Why Banks May Deduct Loan You Never Apply for From Your Bank Account

Why Banks May Deduct Loan You Never Apply for From Your Bank Account
Third-Party Loan Deduction
Have you experienced a strange debit alert on your bank account, where you have no cause to expect such a transaction from a particular bank? Or better still you are aware of a pending loan you have not settled with Bank A but the little amount of money you have is saved in Bank B simply to evade or better say, delay the payment of the unsettled loan with Bank A, but suddenly, you receive a deduction of the said loan in your Bank B.

It sounds weird and confusing but the explanation is contained in this piece of information.

Recently, the Central Bank of Nigeria (CBN) migrated its banking platform to a safer planet where customer loan management systems are integrated with the GSI Regime to make the transaction a safe option for all the involved parties.

The GSI regime prevents a situation where a loan creditor experiences "dead or unrecoverable" loans.

Look at a scenario where Mr. ABC has bank accounts with Banks X, Y, and Z. Mr. ABC secures a loan of N10,000 from Bank Y and refuses to pay after the moratorium period.

Mr. ABC then decides to stop banking with Bank Y while he starts patronizing Banks X and Z.

In the pre-GSI banking regime, Bank Y may need to sue Mr. ABC in court, or accept the loss, mostly in the soft loans with no collateral.

To alleviate this, the GSI Regime mandates an instruction (written or digital) executed by a borrower being an Account Holder in a Participating Financial Institution, authorizing the recovery of an amount specified by the Creditor from any/all accounts maintained by the Account Holder across all Participating Financial Institutions.

In case you have not understood, yet, under the GSI regime, a Creditor Bank is not only at liberty to set off the loan using the credit balance of the Borrower in other qualifying accounts in its own bank but can recover the same using the credit balance in the accounts of the Borrower held with other participating financial institutions.

In simple and layman's terms, it means Bank Y can now recover its loan simply by instructing Banks X and Z that Mr. ABC owes N10,000.00, including the interest and other applied charges. The deduction(s) from any or all of your bank accounts until the amount of the debt is fully set off.

However, you may be wondering how Bank Y came to know about your bank accounts existing with Banks X and Z. You may not need to stress too much, that is one of the purposes for which the Bank Verification Number (BVN) is integrated into the banking sector in Nigeria.

GSI provides a universal platform for all Nigerian banks and their customers to transact debit and credit activities on loan services.

With each of Banks X, Y, and Z having your BVN linked to your bank account with them, respectively, they already possess the power to know all the banks you transact within Nigeria and the amount you have in each of the banks. However, unless in the case of loan recovery and or "transaction error", in which case the law enforcers may be contacted, no bank has the right to debit your bank account without your consent.

So, if looking at the details of the notification sent to you after you have seen an unapproved deduction from your bank account if you see anything like "GISrecovery" know fully well that it is about "third party loan recovery".

To know the actual loan that led to the deduction, you might need to contact your bank where the deduction was made, from where you can make a case.

Category: World-News
Tag: Why Banks May Deduct Loan You Never Apply for From Your Bank Account
Written by Author (author)
Published 2/14/2024 5:17:55 PM

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