By Samuel Malik
With a total asset value of N3.3 trillion and customer deposits of N2.6 trillion, First Bank of Nigeria, one of the biggest and oldest banks in the country, would not be expected to have any problem paying its bills, especially to people providing key services like address verification of customers.
Unfortunately, the bank is accused of owing contractors who provide this service several months’ pay running into hundreds of millions of naira, an action that is in clear violation of the contractual agreement between the parties.
The beginning of a beautiful relationship
In 2013, when First Bank decided to outsource its customer address verification exercise nationwide, it brought in companies, mostly small ones, to take up the task. It would send the customers’ addresses to be verified and the contractors, referred to as vendors, who would go out to locate them and report back to the bank.
Explaining how it works, a vendor told the icirnigeria.org that when a customer opens an account with First Bank, it sends a mail addressed to the customer using the address provided in the account opening form.
The vendor is expected to deliver the mail, a strategy to avoid suspicion, to the address as a way of checking if the address truly exists.
“With the mail, we have a reason to find the address without raising suspicion because you just can’t go asking about people’s address without a genuine reason and not get people agitated” explained the vendor, who, like many others that spoke to this website, cannot be named to avoid risking their contracts being terminated.
“The letter is what gives us access and cover,” he added.
The vendor then sends areport to the bank with the status of the address, stating whether it exists or not.
Depending on the agreement, the vendor sends his/her invoice to the bank and after verifications, payment is made into his/her account.
Part of the agreement is that each vendor must have an account with First Bank.
Satisfied that these companies could handle the job, the bank decided to make the contract yearly, instead of monthly, as was the case in the beginning.
According to a copy of the contract obtained by the icirnigeria.org, a vendor is expected to physically visit and confirm the customer’s address received from an Area Service Manager, ASM, and notify the bank, through the area office or branch concerned, of the status of addresses verified.
The addresses are expected to be verified within 24 hours of receipt, with sanctions imposed for every address verified outside this time, referred to as Turnaround Time, TAT.
Twenty four hours outside TAT attracts a fine of N200, 72 hours attracts N200 and over 72 hours attracts N300. One week outside TAT leads to non-payment for the particular address.
All addresses not located are reported as failed but where a vendor reports an address as failed and the bank discovers that it exists, the cost of this discovery incurred by the bank will be deducted from the vendor’s pay.
The vendor is expected to submit an invoice for payment containing information such as VAT registration number, number of addresses verified, dates and locations not later than the 25th of every month.
One of the responsibilities of the bank, according to the contract, is “the prompt settlement of Vendor’s invoices within fourteen (14) days from the date of submission of invoice, which must be 25th of every month.”
Vendors charge the bank between N500 and N800 per address depending on the complexity of the area and negotiation skills of the vendor.
At the beginning of the engagement, according to vendors, payments were approved by the ASMs and made without delay.
“We were paid within three days, as they did not want a month’s debt to be carried into the next month,” a vendor said, adding, “In fact they were always on our neck to send our invoices when the month is coming to an end.”
First Bank’s violation of contract
Gradually, vendors started experiencing delays in payment, which began in September 2014, but they did not complain because they thought it was just a minor temporary hiccup.
The monthly delay extended to 2015 before snowballing into months, causing the vendors to wonder what went wrong.
“Payments for May and June 2015 were made in September,” a vendor said.
Our investigation revealed that majority of the bank’s over 40 vendors spread across the country are yet to be paid from June to December 2015.
According to the bank, the delay is caused by a new system put in place to validate the reports provided by the vendors. This, it said, is to protect it from incurring losses arising from vendors’ actions, including false verification reports.
“The address verification payment process was recently modified to protect the Bank from making payments for poor quality services. This is especially with respect to operational loss from frauds arising from false address verification reports,” Babatunde Lasaki, the bank’s head of media and external relations, said in response to our enquiries.
“Previously, vendor payments for address verification were collated by Branches/Areas and validated by CPC (Centralised Processing Centre) before payment is made to the respective vendors. Due to the issue of false reports which have repeatedly come up during fraud investigation cases, a new level of validation (conducted by the Bank’s Business Performance Monitoring) was introduced to ensure that the Bank makes payment only for valid services received,” Lasaki further explained.
