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Cooling-off period; bank loan

The cooling-off period for a bank loan is three-business day from the date you signed the loan document or received the loan. A borrower has the right to cancel or reject a bank loan without penalties, interests or consequences within the cooling-off period.

Cooling-off period applies to Commercial or Merchant Banks, Specialized Banks, Micro-finance Banks (MFBs), Discount Houses (DH), Development Finance Institutions (DFIs), Finance Houses (FHs), Primary Mortgage Banks (PMBs), Mobile Money Operators, Fintech and other CBN (Central bank of Nigeria) licenced institutions.

The financial institutions must allow customers a three-business day cooling-off period after signing a credit contract or disbursement – whichever occurs first – within which the customer may cancel or reject the loan without paying penalties or charges.

Regulations 4.3.6 of the Consumer Protection Regulations provides a three-business day cooling-off period for customers to cancel loans by financial institutions in Nigeria.

The three-business day bank loan cooling-off period does not apply to non-bank digital or traditional money lenders in Nigeria. A lawyer who negotiates a loan for a borrower with a non-bank digital or traditional money lender may propose a cooling-off period in the loan document.

Should a customer rely on the cooling-off period to cancel or reject a loan, the financial institution must refund all charges and payments to the customer. Remember that no penalties or charges apply under Regulation 4.3.6 of the Consumer Protection Regulations.

A loan agreement that excludes the three business days cooling-off period is illegal and unenforceable under the Consumer Protection Regulations 2019.

The Consumer Protection Regulations is a subsidiary legislation under the BOFIA 2020 (Banking and Oter Financial Institution Act). Surely, the CBN is the exclusive regulator of NIgeria’s financial services industry.

Therefore, any conflict between the Consumer Protection Regulations and any other consumer legislation such as Federal Competition and Consumer Protection Act (FCCPA) 2018 will be resolved under the Consumer Protection Regulations.

In concluding, the three business days cooling-off period helps financial consumers who change their minds concerning a request for a loan.

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