribunal, andthat being so, its decisions arereviewable by the courts.

Impartiality and FairnessOmbudsman must be seen as neitherfearing nor favouring government nor thecomplainant, even though at the

conclusion of the case after he's given hisdecision or recommendation, theOmbudsman may advocate the cause of acomplainant.

Factors Relating to Impartiality andFairness

Qualifications of the type of personwho may be appointed has been set bylegislation and (a) respected person(s)in terms of knowledge, expertise andintegrity is/are appointed section 6 &7 of the Bill addresses this.Absence of conflict of interest on the

part of the Ombudsman with regard tomatters in the industry, subject matterof the complaints, parties before it.Ordinarily, one would not expect theBill to expressly deal with this, but oneassumes that the appointmentprocess in sections 6 & 7 would ensurethat persons of the right calibre andintegrity are appointed and suchpersons would disclose any conflictsthat they have if it arises or would

recuse themselves altogether in thecase of unacceptable conflict.How conflicts, where they exist, are to

be deal t w i th d isc losures,disqualification, etc.Accessibility to the process by allowing

every eligible complainant access -Section 11 deals with who maycomplain: a) a customer of a financialinstitution to which the Bill relates, andb) a person who has a good reason this is to cater for transactions by andwith financial institutions giving rise tocomplaints by non-customers of suchinstitutions.Ease at which complaints may be

brought by a complainant without theneed for the services of a lawyer.The affordability of the fees to activate

and complete the process anexpensive process would bedisadvantageous to the smal lcomplainant and may be used as aninstrument of oppression by a financialinstitution that ordinarily has a deeperpocket.

Credible Review ProcessOmbudsman has broadly legislativeauthority to investigate, report and make

recommendations against government orother agency or institution.Authority to obtain access to records, to

inspect documents, in terv iewwitnesses, etc.Authority to initiate complaints on its

own and to investigate such complaintswithout the existence of a complainant.Authority to hold hearings, written or

oral.Authority to make decisions and

recommendations on complaints.All the foregoing are provided for by

sections 13 & 14 of the Bill.Following a credible rule-based

procedure that is well publicised andapplicable to everyone under theMiscellaneous provisions of the Bill(section 22), the Ombudsman inconsultation with the CBN Governorcan make regulat ions for i tsproceedings, making a complaint,appeals, fees, etc.Ombudsman may not be compelled by

a court to testify or produce documents. the Bill does not provide for this.

Effectiveness in securing compliancew i t h t h e f i n d i n g s a n drecommendations. Section 15attempts to address this by saying,An award or direction made by theOffice shall be binding on the parties

and the parties shall comply promptlywith the award. We shall return to thislater.

ConfidentialityThe service should be available towhistle-blowers, but they will not operatein the absence of confidentiality as to theiridentity. Also, ordinary complainants mayrequire confidentiality of their proceedingsfor fear of industry-wide reprisals.Disclosure and publication should always

be with the consent of both thecomplainant and the financial institutioncomplained against unless there is anoverriding public interest in favour ofdisclosure and publication

Al l these characterist ics may notnecessarily be present in any givensystem. No single model workseverywhere. Local adaptation to make thesystem fit purpose is sometimes required.The overall legal and regulatory regime of

the country in which the Ombudsmanoperates, the nature of the industry andthe culture and attitude of its people woulddetermine the extent of the powers andauthority conferred on the Ombudsmanby the enabling statute.

The Bill does not address the issue ofconfidentiality at all, but by virtue of theO m b u d s m a n ' s p o w e r t o m a k eRegulations for the conduct of itsproceedings it can and, in my view, shouldaddress these confidentiality issues.

3.0 GENERAL COMMENTS ANDF U R T H E R P R A C T I C A LISSUES

a. The Ombudsman's function is notonly adjudicatory. It can bemediatory as well. Section 3 statesthat the Office shall inquire andsettle any complaint or dispute ...The settlement need not be bydeciding who is wrong or right, itcould be by achieving a compromisefor the disputants.



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b. There will be a need for the Office todraw up procedural rules to governt h e O m b u d s m a n a n d h i sadjudicators' proceedings. The ruleswould provide for such things as tohow the complaint will be filed and

served, the manner of the responseto the complaint, taking of evidence,procedure at the hearing, form ofdecision or recommendation of theOmbudsman and his adjudicators'proceedings, etc. The Bill hasalready empowered the Office to dothis, so there will be no need forseparate legislation for it.

c. The Ombudsman has no coercivepowers and there are no sanctions

for failure to comply with itsdecisions or orders. This is in spite ofthe forceful words of section 15 - Anaward or direction made by theOffice shall be binding on the partiesand the parties shall complypromptly with the award. This is nota peculiar problem with the Bill. It is aproblem with the concept of theOmbudsman system generally. TheOmbudsman's decision is not ajudgment with coercive effect like

that of a court and it is not an arbitralaward that can be converted into ajudgment of a court through specialprocedures that facilitate speedyenforcement. In some countries likethe U.K., special enforcementprocedures have been created forenforcement of the decisions ofcertain Ombudsmen.

d. The status of an Ombudsman'sdecision is that of a valid contract

that binds only the parties to it thecomplainant and the financialinstitution complained against. Togive effect to it, a successfulcomplainant would need to go tocourt to enforce the contract. Thismeans commencing a fresh legalaction.

e. In so far as the decisions of theOmbudsman are of a quasi-judicialbody, they are reviewable by thecourt for compliance with rules ofnatural justice (fair hearing, no man

can be a judge in his own cause),p u b l i c l a w c o n c e p t s o freasonableness, proportionality, etc.

