Clients welcome policy on hidden bank charges
A client consults a teller in a banking hall. FILE PHOTO
Kampala. Consumers have welcomed Bank of Uganda’s new policy that gives them rights to know all the hidden charges associated with various financial services in a particular institution, before they can decide to bank with or sign up for any loan product.
The new initiative code named Key Facts Documents (KFDs) also gives clients of various financial institutions power to reject any hidden charges that may arise after signing up for the loan, and grants them the opportunity to return part of the loan they have borrowed during what is termed as a cooling period without interest in case they found that they can use all the money they have borrowed.
The new policy, which will be used by all the financial institutions supervised by the Central Bank, took effect on Wednesday, April 1, 2015.
The Governor Bank of Uganda, Mr Emmanuel Tumusiime Mutebile, said it is aimed at making financial products easily understandable to consumers by summarising key aspects of the transaction, a prospective client is intending to engage with a commercial bank.
“The discourse of total cost of credit will enable consumers to see full cost of a loan in a standardised way across the whole financial sector and help them to compare the rates of different providers. The total cost of credit is the sum of all applicable fees and charges for a loan,” he said.
Consumers’ views
In an interview with Daily Monitor during the launch of the KFDs at Bank of Uganda on Wednesday, the executive officer of Consumer Education Trust, Mr Richard Kimera, said: “This move will make financial service consumers have confidence in financial institutions in the country because everything is going to be done in a transparent way.”
Mr Kimera explained that the initiative will also help to bring more consumers into the formal financial system because many people have been fearing the hidden bank charges which are not clearly explained by banks and understood by their clients.
The executive director, supervision at Bank of Uganda, Ms Justine Bagyenda, shared Mr Kimera’s sentiments, saying: “If one borrows say a loan of Shs3 million and during the cooling period he or she decides to return part of it, the banks have the obligation to accept it,” she said.
The chairperson of Uganda Bankers Association, who is also the managing director of Centenary Bank, Mr Fabian Kasi, said: “This document is going to be used by all the 25 commercial banks and it is going to create trust in banks by the general public. As bankers, we are ready to implement the tool as it has been stipulated.”
