Opening Of Savings Security Account – With the problem of credit today in Nigeria, bank managers have learnt to devise a means of immediate recovery of loans from day one or the first day the credit or loan was issued. Credit customers are required to open a savings account with a notation “no withdrawal without the attention of the bank manager or the credit officer”. The customer is encouraged to be depositing a certain amount of money each month into the savings account. The account will be interest yielding but no withdrawal is allowed. If the facility should go bad, the bank could use the balance in the savings security account to offset part of the loan/advances since it has a right of set off.
Stocks and shares from reputable companies whose shares are quoted in the stock Exchange Market could be used as security for any credit granted. The proceeds from the share, in essence the dividend warrants is issued to share holders could be used to repay debts. The banks that have accepted stock and shares as security could advise the customer to write the registrar of the quoted company to pay such cash dividend warrants directly into the customer’s account with the bank. sometimes special accounts are opened for such purpose. In case of difficulty in repayment of debts, such special accounts are used to off sett the loan or overdraft.
An Unorthodox Method
One will be tempted to ass why do banks in Nigeria go outside the orthodox method of debt recovery that is obtainable in the developed countries like United States, Britain, Italy, Germany, and Japan to mention a few. The answer is not far fetched, because Nigeria and its business environment is peculiar so it has to be treated as such. The fraudulent practices, the Advance fee fraud (419), the political upheavals and deceits amongst bank customers have made banks to use the unconventional method of loan or advances recovery tool. Such methods includes publication of such creditor in National dailies, the use of armed men, private paid investigators, use of thugs, staff technical embarrassment, and seizure of plants and equipment and debt collectors.
Publication Of Names Of Debtors In National Dailies
Whenever, efforts have been made to collect the debts from the bank debtor customers, the bank goes out of its ways by actually publishing the names of debtors in National newspaper. This has yield good dividend. For example, the New Nigerian bank Ltd recovered over fifteen million naira out of the eighty million naira when it advertises some name of its debtor customers. This method is not so efficient because most of the customers are limited liability companies who operate only in names, but have no identities of the directors and managers of such companies. Again, in Nigeria, most people do not have respect for reputation and integrity, therefore wear lukewarm attitude towards the payment of such debts.
The Use Of Armed Men
the collapse of state owned banks in the nineties have thought the new generation banks a lesson. They have learnt to use armed policemen and the army in recovery of their fund from debtor customers. This method is carried out by or with special arrangement and understanding. It is an effective way of recovery from middle and low class debtors,
With Nigerian’s attitude to credit repayment, it becomes more difficult to recover debts granted to bank customers. Some of these debtor customers already made up their minds not to repay such loans. It becomes more difficult to locate such customers, but banks now appoint private people to locate the present where about of the customers so as to facilitate the quick recovery of the debt. This is very useful method and is yielding a good result.
Use Of Thugs
Things are changing very fast in Nigeria economy. The distressnesses in the banks have thought the bank a good lesson. The lawlessness in the Nigerian society has made things worse. A typical example is in January 29, 2002 the low ranking police officer went for a strike because of bad conditions of service, which have made them distressed and could not cope with family maintenance. Just as the policeman did, is what the bank do, by using thugs to recover their funds from debtor customers whose debt is overdue and bad. In most cases, the thugs force you out of your vicinity beat you up until the victim sends for cash before they release him.
Bank use the technical embarrassment technique or method like in all staff affairs in loan recovery. This is unconventional means where all members of staff go for loan recovery from their debtors. This was in use particularly during the era of distresses in the banking industry. The principle in that of technical harassment and sometimes physical violence. Members of the staff are at precarious position since they are at the verge of losing their jobs due to the distress caused by the huge debts. The banks that have accepted stock and shares as security could advise the customer to write the registrar of the quoted company to pay such cash dividend warrants directly into the customer’s account with the bank. sometimes special accounts are opened for such purpose. In case of difficulty in repayment of debts, such special accounts are used to off sett the loan or overdraft.
The fraudulent practices, the Advance fee fraud (419), the political upheavals and deceits amongst bank customers have made banks to use the unconventional method of loan or advances recovery tool. Such methods includes publication of such creditor in National dailies, the use of armed men, private paid investigators, use of thugs, staff technical embarrassment, and seizure of plants and equipment and debt collectors.
Uses Of Professional Seizure
This method is common with finance Houses and leasing Houses particularly in finance and equipment lease agreements. It is when the Lease defaults in making a repayment as agreed in terms of the lease, seizure will be employed to seize the equipment from the leasee. This is unconventional to the test of the time, but to prevent the lease or his agent from resisting the seizure of the equipment is with the lessor, repayment becomes much easier as it could be sold off to pay the debt if the lease is not coming forth to repay his debt.
This method as described above is common especially if it is a finance Houses or even a leasing Houses. This is usually in situation where a Lease defaults in making a repayment or adhering to the terms and conditions of the lease, an effective or an efficient way is the seizure as it will be used to seize the leasee’s equipment. This is not common, but it is effective, meanwhile, to put a stop to all of these, that is the lease/ his agent in resisting the seizure of the equipment, he can be made to repay with much ease as the debt can actually be sold off if the lease is not ready with the repayment of his debt.
The nature of our judiciary system in the country, Nigeria is not helping matters and as such banks are not motivated to prosecute their cases in Nigerian courts. This is because of long delays occasioned by adjournment of cases. Due to the above factors, banks now resort to bad debt collectors to help in the recovery of their outstanding indebtedness. Much success has been achieved, as the techniques uses by the collectors are unconventional. They employ services of thugs whom we have discussed earlier on in this chapter. The problem with this method of debt recovery is that most of the times, the collector goes away with the collected amount without paying the money into the bank vault. Again, most of the collectors are illiterates and are not guided by professional ethics and if an offence is committed, they and the bank are liable as they are acting as agents of the bank.
Due to the shortcomings of this method, the problem associated with debt collectors could be reduced if their letter of appointment as debt collector specifies the terms within which the collector should operate and a copy of the letter sent to the debtor customer of the bank. Since the problem with collector most times complicate issues, issues such as the collector going away with the collected amount without having to pay the same money into the bank vault, and being that most of the collectors are illiterates and are not guided by professional ethics and if an offence is committed, they and the bank are liable as they are acting as agents of the bank, it is recommended that an agreement is drafted. Again the debt collector should provide acceptable guarantor for a special amount in case he runs away with the collected cash. The guarantor would be held responsible for the money. However, in order to avoid situations where the guarantor and collector may go into agreement and running away with the money, the guarantor may have to deposit huge sum if not an equivalent of the amount to be collected and the guarantor must be a well known individual.