f. The gentle persuasion of the CBN andother regulators in the financial

industry and an industry-widerecognition of the intent and value ofthe Ombudsman system can go along way in making up for its lack ofcoercive powers.

g. Use of the Ombudsman system doesnot foreclose a complainant's right toseek the same remedy in court orthrough ADR. Indeed, it is arguablewhether the Bill can validly preventthe exercise of such a right. One

simple solution to this is to have boththe complainant and the financialinstitution complained against to signat the outset a consent and waiverform, consenting to the validity of theprocess and waiving rights to seekremedy elsewhere on the samesubject matter. This of course doesnot extinguish the right, but providesa defence to its exercise should oneseek redress before a different forumon the same subject matter as that of

which the Ombudsman has beenseized.

h. Under the power to make Regulationsfor the conduct of the proceedings,we have stated that provisions thatensure the confidentiality of theprocess could be made. But theremust be recognition of the fact that incertain cases a wider public interestover and above that of the privateinterests of the parties to the

proceedings may exist and thatpublic interest may necessitate thepublication of the decision of theOmbudsman for the benefit of theindustry at large. This is not acontradiction of the system. Arbitralinstitutions, like the ICC, whoseawards are meant to be private andconfidential often for future guidance,publish some awards after editingand redacting them to protect theanonymity of the parties. The samecan be applied to the decisions of theOmbudsman that are consideredworthy of publication.

I. The absence of provisions forimmunity and protection of theOmbudsman and his adjudicatorsfrom civil and criminal prosecutionsis a major failing of the Bill. If they areto perform their functions effectively

and without fear or distraction,Ombudsman and adjudicators mustenjoy this immunity. Arbitratorsoperating under all establishedsystems of arbitration enjoy suchimmunity. There is no reason whythe enabling law should not confer iton the Ombudsman and hisadjudicators too.

j. The Bill speaks of an appeal. Whodoes an appeal from a decision of

the Ombudsman go to?

k. The competition for the Ombudsmansystem is the court and the ADRprocess. If the Ombudsman systemis to thrive, it must be able to resolveand settle disputes in a qualitativeway at a quicker, cheaper and lessformal rate than its competitors. If itfails to achieve any of this, there willbe no justifiable reason for anyone touse it.

Mr. Belgore (SAN) is the Chairman,Chartered Institute of Arbitrators(CIArb).



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CIBN Annual Lecture2015 Thursday, June 18, 2015



17/32

CIBN Annual Lecture2015Thursday, June 18, 2015

Former



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n p p r a is a l o f t h e P r o p o s e d

O f f ic e o f t h e N ig e r ia n F in a n c ia l

O m b u d s m a n S e r v ic e s

B y O s a ro E g h o b a m ie n S A N

1.0 Brief IntroductionA robust financia l se rvicesindustry requires strong systemsfor support and sustenance.

Equally germane are the people

with real issues who are affectedby the systems put in place. It isinevitable that consumers offinancial services will havecomplaints and encounterunanticipated challenges thatrequire quick resolutions notsuited for adjudication by theregular courts. The practice inmany parts of the world thereforeis to lend support to structures

that protect financial consumersas well as guarantee a sounddevelopment of the financialmarket.

Sustaining consumers' trust andconfidence in the financialservices of an economy is a keypr i n c i p l e u n derp i n n i n g ad y n a m i c , i n n o v a t i v e a n d

competitive financial sector. Aprincipal way to increaseconsumer confidence in thefinancial services of an economy isto provide accessible and user-f r i en d l y a r ran gemen t s t oresolving disputes. The FinancialOmbudsman Service (FOS) playsa pivotal role in this regard byproviding an impartial, fair andefficient dispute resolution

process.The FOS is a statutory body

offering a dispute resolutionservice to consumers, thusreducing the burden on the courts.

The FOS only becomes involvedin disputes when a consumer feelsthat his expectations in relation tothe bargain he has with a financialservices provider has not been metand the service provider is unableto resolve a complaint arising fromthe loss of expectation. Hisdissatisfaction with the handlingof the complaint by the financialservices provider is itself a catalyst

to escalate the matter to theFinancial Ombudsman.

Effectively, what the consumers ofthe service are exhibiting byescalating a complaint is theirdiscontent with the financialservices provider's inability to keepa promise made about a product orservice and its further inability to

resolve the complaint raised in thisrespect. Understandably, theservice provider is the party being

accused, and therefore, a referralto the Financial Ombudsmanbuttresses the principle that a man

may not be a judge in his owncause. The mechanism of theombudsman gives the serviceprovider the opportunity toremedy the situation before thematter is escalated. This isbecause the complaint mightsimply be a misunderstandingbetween the parties and thisapproach gives the serviceprovider an opportunity to

remedy same swift ly andeffectively.

The modern use of the termbegan in Sweden, with theS w e d i s h p a r l i a m e n t a r yOmbudsman instituted in 1809,to safeguard the rights of citizens

by establishing a supervisoryagency independent of theexecutive branch. In Africa, it has

2.0 Deve lopme nt of theFinancial Ombudsman

An Appraisal of the ProposedOffice of the Nigerian Financial

Ombudsman ServicesBy Osaro Eghobamien, SAN & Obi Ugochukwu



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been s u gges t ed t h a t ' t h ePermanent Commission of

Enquiry' in Tanzania, establishedi n 1 9 6 5 w a s t h e f i r s tombudsman's institution in

Africa and served to propagate theidea, especially amongst theAnglophone countries in Africa.

