Where no express interest rate exists in an overdraft or loan agreement, the bank is at liability to charge at a reasonable rate. Faragol Instrument Ltd. V. National Bank of Nigeria (1993) 1 NWLR (pt. 271) 586; United Bank for Africa v Lawal (2008) All FWLR (Pt. 434) pg.1548 @ 1561 para A - C
The basis for interest in a loan or overdraft contract is that interest charged, as Consideration, is an essential element for the basis of forming a valid contract. It is the consideration that the debtor must pay for keeping the bank out of the use of its money for a period and the bank customer who had use this money for himself, ought to compensate the bank for the deprivation. M.H (Nig) Ltd. V. Okefiena (2011) 6 NWLR (pt. 1244) 514 at 533
A claim for interest may be made where it was contemplated by agreement between the parties either expressly or by conduct. Ekwunife V. Wayne (West Africa) Ltd. (1989) 5 NWLR (pt. 122) 422 at 448
Generally, interest will not be payable on a debt or loan where there is no agreement. However, where the conduct of the parties shows that they intend interest to be paid, then interest shall become payable. See London, Chatham & Dover Railway Co. V. South Eastern Railway co. (1893) AC 429; Alfotrin Ltd. (the owners of MV Fotini) V. The Attorney General of the Federation &Anor. (1996)
A customer liability to pay interest on a loan will start from the time the contract granting such loan is fully created and the bank has given the loan to the customer. Where however there is a fixed expiry date for an overdraft or loan, the agreed interest rate will only be applicable from the date the agreement go into effect up to the date it expired. United Bank for Africa v Lawal (2008) All FWLR (Pt. 434) pg.1548 @ 1563 para E – F; Faragol Inst. Ltd. V. N.B.N (1993) 1 NWLR (pt. 271) 586
No, where the terms of interest payable are clearly set out in the agreement, then the general rules or Guidelines of Banking relating to charging interest on loan or overdraft cannot prevail. I.D.S Ltd. V. A.I.B Ltd. (20020 4 NWLR (pt. 758). It is doubtful that the court will allow this rule of contract terms that are consensually reached by parties being given support will apply where the Customer is able to show that the issue of Interest was not discussed, that no contract papers were generated and that he signed none, or that the papers he signed was silent on Interest, or any other set of facts that he can use to lead to the court to accept that the bank imposed the rate arbitrarily.
Yes, if in the absence of an express agreement to an overdraft contract a customer overdraws the balance in his account, and by that reason impliedly takes and utilises the ‘overdraft’ the customer will be liable to pay interest once the amount by which over draws his account. Rickett V. Bank of West Africa (1960) 5 FSC 113.
A bank can only charge compound interest when the customer agrees to it, that is, as a discussed and accepted term? New Nigeria Bank V. Legemah (1979) NCLR 263; Rickett V. Bank of West Africa (1960) 5 FSC 113.
Yes, the bank will be right to recover any reasonable rate of interest and any type of interest if it is shown that the borrower had knowledge of the interest to be charged and he failed to complain. Rickett V. Bank of West Africa (1960) SCHLR 227
The right to bring an action for recovery of the debt from the debtor depends on when the debt becomes payable for instance:
a) If by the nature of the contract the debt is to become payable within a specified date and the debtor defaults the right time to bring an action is the date upon which the debt becomes due and the debtor defaults after demands to repay;
b) If the loan is to be repaid on instalment basis, the right time to bring an action to recover the debt sum is when the debtor defaults in paying any one of the instalment;
c) Also, where there is no specific date for repayment of loan, the loan shall become payable on demand by the creditor and upon default, the creditor can institute an action in court to recover the loan advanced. National Bank of Nig. V. Thompson (1962) ANLR 964; Western Nig. Finance Corp. V. Aladesanm (1970) NCLR 335.