This, however, is far from the truth because the contract already takes care of this.
According to the contract, “Addresses reported as failed will not be paid for if confirmed otherwise by another party.”
The contract further states: “The Vendor will collate and submit monthly reports on address verification of both completed and unverified addresses for all locations to the offices/branches for review. These reports will serve as a basis for monthly review meetings to discuss Vendor’s services delivery and/or deviations from targeted service levels.”
It adds that “Hoax address verification is absolutely unacceptable, and can lead to contract termination, where identified.”
These, coupled with the fact that the Centralised Processing Centre validates the verification reports submitted by the vendors before payments are made, suggest that the bank is not telling the truth.
Vendors argue that the bank should have solved any problem arising from the new system faster, especially as the problem began more than a year ago, which is a long enough time to perfect the new validation process.
“We are aware that even when a bank has to change its entire operation software, it does not take six months,” a vendor said.
Debts mount for both bank and vendors
Despite First Bank’s claim that it needs to revalidate vendors’ reports before making payments, it has continued to engage them and still expects them to keep to the terms of the contract by verifying an address within 24 hours.
This has meant that the vendors have had to source for money to execute the contract while they wait for the bank to fulfil its part of the bargain.
Despite owing the vendors several months’ pay, the bank has curiously refused to give them loans to execute their jobs, leaving them at the mercy of other banks.
“We approached the bank to give us loan to take care of our operation and told them to deduct the money and interests when they are paying our invoices. Unfortunately, the bank refused,” a vendor said.
Many of the vendors who spoke to our reporter believe that they are being deliberately owed as a ploy to tactically disengage them from the contract, as either party is allowed to terminate the contract by giving a month’s notice.
“We hear that this validation process is even an attempt by the bank to reduce by all means the amount due to the vendors by removing old accounts from their list and frustrate the vendors to leave so that they will use their own people for the job,” one of the vendors said.
Many of them also said that they have thought of quitting but are worried that the bank will not pay them if they do.
Lasaki said that First Bank had paid N57.3m out of a total of N118.3m owed in invoices till August 2015.
Our investigations showed that the above payment was for the months of July and August 2015. However, only a handful of vendors were paid.
A senior bank official told the icirnigeria.org in confidence that not all of the N57.3 million had been paid because there was need to work out which vendor would get how much.
According to him, while all vendors are owed from July 2015 to date, one or two others are owed longer, including a particular vendor in Lagos who has been owed since March 2015.
It was learnt that part of the problem is that when the bank sent an email to ASMs for the payment of the money, it did not provide a breakdown of how the money should be paid.
“When the approval for payment was received from the headquarters, the ASMs complained that the approval did not contain all the information they needed, especially with regards to who would be paid how much. You know, since not all of them are owed the same amount and the money approved was only N57.3 million, there was supposed to be an explanation in the email of how the money would be distributed,” the source said, adding that the ASMs replied the email requesting for further details but no reply was received.
However, following our enquiry into the matter, the source said, First Bank became uneasy and queried the ASMs to know why the N57.3 million, which is less than 50 percent of two months invoices, had not been paid.
“That day you contacted the bank,” the source told our reporter, “the ASMs received a mail from headquarters enquiring why the payment had not been made.”
According to our findings and by Lasaki’s admission that the invoices presented till August 2015 was N118.3, First Bank spends about N50 million monthly on address verification but considers this amount excessive and is looking for ways of bringing it down.
Thus, with only a fraction of July and August 2015 invoices approved for payment, the bank is still indebted to the vendors to the tune of more than N200 million.
We asked Lasaki for further information, including how many vendors were paid from the N57.3 million and the total amount they are owed by First Bank, but he declined providing it, only saying vendors are being paid on a weekly basis.
“The remaining invoices that are yet to be paid are due to the validation requirements and even these are being dealt with. The Bank is not indebted to any vendors as the invoices are being treated and the delay is only as a result of the change in the validation process which the vendors are well aware of,” he explained.
Left with no choice, the vendors say they have now resorted to borrowing money from other banks to execute First Bank contract, even as they consider their next line of action, including going to court.
“Each passing day, we keep going deeper into debt because we borrow over N100,000 each week. We need to know where they are heading in order to know our next line of action, including whether to go to court,” a clearly frustrated vendor told said.