The task of the ombudsmang e n e r a l l y i s t o c o n d u c tinvestigations and issue decisionsaris ing from them. Theseinvestigations arise mainly fromcomplaints made by the publicabout the activities of governmentagencies. In many countries,where the institution of the

ombudsman exists, the office wasmade to function primarily in allministries and departments of theFederal Government, as well as inmany states or local governments,as an instrument for enforcingaccountability both in governanceand services delivery.

T h e i n t r o d u c t i o n o f t h eombudsman is not an entirelynew concept to Nigeria, eventhough its earlier activities wereunrelated to financial services.The formal institution of a publiccomplaints body is traceable toSection 274 (5) of the 1979Constitution which prescribes

the establishment of the PublicComplaints Commission (PCC),through which the ombudsmanin Nigeria operates. The work ofthe PCC covers all ministries,departments and extra-ministerialdepartments at all levels ofgovernment - federal, state and

local. The PCC is empowered toinvestigate complaints lodged

before it on administrative actionstaken by such departments,including statutory corporations

or public institutions set up byg o v e r n m e n t , c o m p a n i e sincorporated under or pursuantto the Companies and AlliedMatters Act, and officers or

s e r v a n t s o f a n y o f t h eaforementioned bodies.

The Commission also dealt withinquiries relating to wrongfuldi smissa l , t erminat ion ofappointment, non-payment ofretirement benefits, seizure offarmlands, non-payment ofpensions and gratuities, loss of

parcels by NIPOST, complaintsagainst NEPA (PHCN) andNITEL, etc.

The need to improve consumerconfidence in financial servicesdictates the establishment of afinancial ombudsman in manyjurisdictions. Consumers havegreater confidence in financialservices (and are more likely to

patronise financial products)w h e n t h e y k n o w t h a tunscrupulous businesses that actunfairly can be held to account byan independent body (at theinstance of a complainant).

There is also the confidence inthe fact that such independentbodies can resolve the issuesraised quickly (at minimal cost)and, without the formality ofinstituting or prosecuting anaction in a court of law. It is to thisend that, quite recently, theNigerian legislature (i.e. theSeventh National Assembly)approved and passed a Bill for thecreation of an Office of theFinancial Ombudsman as a bodycorporate with designated

powers. In light of all said thus far,it is necessary to consider the

current framework for resolvingcomplaints, after which regardwill be paid to some of theintricate issues pertinent to theBill.

One of the core functions of theCentral Bank of Nigeria (CBN),as enshrined in section 2(d) of theCBN Act 2007, is the promotionof a sound financial system inNigeria. Implicit in this functionis the promotion of the safety andstability of the financial system to,among other things, engenderand sustain public confidence inthe system. Following theg r o w i n g c o n c e r n s a b o u tunethical and unprofessionalpractices in the Nigerian bankingand finance industry capable oferoding public confidence in theindustry, the CBN, through itsC o n s u m e r P r o t e c t i o nDepartment and The Bankers'

Committee, sought to deal witht h r e a t e n e d c o n s u m e r s 'confidence in the sector and itsproducts.

In furtherance of its statutoryresponsibi l i ty to promoteconfidence in the financialsystem, the CBN had over theyears implemented a measure ofconsumer protection mainly inthe form of customer complaintsmanagement. It provides a guideon how and where complaints canbe lodged against FinancialInstitutions regulated by theCBN, such as CommercialBanks, Microfinance Banks,

Primary Mortgage Institutionsa n d D i s c o u n t H o u s e s .

3.0 Initiatives by the CBN

3.1 The CBN's ConsumerProtection Department(CPD)



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Customers are required to firstreport the complaint at thebank/branch where the issueoriginated and where no responseis provided or the issue remains

unresolved for a period of twoweeks, escalate the complaint tothe Consumer Protect ionDepartment (CPD) of the CBN.In prac t i ce h ow ev er , t h eframework does not accord asufficient level of protection to theconsumers.

The Bankers' Committee, in itsresolve to sanitise the practice ofbanking and finance in Nigeriaand instil discipline in thep r o f e s s i o n , e s t a b l i s h e d aSubcommittee on Ethics &Professionalism on December 19,2000, comprising the CentralBank of Nigeria (CBN), theNigeria Deposit InsuranceCorporat ion (NDIC), the

Chartered Institute of Bankers ofNigeria (CIBN), the FinancialInstitutions Training Centre(FITC) and eleven (11) banks.

The essence of the subcommitteewas to identify practices andconducts considered unethical inthe industry and develop anacceptable code of ethics andprofessionalism, as well as them a c h i n e r y f o r e n f o r c i n gcompliance effectively. Thesubcommittee is to ensure thei n t e g r i t y o f t h e b a n k i n gprofession in order to instil publicconfidence in the banking system.To this end, the Subcommitteeproduced a Code of Ethics andProfessionalism in the Bankingand Finance Industry. This code

contains a list of acts, conducts,commissions and omissions

3.2 The Bankers' Committee

classified as unethical andunprofessional, as well as theframework for addressing same inthe business of banking andfinance in Nigeria. It also provides

the procedure for dealing withcomplaints and the sanctions forinfractions of its provisions. Theaim of the code is to enablefinancial institutions, regulatorybodies, employees of banks andmembers of the Institute to knowin clear terms what acts, conducts,commissions, omissions andpractices are considered unethicaland unprofessional and theappropriate sanctions that wouldapply for non-compliance. It isexpected that the code will bringa b o u t d i s c i p l i n e a n dprofessionalism in the bankingand finance industry.