An action to recover debt is to be done within six (6) years beginning from the date of the debtor’s refusal to pay the debt. Where this is not done, the creditor loses his right to reclaim the debt sum after the expiration of six (6) years as it becomes Statute Barred. However, where the debt is a specialty kind of debt, that is, if the debt is secured by way of mortgage or any other form of charges on property, then the action to recover such debt must be done within a Twelve (12) Years window period. National Bank of Nig. V. Thompson (1962) ANLR 964
No, this is because no separate action can be made in respect to interest on a debt, and when the principal becomes statute barred, the arrears of interest are also barred. However, where an action which was brought to recover money upon a guarantee becomes statute bar, the creditor can still proceed to recover all outstanding interest which had accrued due from the customer before the action became statute bar. Such action can be brought against the guarantor. Parrs Banking co. V. Yates (1898) 2 QB 460; Elder v. Northcott (1930) 2 CH 422
For there to be a good and valid demand or a notice of demand, such demand must be specifically made. The creditor must specifically request for settlement of the overdraft within a period of time and if the debtor fails to meet the dead line, the creditor can go to court. Angyu V. Malami (1992) 9 NWLR (pt. 246) 242
No, a bank’s statement of account sent to the customer is no evidence of the customer’s indebtedness to the bank unless the customer acknowledges the correctness of the bank statement either expressly or by his conduct. National Bank of Nigeria v. Adejoro (1985) 3 Journal of Private & Property Law 67 (Unilag) 67.; WEMA Bank V. Osilaru (2008) 10 NWLR (pt. 1094) 150-180
The central bank of Nigeria has the power to control the interest rate to be charged by banks. They make Guidelines on the maximum and minimum rates to be charged on interest for all advances, loans, credit facilities or deposits. Section 15 Banking Act Cap 28 LFN 1990; UBN V. Albert Aligi (1994) 3 NWLR (pt. 333) 385
After the repayment of the debt becoming due and same is not repaid, the bank can sue for damages (compensation) for breach of contract
No, where a customer dies, a creditor or a bank cannot continue to charge interest upon the customer’s account except there is an express agreement to this. National Bank of Nigeria v. Adejoro (1985) 3 Journal of Private & Property Law 67 (Unilag) 67
Yes, the bank has the right to deduct money from the account to offset the debt you owed and you cannot be heard to complain. Furthermore, it is a generally accepted custom that a bank does charge interest on loans and draft granted by them to their customers. UBA Plc. V. Lawal (2008) 7 NWLR (pt. 1087) 613 at 632.
No, a bank cannot continue to charge interest after an overdraft credit facility it granted has expired. Airoe Const. & Civil Eng. Ltd. V. University of Benin (1985) 1 NWLR (pt. 2) 287
The bank is expected to prove before the court how such interest arose. Is it by agreement with the party? Or by operation of the law? It is not enough for the bank to claim the interest, the bank must show how the amount claimed as interest arose. S.A.F.P. & U. V. UBA Plc. (2010) 17 NWLR (pt. 1221) 192 at 208.
A debtor cannot refuse liability to repay loan borrowed from the creditor. The debtor has an obligation to repay. Union Bank of Nigeria V. Penny-Mart Ltd. (1992) 5 NWLR (pt. 240) 228
No, where the debtor proceeds to acknowledge his indebtedness to his creditor after the creditor’s Statute stipulated time for action on such matters has passed, the creditor can still institute an action to recover the debt as long as he can show by evidence that the debtor had acknowledged that the debt is still unpaid. National Bank of Nig. V. Thompson (1962) ANLR 964
In a contact of overdraft or a loan agreement, the indebtedness of the customer can be proved by the following:
a) By the express agreement between the debtor and the creditor;
b) In the case where the creditor is a bank, then a customer’s indebtedness can be proved by the universal custom of bankers;
c) By evidence showing that the customer has impliedly consented or acquiesced in the creditor’s charging or debiting the customer’s account with such rate of interest. National Bank of Nigeria v. Adejoro (1985) 3 Journal of Private & Property Law 67 (Unilag) 67
The right to recover a debt that is statute barred can be revived where the debtor acknowledges the debt in writing and he signs same. Also part payment of a debt by the debtor that is statute barred can revive the debt sum. National Bank of Nigeria v. Adejoro (1985) 3 Journal of Private & Property Law 67 (Unilag) 67
Where there is an express agreement on the rate of interest chargeable, the bank cannot recover any interest more than is stipulated. Standard Bank of Nig. V. Bolokor Enterprises (1980) FWLR 114
Yes, it is of the essence in a contract that the Guarantor or one who stood as Surety in the interest of the debtor for loan advanced becomes liable for the debt sum upon the failure of debtor to repay the loan. Western Nig. Finance Corp. V. Aladesanma (1970) NCLR 335
The statute of limitation begins to count from the date upon which repayment of the overdraft facility or loan becomes payable and the creditor makes a demand for such payment. Johnson V. Odeku (1964) NCLR 361; Johnson V. Sobaki (1968) 2 NLR 282
Yes, it is compulsory in a contract of an overdraft credit facility or loan, that the creditor firstly, sends a notice demanding the repayment of the loan from the debtor or make an actual demand from the debtor. In the absence of a creditor’s prior demand, any action in court to recover the debt sum would be premature. Angyu V. Malami (1992) 9 NWLR (pt. 246) 242