The National Bank of Malawi (NBM) has been accused of misleading conduct and unconscionable behavior by the Competition and Fair Trading Commission of Malawi (CFCT) after a customer complained that the bank failed to properly execute a loan repayment schedule.
The customer, who has not been named by the CFCT, took out a loan of 900,000 Malawi Kwacha (MK) from NBM in October 2019. The loan was to be repaid over a period of 36 months, with deductions made directly from the customer’s bank account.
However, the customer claims that they did not receive any text alerts regarding the deductions, which is a customary practice for transactions involving their account. When they contacted NBM to inquire about this, the bank explained that clients with loans typically do not receive deduction notifications.
Despite this explanation, the customer persisted in seeking confirmation that their loan deductions were being properly executed. They received a repayment schedule in 2019 and an updated version in July 2020. However, they were surprised to receive a text alert in August 2020 indicating that an amount had been deducted from their account to repay the loan. Unfortunately, this notification occurred only for two months before abruptly ceasing.
“The Complainant was, however, surprised that a month or so after the bank sent the loan repayment schedule, he received a text alert that indicated that an amount had been deducted from his account servicing the subject loan. However, this only occurred for two months and then stopped,” the CFCT said in a statement.
“It was further submitted that, on 10 October 2022, an amount of MK10,000 was deducted from the complainant’s account. He then received an email alert indicating that the amount was servicing the loan. When the Complainant engaged the Respondent, he was assured that this was the final deduction for his loan repayment.
“However, on 19 October 2022, another deduction amounting to MK15,000 was effected, which was surprising to the Complainant. When the Complainant engaged the Respondent, he was informed that the loan had not yet been settled due to a ‘technical error’ in the bank’s system that resulted in the stoppage of the deductions from November 2021 to October 2022. The Complainant was further informed that he still owed the Respondent an amount of MK717,000.
“Furthermore, on 25 October 2022, the Complainant received an email alert which indicated that an amount of MK600,000 had been deducted as loan repayment. The Complainant engaged the Respondent and he was assured that the amount would be credited back to his account by close of business on 26 October 2022, which was indeed effected,” the CFCT statement reads.
During a subsequent meeting on November 28, 2022, NBM proposed a new loan repayment schedule for the customer, starting from January 2023, with an adjusted interest rate. The customer objected to this proposal, stating that the failure to execute the deductions was the bank’s fault.
The customer considered the bank’s demand for repayment at an adjusted interest rate to be unfair and unwarranted, feeling unjustly penalized for an incident beyond their control. Seeking resolution, they brought the matter to the attention of the Malawi Competition and Fair Trading Commission.
Following deliberations, the Commission has faulted National Bank and ordered NBM “to adopt the loan repayment schedule that was initially applied and maintain the same interest rate of 23.2%; [and to] timely and effectively communicate with their customers on the status on loan deductions, particularly when the deductions have stopped.”
This incident has raised concerns among commentators about the transparency and customer service practices of commercial banks in Malawi. NBM is yet to communicate whether it will comply or challenge the ruling by the Commission.