Besides developing standards andcodes for ethical and professionalb a n k i n g p r a c t i c e , t h e

s u b c o m m i t t e e c o n s i d e r scomplaints from bank customers,the general public and within thebanking system, includingcomplaints by banks againstregulatory authorities or otherbanks and vice versa andcomplaints from bank staff againsttheir employers or vice versa. As ac o n d i t i o n p r e c e d e n t t operforming its function in thisregard, such complaints or issuesin dispute must be brought within6 years from when the cause of thecomplaint arose and should not bethe subject of a pending litigationbefore a court of competent

jurisdiction or one for which adetermination/decision has beenmade by a court, the CBN or otherstatutory regulatory institution.

Payment of a non-refundabledeposit of N50,000.00 (fifty

thousand Naira) or 5% of theclaim (whichever is lower) is alsorequired. A decision of thesubcommittee as confirmed bythe Bankers' Committee is final.

It can be said therefore that theidea of a financial ombudsman forthe financial sector started bycovering a single aspect of theindustry (banking). However,there is now a trend towards asingle financial ombudsman tocover all financial sectors, as isevident in the provisions of thenew Bill, the Office of theFinancial Ombudsman Bill.

The scope of the Bill is intendedto apply to all Banking, Mortgage,Insurance, Investment andSecurities, Consumer Credit,Pensions and other Non-Bankingfinancial transactions. In someother sectors (and before the Billcomes into force), what is alreadyobtainable is the use of alternative

forms of dispute resolution(ADR) as against a financialombu ds man s u ch a s acomplaints department withinthe regulator body or complaintsboards.

The bill established the Office ofthe Financial Ombudsman as anindependent body corporate. Theoffice is created to entertaini n q u i r i e s a n d s e t t l ecomplaints/disputes betweenI n d i v i d u a l s o r c o r p o r a t e

o r g a n i s a t i o n s ; f i n a n c i a linstitutions; financial regulators

4.0 Issues from the Office ofthe Nigerian FinancialOmbudsman Bill (the

' Bill')

4.1 E s t a b l i s h m e n t a n dFunctions of the Office



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on transactions relating tobanking, mortgages, insurance,investment and securit ies ,consumer credit, pensions andother non-banking financial

transactions.

It would appear from the contextof its provision, that the bill doesnot contemplate dealings withc o m p l a i n t s f r o m m i c r o -enterprises. Also, it seems that theombudsman does not entertaincomplicated legal issues and otherissues which are not appropriatefor his inquiry or decision such asnovel cases, determination ofcauses wherein the appropriaterelief may only arise from acompetent court (e.g. interimrelief/preservative orders or aninquiry/decision into a matterwhich is the subject of a pendingsuit before a court of record,tribunal or arbitration).

Consumers are (as a conditionprecedent) required to initially layrelevant complaints to thefinancial business/institutionresponsible for same and to givethe institution an opportunity torectify the complaint made. Thefinancial institution is therefore

expected to look into complaintsproperly made and provide aprompt/clear response to theconsumer. It is further requiredthat relevant institutions will setu p a fo rmal i s ed i n t e rn a lmechanism for dealing withdisputes. For the sake oftransparency, it is expected thatsuch mechanisms should be

published to ensure that they areeas i ly access ible by everyconsumer of the financial serviceof that institution.

4.2 Eligibility and Acceptanceof Complaints

Pursuant to the bill, a person maymake a complaint where he is acus tomer of the f inancia linstitution to which this billapplies and has good reason to

c o m p l a i n . T h e F i n a n c i a lOmbudsman will not accept acomplaint unless the complaintmade to the financial institution isnot resolved by the financialinstitution within 30 days ofreceipt of the complaint.

Where the complaint has alreadybeen made by the complainant tothe financial institution and thefinancial institution has rejected itor handled same unsatisfactorily,the consumer may refer thecomplaint to the ombudsman forindependent consideration. In thisinstance, the complaint must bemade to the office of theombudsman within 6 months ofthe financial institution's finalresponse. The United Kingdom

( U K ) f i n a n c i a l s e r v i c e sombu ds man l aw a l l ow s acomplainant to refer the complaintto the ombudsman service within6 years of the event which causedthe complaint or (if later) within 3years of the time when thecomplainant should have becomeaware that there were grounds forcomplaint. It is important to notethat if the complaint is one thatcould have been instituted in asuperior court of record (i.e.Federal High Court or State HighCourt) it must be instituted in theappropriate court within 6 years ofthe date of the alleged offence. Thefact that the complainant firstinstituted the complaint before theombudsman will give no addedadvantage in connection with

time. Consequently, if thecomplaint presented first beforethe relevant institution and then

s u b s e q u e n t l y b e f o r e t h eombudsman takes anything closeto 6 years, the claimant wouldhave lost his right to institute theaction before a court of law. There

is considerable force in theargument that the legal limitationperiod (usually 6 years forcontracts) ought to be suspendedwhile the case is being handleda n d i n v e s t i g a t e d b y t h eombudsman.

In the event that a consumer iseligible and his complaintacceptable (based on the specifiedcriteria), the ombudsman willlook into the circumstances of thecase and see if it is possible tomediate a fair settlement betweenthe consumer and the institution.If not, the ombudsman will takea c c o u n t o f a l l t h eevidence/arguments and issue adec i s ion/recommendat ion .Unlike the prevailing courts

system, the ombudsman does notentirely rely on the parties tobring forward all the necessaryevidence and arguments. Theadjudicators (members of theombudsman service's staff) area l s o s a d d l e d w i t h t h eresponsibility to activelyinvestigate the case.

