January 19, 2021
KMO LEGAL NEWSLETTER – JANUARY 2021 (VOL.1)
EXTENT OF LIABILITY IN THE EXECUTION OF BANK REFERENCE FORMS
By Felix Ayem (Associate)
Introduction
One of the criteria for opening a current account in any Bank in Nigeria, is the requirement that at least two referees must recommend the prospective account holder to the Bank. The Referees are expected to execute Reference Forms recommending the persons believed to be well known to them.
Reference Forms of different banks contain some conditions conspicuously written on them. The purpose of executing Reference Forms by Referees however appears to be a mere act of introducing persons whom, in their estimation, are reputable and capable of operating or maintaining current accounts with the Bank without more. However, there is a recent practice on the part of some Banks in Nigeria to attempt to hold referees liable where a customer defaults in the payment of a loan facility obtained in the in the ordinary course of his banking relationship.
In this article, emphasis is on the extent of the liability of Referees in executing Reference Forms. Can a Referee be held liable for all subsequent action of the referenced customer particularly in the event of default in repayment of a loan facility as described above? In other words, does a mere reference of a customer as a fit and proper person to operate a current account with a Bank translate to a guarantee agreement between the Referee and the Bank?
