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LCCI cautions banks against publishing debtors’ names

By on July 22, 2015

The Lagos Chamber of Commerce and Industry has warned banks not to publish the names of their debtors, saying it is unprofessional and capable of undermining the spirit of enterprise in the economy

Deposit Money Banks have been serving notices of their intentions to publish the names of ‘delinquent debtors’ in the media along with the names of the names of the directors, subsidiary companies and related parties of corporate debtors.

There are also indications that such individuals, companies and their subsidiaries will be barred from the foreign exchange market.

The decision to publish the names of the bad debtors came in the wake of the disclosure that the non-performing loans in the nation’s banking system had climbed to over N400bn.

The Central Bank of Nigeria had given the chronic debtors till July 31, 2015 deadline to work out agreements with the DMBs on how to settle their indebtedness or the banks would be at liberty to name and shame them through media publication of their names.

However, the LCCI, in a statement on Monday signed by its President, Mr. Remi Bello, said the publication of the debtors’ names would be a sweeping generalisation that all loan defaulters were criminals who did not want to pay back.

It said, “There are global best practice principles in debt recovery. Publishing the names of debtor companies and their directors in national newspapers is unorthodox and unprofessional. Due consideration should also be given to the legal implications.

“Entrepreneurship is about risk-taking. Sometimes profits are made; at other times, losses are suffered. It will be unfair to portray business failure as an act of criminality, which is what the publication of names connotes. The reputational cost to such businesses is also very high. In any event, loans are supposed be collaterised and a foreclosure invoked in the event that such loans are not redeemed. This is the best practice approach to debt recovery.”

Although the LCCI admitted that there was a compelling reason to take some drastic actions to avoid the grave consequences of mounting bad loans, it urged the banks to examine the context of default on a case by case basis.

The chamber, which identified two categories of debtors, said, “There are defaults that have arisen as a result of genuine business failure some of which are irreversible and which affect the capacity to repay; and there are defaults that have arisen as a consequence of deliberate intent not to repay. The latter borders on character quality, which is what the Know-Your-Customer concept is meant to address.”

 

[Punch]