Background
What is the legal effect of SMS alert on banking services in Nigeria? In a 2017 article, the Vanguard described SMS alerts wildly as mandatory but not compulsory.
Indeed, the CBN’s (Central Bank of Nigeria) consumer protection framework, 2016 mandates that anyone with a bank account should activate an SMS alert on the bank account.
The Guard to Charges by Banks and other Financial and Non-bank Financial Institutions 2019 (the “Guide to bank charges”) permits customers to opt-out of the SMS alert after the customer indemnifies the bank.
The indemnity is a written undertaking that the bank will not be responsible for any loss the customer suffers if the bank did not (promptly) inform the customer of transactions on the account.
Nigerian financial institutions could, sometimes, adopt a one-cap-fits-all approach to regulatory requirements – when such regulations are suitable.
SMS alerts are notices financial institutions send customers when transactions happen on a customer’s bank account or digital wallet – under the Guide to bank charges.
SMS Alert versus SMS banking
SMS alert is not the same as USSD (unstructured supplementary service data) banking, popularly known as SMS banking in Nigeria. USSD banking is a digital platform enabling customers to perform banking services as if the customer were in the banking hall.
USSD banking is generally safe except when your phone is lost or stolen or your associates know your USSD banking PIN and other personal details.
A 2018 Judicial Approach to SMS Alert
The Court of Appeal in STERLING BANK v. AKINTOYE AKINBODE (2018) LPELR-50669 considered the purpose of SMS alerts and whether a customer must subscribe to SMS alerts in Nigeria.
The Court affirmed that the purpose of the SMS alert is to let the customer know of a transaction made on its account. A person who subscribed to an SMS alert will know immediately after a transaction on his account.
An SMS alert enables the customer who did not initiate the transaction to take immediate steps to notify the bank to stop further transactions on the account. The Court held that the SMS is just an alert on cash movement to and from the account.
Suppose the customer did not subscribe to an SMS alert. The customer will only know of transactions in the account when he gets his monthly statement or when he makes a request for his account history – or receives an alert by email.
Emails alerts are free alternatives to SMS alerts that are paid-for-services.
The Court of Appeal held that “a customer is not obligated to subscribe to the service” – SMS alert.
Duty of Financial Institution to Notify Customers
The bank owes a duty of care to the customer. A duty of care carries a more significant responsibility. It is indeed contractual. When a bank fails in its duty of care, there are consequences (STERLING BANK v. AKINTOYE AKINBODE (supra)).
– We submit that a banker-customer relationship is a superior contract because it enjoys the statutory flavour.
A Bank’s duty of care implies an obligation to take reasonable care and skill in carrying out its customers’ business.
In STERLING BANK v. AKINTOYE AKINBODE (supra), Sterling bank issued ATM card to Mr Akinbode. Mr Akinbode promptly complained to Sterling bank that the card failed when he activated it.
Sterling bank assured Mr Akinbode that the bank would resolve his complaint within a “short while”, and the short while turned into 13 hours. Sterling failed to notify Mr Akinbode that it had resolved his complaint.
Mr Akinbode did not know the bank activated the card until he noticed in the May statement of account that the bank debited his account 1,630,000NGN.
Sterling bank denied that it had a duty to inform Mr Akinbode that it had resolved the complaint. It invoked the fact that Mr Akinbode had opted out of SMS alert. The Court disagreed with Sterling bank.
Conclusion
The CBN’s consumer protection framework requires Sterling bank and any other financial institution to communicate with a customer through the channel of correspondence.
In law, Sterling bank’s intended SMS alert would not be an excellent communication to Mr Akinbode’s written hand-delivered complaint.
But for a jaundiced approach to regulations, a bank customer is not prejudiced if it opts out of SMS. The CBN’s indemnity is an item that could scare customers into not opting out of SMS alerts.
