Hardly a day goes by without further proof of the utility of Uganda's recently passed Competition Act 2023. The recent decision of Excellent Assorted Manufacturing v DFCU Bank has highlighted the need for consumer protection in the banking sector.
Background to the decision
The plaintiffs challenged several charges and debits to their accounts by their banks, spanning a period of several years. In what may well be a record-breaking High Court decision of 240 pages, the court investigated each of the contested entries, found several of them unjustified and ordered a refund with interest from the date of the debits.
This article focuses on the court's application of the Financial Institutions Consumer Protection Guidelines, issued by the Bank of Uganda in June 2011. The Guidelines lay down three principles to guide the banker–customer relationship: fairness, reliability and transparency. In this case, the defendant bank resisted the application of the Guidelines, arguing that they had no force of law and could not be the basis of the plaintiff's claim against them. According to the bank, the Financial Institutions Act only provided for the Bank of Uganda to issue regulations, not guidelines.
The court dismissed this argument holding that the Bank was bound to follow the Guidelines. The court further held that in the absence of a superior legal instrument, guidelines issued by a regulatory body have persuasive authority from which the court can derive useful guidance.
Interestingly, just over a year earlier in the case of Miao Hua Xian, a court had upheld the defendant bank's argument, finding that the Guidelines did not show their origin, the author or time of making the regulations and that therefore following a similar case (National Drug Authority v Park View), the Guidelines did not have the force of law. The violation of the Guidelines was therefore not a basis for claim or defence. This decision was not referred to in the current case.
The Competition Act 2023
While it is clear that the Guidelines are not in the form of regulations permitted under the Financial Institutions Act 2004, It is not certain why the Bank of Uganda has not converted the Guidelines to the form of regulations. This does not bode well for the consumers in the banking sector.
Now that the Competition Act 2023 is soon to come into force, it will hopefully provide a better legislative framework for consumer protection not only in the banking sector but the whole economy. The law aims to create a Competition and Consumer Protection Commission with a wide mandate to protect the interests of consumers in the market and implement the law relating to consumer protection across all sectors of the economy. It is therefore expected to override sector-specific regulations, including the suspect Guidelines.
A broad legislative framework for consumer protection is welcome and long overdue. While there may be challenges with the implementation of the law following the debate around the administrative structure, the creation of a body that addresses consumer protection matters is a step in the right direction.
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