Regulation of financial services in Tanzania is largely conducted by the Central Bank of Tanzania (the Bank).

Consumer Protection Regulations

On November 22, 2019, the Bank issued the Consumer Protection Regulations (the Regulations) in a bid to enhance financial services customers’ confidence in the sector and to promote stability, growth and innovation. The Regulations introduce high standards for efficient customer service delivery, market discipline and ensure that consumers are treated fairly by regulated bodies. It is basically the foundation for the establishment of a robust consumer protection regime in the financial sector, thereby enhancing financial inclusion and ultimately creating a stable financial system.

The Regulations apply to all financial service providers (in both Mainland Tanzania and Tanzania Zanzibar), including mobile money operators, licensed by the Bank, except where prescribed otherwise by the Bank in other regulations. At their core, the Regulations seek to create balance in the sector between financial service providers and their authorized agents (FSPs) and consumers of financial services, to ensure fair, inclusive and equitable exchange of products and services. They also aim to improve public financial awareness, (particularly on budgeting, financial planning, savings, investing, borrowing, retirement plans and self-protection against fraud), improve disclosure and transparency on products and services provided, improve consumer asset and data confidentiality, security and integrity, increase competition in the sector through supporting innovation and interoperability, and allow consumers to switch products and services.

Consequently, FSPs are required to develop internal structures of governance such as internal audit and compliance as well as policies and procedures that ensure effective implementation of the Regulations. In addition, the Regulations impose responsibilities on the board of directors and senior management of the FSP in that:

• the board of directors of the FSPs are responsible for approving policies and overseeing their implementation; and
• senior management must have an adequate process in place to monitor the FSP in all aspects of operation to ensure compliance with the Regulations.

Further, it is a requirement under the Regulations that these policies be submitted and reviewed annually by the Bank not later than 30 days following the board of director’s approval.

General principles for financial consumer protection

The Regulations have embodied the general G-20 High-Level Principles on Financial Consumer Protection which were developed in 2011 by a special task force of the Organisation for Economic Co-operation and Development (OECD).¹ The principles include:

• equitable and fair treatment of consumers;
• financial education and awareness;
• disclosure and transparency;
• behavior / work ethics or responsible business conduct;
• protection of consumers’ assets and information;
• competition; and
• complaint handling and redress.

Complaints handling process

Institution of complaint with the FSP

Part IX of the Regulations governs the complaint handling process and redress mechanism. It requires FSPs to:

• establish clear channels for receiving, processing and determining consumer complaints through channels such as phone lines, help desks, dedicated email addresses and web chats that are free, fair, accessible, timely, transparent and independent;
• develop a fair redress mechanism and compensation policy and procedure (in line with the guidelines issued by the Bank) for qualified consumers for compensation in erroneous debits, excess charges or financial losses incurred by consumers due to negligence or fraudulent activities; and
• avoid conflicts of interest when handling consumer complaints.

To ensure timely determination of complaints, the Regulations prescribe time limits which vary from 6 hours to 14 days depending on the category of product or service offered by the FSPs. However, if the FSP is unable to handle the complaint under the time limit specified under the Regulations, the FSP may seek an extension by notifying the Bank of such failure before expiry of the statutory period.²

Eligibility of lodgment of complaint with the Bank

Where complaints are not resolved by FSPs to the consumer’s satisfaction, the Regulations provide that redress is with the Bank provided that the complaint is escalated within 14 days of the complainant receiving notification of the resolution from the FSP. However, before the Bank can intervene, it must be satisfied that the FSP provider handled the complaint to its conclusion and that the complainant has suffered financial loss or material inconvenience.

The Regulations further provide that a written complaint may be lodged directly with the Bank if the complainant has not received a response from the FSP (depending on the time limit, which varies depending on the type of product that is the subject of the complaint).

Institution of complaint with the Bank

A complaint lodged with the Bank must be in a form prescribed under the third schedule of the Regulation. However, the Bank is yet to issue any guidelines or a circular governing receipt, processing and determination of consumer complaints lodged at the Bank.

Further, the Bank may initiate on its own and deal with any issue regarding consumers protection without being initiated by any party.

Determination of complaints by the Bank of Tanzania

To ensure quick determination of disputes, the law prescribed time limits in which a matter has to be finally determined by the Bank. They are:

• 30 days for payment products related complaints;
• 45 days for banking products related complaints; and
• 30 days for bureau de change related complaints.

Award

The award of the Bank is binding and conclusive provided the complainant or FSP has the option to judicially review the decision.

Orders

The Bank has powers to order the following reliefs to the complainant:

• compensation and refund;
• correction of erroneous data, information or statement;
• cessation or desist from conduct that is subject of complaint;
• a formal apology; or
• to do or desist from doing any action as the Bank may deem appropriate.

Application for revision

The law empowers the governor of the Bank to revise the decision of the Bank if one of the parties requests it. The request to revise must be lodged in the form prescribed under the fifth schedule of the Regulation and the same must be lodged within seven days from the date of the delivery of the determination by the Bank of Tanzania. The governor must reach a decision within 21 days.

Judicial review to the High Court of the United Republic of Tanzania

If they are dissatisfied with the governor’s decision, a party may apply for a judicial review to the High Court.³

General sanctions

The Bank of Tanzania may impose the following sanctions for non-compliance with the regulations:

• suspension from operations for a period not exceeding one year;
• a fine or penalty not exceeding TZS20 million;
• suspension or order for withdrawal of financial product or service or advertisement materials;
• suspension of management staff;
• impose conditions, restrictions or cancellation of registration or license provided;
• disqualification of management to carry out regulated activities;
• publication of names of offenders;
• reprimands; or
• other sanctions deemed appropriate.⁴

COVID-19 policy measures

Undoubtedly, the current global health crisis has disturbed the financial sector’s stability, and financial service providers have taken measures to deal with the situation. The crisis has created new risks for consumers, increased breaches of law and threatened market integrity as financial service providers may face difficulties in complying with regulatory obligations. Therefore, the Bank of Tanzania has had to adjust the regulatory requirements, and regulated bodies have had to adjust services and products while complying with legislative obligations.

In addition, the Monetary Policy of the Committee (MPC) of the Bank, following a thorough assessment of the impact of COVID-19 to various sectors, approved the following policy measures:

• to lower the Statutory Minimum Reserves (SMR) requirement from 7% to 6% to provide additional liquidity to banks;
• to reduce the discount rate from 7% to 5%, enabling banks to borrow additional funds from the Bank at a lower discount rate to then lend to their customers at a lower rate;
• to issue reduced haircuts on treasury bills from 10% to 5% and on treasury bonds from 40% to 20%, increasing the ability of commercial banks to borrow from the Bank with less collateral than before;
• to permit regulatory flexibility for banks and financial institutions to discuss restructuring of loans (loan repayment moratorium) with borrowers who are facing financial difficulty because of the pandemic. The granting of loan rescheduling will be granted to institutions conducting business in a transparent and impartial manner and determined on a case-by-case basis;
• to increase daily transaction limits for mobile money customers from TZS3 million to TZS5 million as well as increasing daily balance amounts from TZS5 million to TZS10 million for all mobile money platforms in a bid to promote non-cash payments, avoid congestion in public spaces such as banking premises, and use of digital platforms.

The Bank further confirmed that Tanzania has adequate foreign exchange reserves for importation of goods and that it will continue to monitor the situation and take appropriate policy measures to limit the impact of COVID-19.

By Angela Mndolwa (Partner) and Idrissa Juma (Associate Trainee), IMMMA Advocates.