To secure the competence of anombudsman, the bill also requiresthat only persons knowledgeablein the laws, regulations, normsand practices of the financialservices sector in Nigeria arequalified for appointment by theMi n i s t e r o f F i n an ce (onr e c o m m e n d a t i o n s b y t h e

Governor of the CBN) as afinancial ombudsman. Thisensures that the consumer is not

4.3 Appoin tment of theFinancial Ombudsman



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placed at a disadvantaged positionby the superior technicalknowledge/resources of thefinancial institution.

The appointment must be madeonly after due consultations withthe Financial Sector RegulatoryCo-ordinating Committee,Bankers' Committee; NigerianInsurance Association, andCapital Operators' Association bythe Governor of the CBN. Whatdoes not seem apparent is whetherthe provision for appointment ofthe ombudsman is such thats u f f i c i e n t l y s e c u r e s t h eindependence of the office fromg o v e r n m e n tcontrol/intervention. The office isexposed to the risk of beingpoliticised to the extent theappointment of the ombudsmanand other adjudicators is the soleresponsibility of the Ministry ofFinance (executive arm) on the

recommendation of the Governorof the Central Bank. In the UK forinstance, the law provides for theombudsmen (including a chiefombudsman) to be appointed bythe independent public interestboard of the ombudsman service,but says the ombudsmen must beappointed on terms that securetheir independence from theboard. The ombudsmen area p p o i n t e d o n p e r m a n e n tcontracts. Perhaps it could be saidthat the character of the personappointed will, to a large extent,underscore its independence.

It should not be possible toremove the ombudsman early except for incapacity, misconductor other good causes. The

decision should be in the hands ofthe independent body that

appointed the ombudsman, or abody equally independent of thefinancial industry. The industryshould not be able to bringpressure on the ombudsman by

influencing any reduction orsuspension of the ombudsman'ssalary. It may be helpful to link thesalary to that of a particular salarygrade of a judge or other publicofficial. The ombudsman ought tobe visibly and demonstrablyindependent from those whomthe ombudsman has the power toinvestigate.

The persons who appoint theo m b u d s m a n s h o u l d b eindependent of those subject toinvestigation by the ombudsman.Furthermore, the ombudsmanalone (or someone acting on his orher authority) must have thepower to decide whether or not ac o m p l a i n t i s w i t h i n t h eombudsman's jurisdiction. If it is,

the ombudsman must have thepower to determine it. Theombudsman's determinationshould be final and should not beable to be overturned other than bythe courts or an appeal routeprovided for by law.

A financial ombudsman can befunded by the government.However, given the huge pressureon public finances, it is the usualpractice for the cost of the financialombudsman to be borne by thefinancial industry from which theombudsman's work arises. Again,pursuant to the bill, the office isexpected to be funded fromdifferent sources, including aninitial take-off grant by the Federal

Government; case fees as may beprescribed in regulations; yearly

4.4 Funding

contributions by the privatesector; contributions from donoragencies; and 20% of the annualbudget estimate of the office to beappropriated by the Federal

Government. It is submitted thata take-off grant from the FederalGovernment as well as 20% ofannual budget to be appropriatedfor this purpose might turn out tobe ill-advised.

This is because many goodinitiatives have been terminatedeven before actualisation of theconcept, the requisite budgetaryappropriation not having beenobtained. And even where it issuccessfully obtained, theinstitution is easily subjected topolitical manipulation. Thestructure, it is submitted, ought tobe entirely funded by the privatesector. In the UK, there is nocharge for complainants. Theombudsman service budget is

p r o p o s e d b y t h e c h i e fombudsman, adopted by theboard and approved by theFinancial Service Authority(FSA). Part of the budget iscollected through a levy on allfinancial businesses by the FSA,broadly in proportion to marketshare. Most of the budget isfunded in the form of case feescharged to those financialbusinesses with cases referred tothe ombudsman service, suchthat funding is broadly inproportion to use; however, theinitial three cases per business peryear are free.

In deciding whether or not touphold a consumer's complaint,

the ombudsman is enjoined tonormally take into account what

4.5 Enforcement and Award



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the court will do in a similar case;available industry code and goodindustry practice. However, thedecision/recommendation will belargely based on what the

ombudsman considers to be faira n d r e a s o n a b l e i n t h ecircumstances of the case andwould be expected to give reasonsforthe decision/recommendation.

If a consumer's complaint isupheld, the off ice of theo m b u d s m a n m a y a w a r dcompensation, interest or cost to asuccessful complaint or issuefurther directives. Such award ordirection is binding on parties andcompliance is enforceable in acourt of law (even though noindication is expressly provided asto the particular court withcompetence to enforce suchaward). The subject matter of thecomplaint and the issues that arisewill, by and large, determine

jurisdiction. If either of the partiesrejects the recommendation(based on prevailing practice indeveloped jurisdictions), bothparties are allowed to submitfurther arguments and evidence(for reconsideration by theombudsman) and then one ofthe ombudsmen will issue a finaldecision. However, the bill isdevoid of any provisions to thiseffect.

The bil l contemplates theexistence of an appeal procedurewithout necessarily prescribingthe appeal structure. The bills t a t e s t h a t , t h e f i n an c i a lombudsman shall, in connection

with the Governor, makeregulations to provide for appeals

4.6 A p p e a l s f r o m t h eOmbudsman's Award

procedure against the decision ofthe office. Hence, whilst the billempowers the relevant authorityto make rules, it is silent as regardsthe institution to which an appeal

lies. Put simply, no appeal isexpressed to lie against an award ofthe ombudsman.

