1. Introduction

Rwanda has continuously implemented Consumer Protection centered Laws with the aim of ensuring consumers interests promotion and protection.

There has however been a notable gap with regard to financial consumer protection. In realizing the important role the existence of a sound financial consumer protection framework plays in the expansion of access to financial services, Rwanda has enacted a new Law No 017/2021 of 03/03/2021 relating to Financial Services Consumer Protection which seeks to protect a financial service consumer and has provided a number of provisions to this effect.

• Principles of protection of a financial service consumer

The Law lays down a broad number of principles aimed at protecting a financial service consumer.[1]

1. Proper treatment of a financial service consumer

A financial service provider or his/her representative is required to treat consumer of a financial service fairly, honestly, without discrimination and exercise due care, skill and diligence with regard to the financial product or service it provides. He/she must put in place policies and procedures in order to educate his or her employees and a representative on how to treat financial service consumer in accordance with this principle.

• Transparency

There must be transparency in the way a financial service provider or his/her representative communicate with a financial service consumer about the financial product, the service provided and the cost. This principle transparency applies at all stages of a financial service provider’s engagement with the financial service consumer.

• Cost of a financial service

A financial service consumer must be informed of the total cost of a financial service which is determined in a way not detrimental to the financial service consumer and the financial service provider.

• Management of conflict of interest

A financial service provider or a representative must appropriately manage any conflicts of interest that may result in unfair treatment of financial service consumer. The conflict of interest arises when a financial service provider or his or her representative benefits from the fact of selling a financial product or a service that is unsuitable for the financial service consumer’s needs or encouraging a financial service consumer to invest in a higher risk financial product or service because it will result in a higher benefit for the provider.

• Appropriate advice on a financial product or service 

A financial service consumer must be provided with the right advice that can incite him or her to buy, make greater use of or continue to use the financial product or service. He or she is provided with appropriate advice on a financial product or service, taking into consideration the following: his or her objectives as he or she disclosed them or as they are otherwise known by the financial service provider; his or her needs and their nature as he or she disclosed or as they are otherwise known by the financial service provider; his or her purchasing power for financial product or service; risks that may be incurred by a financial service consumer while purchasing a financial product or service.

• Prohibitions in provision of unsolicited services

A financial service provider or a representative must not offer a financial product or service that is unsolicited by a financial service consumer.

• Contracts

This progressive Law also gives the requirements that should be contained in a financial service consumer contract, a disclosure document or any other document to be issued to the financial service consumer as prescribed in the Law or regulation[2]: They must be written in one of Rwanda’s official languages as chosen by the financial service consumer. These are English, French or Kinyarwanda; they must conform to any minimum font size requirements set in the regulation; and comply with the requirements set out in the regulation relating to documents.

A financial service consumer is supposed to be provided with, in a fair and impartial manner, an explanation of the terms and conditions of the financial service consumer contract including key risks and all due fees and charges. He is also to be provided in an agreed time with a complete and written copy of the contract containing terms and conditions relevant to the financial product or service before the financial service consumer signs the contract.

In the event of changes in the contract, a financial service provider or a representative cannot make changes to any financial product or service contract unless there is an agreement with the financial service consumer. In case the contract confers on the financial service provider or the representative powers to make changes, the financial service consumer must be notified of these intended changes, reasons of the changes and the timing of their commencement which must not be less than thirty (30) days to allow the financial service consumer to prepare for them. If the financial consumer is not satisfied with the intended changes, he has the right to terminate the contract and at no cost.

A financial service consumer is entitled to change a financial product or a financial service provider.

The law also waives the penalty for early repayment .A financial service consumer who pays off early a credit he had borrowed from a financial service provider without transferring it to another financial service provider, is thus not liable to a sanction of early repayment.

In case the Contract has a clause which can be construed as unfair, the law Under Article 26 provides that clause becomes invalid in its entirety. It further states that the Regulation determines the standards to be followed to consider any clause of a contract for the provision of any financial product or service as unfair and determines how justice is administered to the aggrieved person.

With regard to right to termination, both parties to a financial service consumer contract have the right to terminate it in relation to a financial product or service and put it in the key facts statement.

The new law has also provided an important aspect to the contract with the provision on Cooling-off period for terms and conditions of a signed contract. It states that after the contract has been signed, a financial service consumer, if he or she wishes, is entitled to sufficient time which does not exceed thirty (30) working days from the date of signing of the contract to reflect on the contents of a contract relating to a specific product or financial service and he or she puts it in writing. 

