The Central Bank of Kenya (CBK) is looking for a consultant to spy on commercial banks and microfinance lenders with the aim of exposing consumer infractions such as hidden charges, false advertising, reckless lending and corruption.
The consultant will be required to conduct covert operations in the banking hall while impersonating a client seeking practices that violate CBK guidelines on consumer protection.
Banks that violate the rules face the withdrawal of licenses, the ousting of directors and a fine of 5 million shillings while workers in violation risk a fine of 200,000 shillings.
“The investigation aims… to conduct a mystery shopping to confirm banks’ compliance with consumer protection guidelines. The consultation will be limited to a period of three months from the start date,” explains CBK.
“(The consultant will conduct) mystery shopping at various institutions approved under the banking law.”
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Mystery shopper is an activity of impersonating a customer while being hired by a third party to verify a company’s products or services.
CBK checks aim to offer greater protection to bank customers, who have suffered from arbitrary increases in fees and interest on loans as well as numerous charges hidden in fine print.
The consumer protection guidelines prohibit banks from engaging in unfair or deceptive practices such as false advertising or shaming a consumer.
It requires banks to provide full disclosure of their fees and interest rates and to display the cost of their service prominently in branches, product promotions and websites.
Lenders are limited to imprudent lending and are required to track borrowers and ensure that they have used the borrowed funds for the intended purpose.
The rules, now backed by data protection law, establish restrictions on how personally identifiable data obtained by banks must be processed, stored and shared.
CBK places the responsibility for security on banks amid the unprecedented wave of online banking fraud, primarily through scams.
Banks are required to advise consumers on how to protect their accounts, checkbooks, bank cards, PINs or other documents or any account information.
“An institution must provide consumers with one or more dedicated telephone lines to enable consumers to report a lost or stolen card, checkbook or passbook or a suspicious transaction,” the CBK states.
Despite the regulator’s efforts to inject transparency into banking sector pricing, previous studies by Financial Sector Deepening (FSD) Kenya have pinpointed the hidden costs charged to unsuspecting consumers.
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The report revealed that banks are filing statements that do not fully respect the tariff situation.
“Although banks are required by the Central Bank of Kenya (CBK) to publish ‘Fee Guides’ with all their fees and charges, the FSD study found that many of these were outdated, incomplete or missing account-specific information,” the FSD said in the study whose findings blame the regulator for failing to protect consumers.
“Despite visiting more than 30 bank branches and consulting fee guides, customer service representatives, banking websites, requests from colleagues and friends, for several weeks in 2015 and 2016, we still did not could not obtain consistent price information,” FSD says in the study.
The report presents the findings of a two-year study conducted by FSD Kenya, a UK-funded NGO, to understand the costs of banking services in Kenya.
It says two rounds of mystery shopping were conducted in October and November 2015 and 2016 to create a database and measure the costs of core transaction groups such as opening, managing and closing bank accounts.
However, while conducting the study, the report says it became clear that pricing data from banks is hard to come by and market information is still opaque.
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To collect data, the researchers visited several bank branches posing as customers, as well as customer service hotlines and web searches to gather data.
The researchers said some data was difficult to obtain and validate, even from different branches of the same bank.
Now, CBK is looking to conduct its own mystery shopping exercise. Last year, it reported nine anonymous banks for non-compliance with various guidelines and prudential rules, compared to 13 in 2020.