The decision of the ombudsman issaid to be that of an inferiorinstitution. In other words, it is adecision by an institution lower inhierarchy than either the State orF e d e r a l H i g h C o u r t .Consequently, any party can applyto any of the superior courts toreview the decision of theombudsman (i.e., to ensure thatthe ombudsman acts within itspowers as prescribed by law indelivering its award).

The courts will only interfere if,for instance, the ombudsman hasfailed to follow a fair procedure or

has acted irrationally in whichcase the court would send the caseback to the ombudsman to bedecided again. The court has nobusiness deciding the merits of thecase. I t i s perhaps worthmentioning that the ombudsmandoes not compete with theexclusive jurisdiction of theFederal High Court in connectionwith banking matters.

This is an inferior tribunal whoseawards should be subject to reviewby the Federal High Court.Ef fect ively, once there is amechanism provided for resolvingdisputes, the law recognises thatsuch primary adjudicatoryprocesses should be exhaustedbefore approaching the courts.

5.0 ConclusionThe inadequacy of the existingf r a m e w o r k f o r f i n a n c i a lc o n s u m e r p r o t e c t i o n h a scontinued to impact negatively on

the level of confidence in thefinancial sector. Rectification ofthese anomalies through thec o l l e c t i v e e f f o r t s o f a l lstakeholders will go a long way inrestoring investor and consumerconfidence. Given the structuresthat have been created so far by theCBN as well as the bill amongstother measures, it is expected thatconsumer satisfaction in thefinancial sector in Nigeria wouldbe greatly improved.

Our further recommendationtherefore, in addition to thosec o n t a i n e d i n p r e c e d i n gparagraphs, is that the NigerianPresident should assent to the billas soon as practicable, as theestablishment of the Office of

Ombudsman would help restorethe trust and confidence of theNigerian consumers in thef i n an c i a l s e rv i ces s ec t or .Moreover, it would assist toreduce the burden on our courtsand lead to speed and efficiency indispute resolution in the sector.Though the bill may not be freefrom criticisms (some of whichhave already been noted above),such defects may be curedthrough amendments of therelevant provisions on testing itspracticability when the samebecomes law.

Mr. Eghogamien (SAN), is aM a n a g i n g P a r t n e r ,Perchstone and Graeys

Obi Ugochukwu is a SeniorAssociate, Perchstone andGraeys



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1.0 IntroductionThe Bill to establish the Office of theNigerian Financial Ombudsman (ONFO)has been passed by the National

Assembly and awaits presidential assent.The ONFO is proposed to serve as anindependent body for managing andresolving complaints relating to banking,mortgage, insurance, investment andsecurities, pensions and other non-banking financial transactions. It will alsohandle complaints between financialinstitutions and regulators in the financialindustry.

The establishment of ONFO is premised

on the need to provide a robust financialdispute resolution mechanism betweenconsumers and financial servicesproviders without recourse to regulatorsand the courts in line with internationalbest practice. The ONFO is thereforeintended to improve complaintsmanagement not only in the bankingindustry but the entire financial industry.

2.0 Extant Complaints ResolutionPlatforms in the Banking

IndustryThe internal complaints managementprocesses of banks represent the first andought to be the most critical element in thebanking system complaints managementchain. However, the profit-motive ofbanks, underscored by competition andgrowing sophistication in financialproducts and services, offer little incentiveto the banks to efficiently addresscustomer complaints and embraceappropriate consumer protection

philosophy in their institutions. Thisinformed the establishment of the

following mechanisms to addresscomplaints of customers against theirbanks:

a. The Sub-Committee on Ethicsand Professionalism of theBankers' Committee:

The sub-committee was established in2000 to, among other things, considercomplaints from customers of banks witha view to resolving the complaints. For acomplaint to be handled by the sub-committee, certain conditions shall bemet, including: payment of a non-refundable deposit of N50,000.00 or 5%of claim, whichever is lower; complaints

must not be before a court; complaintsmust not have been adjudicated upon bya court of competent jurisdiction, the CBNor any other statutory regulatoryinstitution. Membership of the sub-committee comprised the CBN, NDIC,CIBN, FITC and 11 banks.

Three areas that have come undercriticism regarding the operations of thesub-committee are: the payment of non-refundable deposit which negates global

best practice that advocates free redressmechanism; presence of banks asmembers of the investigating panel whichmay impact on its independence in takingdecisions; and the presence of regulatorsin a committee that is envisioned to be aself-regulatory organisation (SRO).

b. The Consumer ProtectionCouncil (CPC):

This is the agency established by law toprotect Nigerian consumers against

unfair treatment and abuses fromproviders of goods and services. This

means that the Council was establishedto protect the interest of consumers in allsectors of the Nigerian economy,including the financial industry. However,

it has been observed that, owing to thefoundational underpinning of its creation,the Council possesses technical andbudgetary limitations that make it ill-suitedto address financial consumer protection.The Council has been collaborating withthe CBN in this regard.

c. The Consumer ProtectionDepartment (CPD):

The Department was created in April 2012as part of the 4-Pillar Banking Reform

initiated by the CBN to safeguardconsumer rights, including providing aneffective redress mechanism foraggrieved financial consumers. Theoverarching mandate of the CPD is todevelop and implement an effectiveconsumer protection framework thatpromotes consumer confidence in thefinancial system. One of the specificobjectives of the Department is to developredress mechanisms to addresscomplaints lodged by consumers against

banks and other financial institutions.