Should the Consumer change his mind, he or she is not liable to any charge except service fees used when reviewing the file and preparing the contract.

With regard to notice, before holding a financial service consumer liable for failure to comply with the contract, a financial service provider or a representative provides him or her with a written notice of a period of thirty (30) days from the date the financial service consumer was notified, explaining the amount overdue and how it was calculated.

• Prohibited conducts

The Law provides that a financial service provider or a representative are prohibited from engaging in a conduct which misleads or misrepresents in a direct or indirect manner the quality of a financial product or service or causes or is likely to cause a false impression by a financial service consumer.

• Information

Regarding a consumer’s personal information, a financial service provider or a representative is required to protect the confidentiality and security of personal information of an identified or identifiable consumer of financial service personal information when providing financial products and services and to protect them against any anticipated threats or hazards to security or integrity of the information, as well as against any unauthorized access, unless it is otherwise provided by other laws.

A consumer has the right to be informed of the collection, processing and distribution of any information of his or her concern not related to primary purpose for which the information was originally provided, unless it is provided otherwise in other laws.

In addition, this Law states that a financial service provider or a representative provides free of charge a financial service consumer with a key facts statement for a financial product or service to enable him or her to make an informed decision about acquisition of the financial product or service.

A key facts statement for a financial product must be written on a durable medium. The Law states that the Regulatory Authority issues a regulation detailing the content of the key facts statement for a financial product and other requirements that must be disclosed in a key facts statement for the financial product or service.

A financial service provider has to provide a financial service consumer with additional information relating to the financial product or service upon request.

• Advertisement or Promotional material

Advertising or promotional materials in relation to any specific financial product or service must be clear and include all the necessary information to be disclosed. A financial service provider will be liable for false information he or she has given while advertising or promoting a financial product or service.

• Interest

This Law broadly covers the aspect of interest. A financial service consumer must be informed of the methods of calculation of interest rate and repayment of loan. He or she should be informed of the type of interest rate, which can be variable or fixed. A financial service provider has to publish interest rates and amount to be paid on a financial product or service.

The method of loan repayment can be declining or flat. If it is a declining method, a financial service provider informs a consumer that he or she can choose the fixed repayment or variable repayment. If the consumer chooses the variable repayment, he or she is informed that repayment of the principal amount borrowed is fixed.

 The Consumer should also be informed of how the credit will be paid and shows him or her the total amount of interests to be paid on such a credit. This information must be included in annex to the contract between a financial service provider and a financial service consumer.

 A financial service provider and a financial service consumer can, by mutual agreement, modify the methods of calculation of interest rate and repayment of loan. A financial service provider or a representative is not allowed to round up interest rates.

The financial service provider is also not authorized to charge or accept payment of an amount including interest and financial service fees unless it was disclosed to a financial service consumer or in case it is provided for in the contract. Therefore any amount imposed, accepted or charged but was not disclosed or stated in the contract are void and must therefore be refunded to the financial service consumer who is also entitled to bring an action for damages.

The new Law also captures the in duplum rule. In duplum directly translates to “double the amount”, but in law the in duplum rule provides that arrear interest ceases to accrue once the sum of the unpaid (accrued) interest equals the amount of capital outstanding at the time (and not the amount of capital originally advanced).

Under Article 20, a financial service provider must not exceed the following amount of outstanding debt:  1° outstanding principal debt, in case of repayment default by a financial service consumer; 2° interests not exceeding the outstanding balance of principal debt, in case a financial service consumer fails to repay as per his or her contract with a financial service provider; 3° cost incurred while recovering the total amount from the debtor of the financial service provider;

Where the loan contract has undergone amendments due to repayment default, the latest contract applies.

• Completion of loan repayment

Upon completion of paying off the loan, the financial service provider or a representative has to inform in writing the financial service consumer through certification that he or she has completed to pay off his or her loan within fifteen (15) days from the last repayment. The mortgagee who completed to pay off his or her credit is given back his or her mortgage without deregistration fees.

• Complaints and disputes resolution

A financial service provider has to establish a transparent complaints and disputes resolution mechanism between him or her and a financial service consumer. This mechanism must be clearly explained and the financial service consumer receives a clear response in a planned timeframe. He or she also has to be notified of the appeal procedures in case of unsatisfactory response.[3] 

 Conclusion

The new law on Finance Services Consumer Protection offers a sound financial consumer protection framework which is fundamental to improving usage and quality of financial services, access to them, and overall deepening of the financial sector. Its implementation will ultimately ensure significant economic and societal benefits.

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[1] Chapter II

[2] Chapter III

[3] Chapter VII