The new Code of Conduct for Credit Institutions and Financial Companies and Financial Consumer Protection was recently published, approved by Notice No. 8/GBM/2021 of December 22nd, further the approval of the New Legal Regime applicable to Credit Institutions and Financial Companies by Law 20/2020 (LICSF). The new code revokes Notice No. 2/GBM/2018 of April 16th the first code of conduct governing such matters.
According to its preamble, the new code of conduct arises from the need to promote best practices in the conduct of credit institutions and financial companies and the protection of financial consumers in the production, distribution and offer of financial products and services, as well as to promote trust and fairness in the relationship they establish with consumers.
The new code strengthens and broadens the scope of financial consumer protection (with regard to data protection and advertising of financial products and services) and embodies the general consumer protection principles set out in the Law of Credit Institutions and Financial Companies.
We will look in more detail at some of the provisions introduced as a result of the objectives listed above:
1. Extension of the scope of application
The new regime extends the scope of application of the diploma, and now applies not only to ICSFs and microfinance operators, but to all entities subject to supervision or monitoring by the Bank of Mozambique in the course of their activity.
2. Rights of the financial consumer
While the previous code of conduct already provided for some of the rights described below, the current code sets out the rights of the financial consumer in an exhaustive and detailed manner, namely:
2.1. Right to withdraw from the contract
The financial consumer is given the right to withdraw from the contract, within the period defined for this, provided that the claim is made in writing and that the financial products received are returned within 7 (seven) days.
2.2. Right to Information and awareness
The financial consumer has the right to obtain from the institution clear and objective information on the financial products and services offered, fees, commissions and charges, and basic knowledge on joining them, in order to make an informed decision.
2.3. Right to choose
The financial consumer is entitled to choose financial products or services, as well as to change the institution or the domicile for receiving or obtaining the respective products and services, and the financial institution cannot prevent the consumer from doing so.
2.4. Right to early mobilisation of the term deposit
Institutions must state in the contract the conditions for early mobilisation of the term deposit (indicating whether partial or total mobilisation is allowed and also whether it can be done at any time or on pre-determined dates).
Institutions should also describe the penalties applicable to early mobilisation, by demonstrating the basis of calculations.
3. Duties of the financial consumer
New provisions were introduced regarding the duties of the financial consumer, imposing (among others) the obligation to (i) act in good faith during the negotiation, as well as in the performance of the contracts entered into with the institution; (ii) read and analyse all the information made available by the institution, before contracting any financial product; (iii) not make use of amounts unduly deposited or transferred to his bank or electronic money account; (iv) comply punctually with the contract entered into with the institution, paying all the instalments and other charges within the time limits established in the contract.
4. Rules of conduct and Protection of the financial consumer
In carrying out their activities, institutions should adopt transparent, up to date and clear policies and rules of conduct related to the treatment and respect of the financial consumer, integrating them as part of their institutional culture and in their market activities, disseminating them among their employees and publishing them on their respective websites for consultation by the consumer and the general public.
4.1. Transparency
Institutions must, before and during the contractual relationship, provide the consumer with information and assistance on the characteristics and use of the financial product or service, the conditions of access, adherence or contracting, in a true, clear, complete, objective and appropriate manner, in language that is perceptible and distinct from the promotional material.
4.2. Duty to report changes in the provision of financial services
In the course of their activities, institutions shall communicate to the financial consumer and the general public at least 30 (thirty) days in advance any change in the provision of financial services, any decision to close a branch, wind up or suspend its activities, or transfer its business to another institution or location.
4.3. Duty to provide a customer service channel
In the light of the new code, institutions should publicise and maintain a free, direct service and access in Mozambique and abroad, which is quick and easy, in the Portuguese language, and which allows the consumer to contact them twenty-four hours a day, by telephone and, complementarily, by any other means.
4.4. Duty to report on transactions through payment instruments and channels
Under the terms of the new code, institutions are obliged to provide the consumer with a short message service (SMS) for information on any operations or transactions carried out in Mozambique or abroad, through electronic or physical payment instruments, in real time and free of charge.
5. Abusive and prohibited practices
The range of abusive practices by institutions was extended to include (among others), the following prohibitions (i) restricting the consumer's freedom to choose the insurance company of his choice for the establishment of credit insurance; (ii) taking possession of and/or retaining the consumer's payment instrument and/or respective access codes, namely bank card, cheque, as a condition or guarantee for the repayment or payment of debts or any expenses; (iii) imposing on the consumer the assumption of additional pecuniary obligations that are more burdensome compared to the existing ones, generating breach of primary and additional obligations.
6. Responsible credit
As for credit, the new framework establishes that credit institutions and financial companies should promote responsible credit by its consumers, taking into consideration their financial situation, consumer's objectives and needs, the nature, the amount and characteristics of the credit agreement, doing so by analysing the consumer's income creditworthiness and collateral adequacy, by consulting the credit registration centers.
6.1. Early credit repayment
The consumer has the right to early repayment of the credit, which can be total or partial, during the term of the contract, regardless of amount, upon prior written notice to the institution, and the proportional reduction of interest and charges for the remaining interest period should be ensured. The terms and conditions of the proportional reduction of interest relating to the remaining period of the contract will be established by the Bank of Mozambique.
6.2. Interest and default interest
In the event of default of credit instalments on the due date, in addition to the principal and remuneratory interest due, the borrower may only pay default interest on the amount of the overdue and unpaid instalment, the rate of which must not exceed 2%.
The new framework prohibits for covenants and establishment of additional charges on the grounds of consumer's late payment, with the exception of judicial collection debt.
6..3. Capitalization of default interest
The capitalization of interest for late payment is only admissible in restructuring or consolidation of credit contracts, and provided that it does not exceed the value of the principal granted, which must be made in writing and executed by the parties.
6..4. Overdraft
The new framework sets for the first time, the formalities that should be complied when subscribing for an overdraft, setting forth that the subscription of an overdraft associated with a checking deposit account shall be made through the consumers’ signature in a separate and exclusive document, which will establish the terms and conditions.
The new code entered into force on December 22nd, 2021.
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