In Ghana, lending transactions are primarily regulated by the Borrowers and Lenders Act, 2020 (Act 1052). The Borrowers and Lenders Act was enacted to regulate transactions between borrowers and lenders, to establish a Collateral Registry, to promote a legal framework for the registration and enforcement of security interests in collateral, to establish an order of priority of security interests and to provide for credit agreements generally, and related matters.
Section 85 of the Act defines a borrower as a person who enters into a credit agreement with a lender. The borrower has rights that are provided and protected for under the law.
Firstly, a borrower must have a legal capacity to enter into a contract before he or she can apply for credit. A lender may, however, refuse to grant the credit to the borrower on grounds consistent with the lender's own risk assessments and underwriting. That being said, a borrower shall not be refused on grounds such as gender, race, colour, ethnic origin, political opinion, religious creed, social and economic status.
The interest rate indicated in a credit agreement by a lender must be calculated only on an annual basis. At no material time should an interest be calculated otherwise in a credit agreement.
A borrower has the right to refuse payment of a penal rate when it is calculated on the outstanding loan amount instead of the delayed payment as stipulated under the Act.
A borrower must be provided with clear, comprehensive accurate information regarding the credit agreement and also about his or her rights and responsibilities under the agreement. This is what is termed as a pre-disclosure agreement. A pre-disclosure agreement is mandated to be provided to a borrower by a lender regulated by the Bank of Ghana before the actual credit agreement is executed. The pre-disclosure agreement must include;
- Principal amount
- Proposed disbursement schedule of the principal amount
- Interest rate
- Total amount involved in the proposed agreement
- Proposed repayment schedule
- Basis of any cost that may be assessed if the borrower breaches the contract
- Any fees that apply to the prepayment of any obligation under the credit agreement.
- Insurance for the loan
The borrower would be entitled to a refund at the prevailing bank rate if any fees and charges not disclosed in the pre-disclosure agreements are applied during the pendency of the credit agreement.
The borrower has a right to confidentiality unless he or she gives consent for it be disclosed to a third party or by the operation of law.
A borrower must have in his possession his or her account statement within 5 days once a request is made to the lender. The account statement must include any payment made, remaining balance, fees and interest.
A borrower who has defaulted in his obligation to the lender must be given a notice of default in writing in which the borrower has within thirty days to remedy the situation where the lender decides to realise the security interest. If the security interest is perishable then the demand will be due immediately.
Finally, a lender is required to discharge a security interest (or cause a registered security interest to be discharged) within 5 days after the borrower performs its obligations under the credit agreement to which the registration relates.
The lender is required to provide the borrower with proof of the discharge within the same timeline, that is the 5 days. The borrower may request the lender to discharge (or register the discharge of) its registered security interest where the lender fails to comply with its discharge obligations. In such cases, the lender is required to comply within 5 days of receipt of the written notice from the borrower. Where the lender fails to comply with its discharge obligations within the specified period after being notified by the borrower, the borrower may apply to court for an order compelling the lender to comply with its discharge obligations.
It is also the lender's duty to give a copy of the memorandum of release of debt to the borrower within 5 days after the discharge of a registration.
A borrower who decides to exercise his rights under the Act must not be penalised, or have his agreement altered or a proposal to change the terms and conditions of his agreement that could result in acts to accelerate, enforce, suspend or terminate the agreement.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.