The Department had resolved complaintsfrom aggrieved customers of financialinstitutions and facilitated the refunds ofN18.65 billion; $3.06 million and 83 to

thcustomers as at 30 April, 2015. Thesefigures include refunds facilitated by theComplaints Management Office (CMO) inthe Financial Policy and RegulationDepartment (FPRD) between March2010 and April 2012, when the CPD was

created.

EXISTING PLATFORMS AND THE NEW OMBUDSMAN OFFICEBY UMMA DUTSE

FINANCIAL CONFLICT

RESOLUTION IN NIGERIA:



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Additionally, a helpdesk circular refFPR/DIR/CIR/GEN/01/020 dated August16, 2011 mandated banks to expand theirexisting ATM Helpdesk to handle othercomplaints and other financial institutionsto establish helpdesks to handle allconsumer complaints within 14 days(complaints on excess charge and loanwere later extended to 30 days).

To enhance ef fect iveness, theDepartment's complaints managementprocess was automated by deploying aConsumer Complaints ManagementSystem (CCMS) to handle complaintsfrom consumers.

3.0 Nexus between NigerianFinancial Ombudsman andC o n s u m e r P r o t e c t i o nDepartment/CBN

Three years after its creation, the CPDcontinues to resolve complaints betweenFIs and their consumers, even whenthese complaints ought to have beenresolved by FIs that often created thecomplaints. This development tasks theresources and inhibits the ability of theDepartment to concentrate on proactive

functions, like market regulation andconsumer education which wouldpotentially reduce complaints. Theestablishment of the ONFO as a 'one-stopshop' to address complaints relating to thefinancial system, is, therefore, expectedto enable the CBN concentrate onproviding strategic direction anddeveloping appropriate policies toimprove financial literacy and engenderresponsible business conduct in CBN-regulated FIs instead of resolving

complaints. It is envisioned that, in theshort term, the ONFO will providefinancial consumers with an alternativechannel of handling complaints, while, inthe long term; the CBN may cedehandling complaints to the ONFO.

Instructively, the CBN is at an advancedstage in the development of a ConsumerProtection Framework (CPF) to provideregulatory context and direction forconsumer protection initiatives of CBN-regulated institutions. The framework will

provide the basis for the CBN to channelresources on the development of

proactive policies to regulate the conductof FIs in the area of competition,protection of consumer assets andprivacy, fair treatment, consumereducation, as well as disclosure andtransparency, among others.

For improved efficiency, it is expected thatthe CBN and the ONFO will form astrategic partnership in the areas ofinformation sharing, technical expertiseand capacity building.

4.0 International Principles ofFinancial OmbudsmanServices

The financial ombudsman system, which

is steadily assuming a global dimension,could take different forms or shapes. Inthe UK and Australia, it is referred to asThe Financial Ombudsman Service; theOffice of the Ombudsman for FinancialServices Providers in South Africa, andthe Financial Ombudsman Service'sBureau in Ireland.

Regardless of the difference innomenclature and nuances, eachfinancial Ombudsman services operates

as an independent, out-of-court disputeresolution mechanism in the financialsector and provides dispute resolutionservices for consumers who are unable toresolve complaints with their financialservices providers. The financialindependence of financial ombudsmanservices is largely guaranteed becausethey are funded by levies from financialinstitutions.

Generally, areas covered by the

Ombudsman system include: banking,credit, insurance, investment, financialadvice and pension. Where a consumerdoes not accept an ombudsman'sdecision, his legal rights remainunaffected and he can take the matter tocourt.

Globally, the operations of financialombudsman services are guided by theinternational network for financialservices ombudsman scheme (INFO), a

network for member schemes tocollaborate to develop expertise in

dispute resolution by exchangingexperiences and information. Accordingto INFO, a l l member f inanc ia lombudsman services are expected tocomply with six fundamental principleslisted below.

a. I nd ep en de nc e: F inancialombudsman schemes are analternative to the courts andshould be free from the influenceof parties to disputes, regulatorsand governments. They shouldnot only be, but also seen to beindependent by resolvingcomplaints without fear orfavour.

b. Clarity of Scope and Powers:

The financial ombudsmans c h e m e s h o u l d p u b l i s hnecessary deta i ls o f i tsoperations, including its powers,scope of i ts jurisdiction;complaints' handling processes,confidentiality issues; and anyeffect on the complainant's legalrights of using the ombudsmanscheme.

c. Accessibil ity: The financial

ombudsman scheme should bee a s i l y a c c e s s i b l e t ocomplainants at no cost andmake appropriate provision forvulnerable complainants. Itshou ld p rov ide de ta i l edinformation about its existenceand operations in the mostappropriate ways.

d. E ff ec ti ve ne ss : F inancia lombudsman schemes shouldbe properly resourced both

financially and technically andshould also have a flexible andinformal process, such thatcomplainants do not needprofessional advisers.

e. Fa i rness : The f i nanc ia lombudsman scheme should beprompt, impartial and telldisputing parties in writingjustifications of its decisions.

f. T r a n s p a r e n c y a n d

Ac cou ntability: Financialombudsman schemes shouldpay due regard to public interest



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and seek public input to improvetheir operations. They shouldpublish a report (at least yearly)detailing their activities withinthe period under review.

5.0 ONFO: Some salient issues

Some issues regarding the ONFO arehighlighted below to elicit discussions:

The ONFO is billed to serve theentire financial industry and, assuch, should be adequatelyresourced with experts indifferent sectors of the financialsystem, including banking,insurance, mortgage, and

pension.

The Bill provides that 20% of theONFO funding will be providedby the Federal Government,unlike what obtains in otherjurisdictions where the sourcesof funding are statutory leviesand case fees from institutions

regulated by the ombudsman. Inthis regard, the provision of thesection may compromise theindependence of ONFO.

