- URA’s attempts to compel banks to disclose their clients banking information was in total contravention of the constitution, banking law and principle as we have come to know them
- Banks are not at liberty to disclose without court order and if they go ahead to release personal data of their clients they do so in breach of trust and confidentiality and can be sued for specific and general damages
- Uganda is a signatory to the East African legal framework on the protection of personal information and the cyber laws which was put in place in 2010 and this should be respected
By Moses Sserwanga
The Uganda Bankers Association has come out strongly and rightly so to reject machinations by the Uganda Revenue Authority (URA) to obtain private information of the banks’ customers data for taxation purposes.
At least 30 commercial banks have since petitioned the Constitution Court to declare section 42 of the Tax Procedures Act 2014 under which URA issued the notice to obtain banks’clients data, unconstitutional. For starters, the Uganda Constitution in article 27 provides for the unfettered right to privacy of personal information including but not limited to the unauthorized disclosure of personal identity information and photographs.
Much as parliament is yet to enact an enabling law about personal data protection including the right to privacy of an individual’s photographs, it is an internationally accepted legal principle that banks owe a fiduciary duty to their clients irrespective of their standing in society. This is the same duty that applies to a doctor and lawyer to client’s relationship.
The fiduciary relationship is premised on the internationally established understanding that whatever information comes in the possession of the said professionals in course of their professional duty about their clients is treated as being confidential and cannot be passed on to third parties without the express permission of the affected individual or by court order in criminal and civil cases.
This same principle is encapsulated in the Bank of Uganda Consumer Protection Guidelines 2011 which among others compel commercial banks to treat their customers fairly and reasonably by not being aggressive, humiliating and or intimidating.
This same procedure applies to the notorious practice of banks running full page notices where they publish photographs of people who have defaulted on loans in national newspapers. This practice is not only humiliating to the affected individuals whose photographs are put in the public domination and therefore exposed to third parties but it is also fundamentally flawed and illegal.
The loan contract is between the bank and the individual or entity to which the loan is extended. That contract is never intended for the knowledge of third parties even when there is a breach by either party. The banking law and civil procedures accord banks many legal channels through which they can recover a loan from a defaulting customer without breaching their right to privacy.
The banks can do so by either foreclosing a mortgage or through court processes where they can obtain court orders for specific cases. In decided cases courts have stated that there is nothing immoral if an individual failed to repay a loan due to circumstances beyond their control and that the practice of exhibiting a photograph of a person and shamming them in public for the sin of being in an impecunious condition cannot be encouraged in civilized societies.
Banks also have a duty to adequately inform and educate their clientele about the implications of taking out loans especially salaried loans which are pegged on an individual’s “guarantee” to remain in employment.
The practice by banks now is that once such an individual loses their job the loan balances automatically fall due. The question then is, how can such a person who has lost their job automatically pay up for their loan balances? This is the same problem that brought the USA economy to its knees in the mid 2000’s.
The aggressive marketing of loans has dire ramifications for the banks, their clients and the well-being of the national economy. Banks being in a superior position must at all times act judiciously.
The writer is Media and Communications Consultant /Trainer and Advocate of the High Court of Uganda