The ONFO is proposed without

a board but with a looseoversight by the Minister ofFinance and the Governor of theCBN. This may compromiseprovision of strategic directionand effective oversight.

N o n - r e p r e s e n t a t i o n o fconsumers in the ONFOstructure which means inputs ofa major stakeholder group is notconsidered in the ONFO

structure.

6.0 Conclusion

The financial ombudsman is a valuablefree service for consumers and has greatpotential for reducing the number ofcomplaints in the financial system. It isenvisaged that it would provide incentives

to financial institutions to be moreconsumer-centric since f inancialinstitutions would try to avoid the paymentof case fees as may be prescribed inregulations.

To the regulators, it offers a fillip to enablethem focus more on proactive consumerprotection initiatives, like market conductregulation and consumer education,which ultimately enhance consumerconfidence. Together with an effectiveredress mechanism, provided by afinancial ombudsman, a consumerprotection tripod is created which isexpected to improve financial systemstability.

Mrs. Dutse is the Director,Consumer Protection, CentralBank of Nigeria (CBN)



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1.0 IntroductionThe Independent CorruptPractices and Other Related

Offences Commission (ICPC)was established by the CorruptPractices and Other RelatedOffences Act, 2000 (the Act). TheAc t seeks to prohibi t andprescribe punishment for corruptpractices and other relatedo f f e n c e s a n d v e s t s t h eC o m m i s s i o n w i t h t h eresponsibility for investigation

and prosecution of offendersthereof.

The Act charges the Commissionwith three mandates, namely;e n f o r c e m e n t o f t h e A c t ;prevention of corruption; andpublic education and mobilisationon and against corruption. In theexecution of these mandates, theICPC focuses on preventing and

combating corruption, promotingthe environment for transparency

and accountability and sustainingcorruption control.

Broadly speaking, corruption isdishonest or illegal behaviour,especially of people in authority,according to the Oxford AdvancedLearner's Dictionary. Otheroffences include fraud, unethicalbehaviour, failure to meet thestandards in a contract, etc.

B u s i n e s s e s t h r i v e i n a nenvironment of good governance,in government and corporationsalike. Corruption and unethicalbehaviours such as forgery, insiderd e a l i n g , i d e n t i t y t h e f t ,embezzlement, bribery, deceit andabuse of position, tax evasion, etc,impact heavily on the businessclimate; they add to the cost ofdoing business and place honest

businesses at a disadvantage.

2.0 What is Corruption?

Businesses thrive on trust. Thisimplies honesty and reliability;t h i s m e a n s g u a r a n t e e o f

contracted expectations. Failureto meet the obligations in anygiven contract is tantamount to abreach of trust and this may havehappened due to corruption.Organisations must be alive totheir responsibilities of meetingcontractual obl igat ions tocustomers, even to the leastcustomer. This is particularly

i m p o r t a n t i n t h ebanking/financial sector wherecustomers' confidence can easilybe shaken by poor performance,in the face of threat to the safety oftheir funds (deposits). Apartfrom safeguarding its bottom line,customer confidence is a majorreason why banks must beinterested in maintaining a zerotolerance environment for

corruption.

Financial Ombudsman Services in Nigeria:

Facilitating an Ethical Business Environment

Through an ICPC/Banking Industry Initiative

By Dame J.N. Onum Nwariaku



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Th e ban k i n g i n du s t ry i sbedevilled by a deluge of fraudcases, impacting negatively on thebottom line of many bankingsector organisations. Total fraud

cases reported in the bankingsector in 2013 stood at 3,756compared to the 3,380 in 2012.The amount involved in the fraudincidences also grew to N21.79billion in 2013 from N18.05billion the previous year.

The increasingly easy globalcommunication system and theenthusiastic embrace of e-banking in Nigeria have helped todrive fraud in the financial sector.A l s o , a c c o r d i n g t o t h eIn t ern a t i on a l Compl i an ceAssociation of the UnitedKingdom (UK), the financialsector is vulnerable to fraud 'dueto the often complex nature offinancial services; detecting andpreventing fraud within the

financial sector poses an almostinsurmountable challenge'. Thethreats may come from within oroutside the organization, and theorganisation or the customer maybe the victim.

As t h e Au s t ra l i an Cr im eCommission has declared, theimpacts of financial fraud arevaried and debilitating for anorganisation and a country. Theyinclude damage to the country'sfinancial reputation, loss ofc u s t o m e r c o n f i d e n c e i nbusinesses, reduced ability toattract foreign investment,increased cost of security andregulation, and negative effect oneconomic growth.

Obviously, no investor will put hismoney in a venture or in a clime

with an extremely high risk factor.When it comes to exercising anoption, the investor will certainlyprefer a safe and conduciveinvestment climate with clearly

defined rules with certainty withinwhich to operate. (Russell Dukeand Michael Tichareva of NationalStandard Finance).

In executing its mandate, theICPC recognises that achieving anenduring success in the war againstcorruption requires the concertedeffort of a l l s takeholders .Therefore, it places a highpremium on establishing andnurturing strategic partnershipswith all major segments of theNigerian society for the overallrestoration of the Nigerianeconomy and the age-old nationalethos. One of such segments isthe banking sector. Thecommission acknowledges thecollaboration of some banks so far

in its effort at checkmating andapprehending fraudsters andmoney launderers, and calls formore collaboration.

The ICPC is engaged in ethicalinterventions in the followingareas:I. T h e N a t i o n a l Va l u e s

cibn journal

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