Dormant and inactive accounts: The definition of a dormant account has been extended to 12 months (from five months), and a new category ('inactive account' which is an account that has been unused for over five months) has been introduced.
    New liability for scams: Financial service providers are now explicitly liable for losses arising out of scams related to consumer assets, with mandatory prompt refunds unless consumer negligence is proven. Prior to the amendment, liability in relation to consumer assets was limited to fraud, misappropriation and the misuse of such assets.
    Restriction on imposed fees: The amendment has introduced an express BOT mandate to 'prohibit any fee or charge' imposed by a financial service provider, if the BOT deems such prohibition necessary to protect consumers, promote financial stability or ensure fair market practices. This means financial institutions in Tanzania (or those lending into Tanzania) will face heightened scrutiny over the fees they impose. This might, over the long term, also affect revenue models for resident banks or financial institutions who rely on various fees and charges (eg account maintenance, transaction fees, ATM charges, etc) as a significant source of non-interest income.

Interest calculation method
An express obligation has been introduced requiring financial service providers to calculate interest using the reducing balance method.
Before the amendment, BOT had a gatekeeping role on what calculation method to use, as there was only a prohibition to apply a straight-line method 'or any other method' that had not been sanctioned by the BOT. This meant that financial institutions could only use alternative interest calculation methods if they had obtained prior approval from the BOT.
For the market, the uniform requirement to use the reducing balance method reduces the risk of consumer confusion and potential disputes over interest calculations. It also aligns Tanzanian practice with international standards, potentially increasing confidence in the financial sector.
As a practical next step, providers must review and, if necessary, update their systems and their loan documentation to ensure that all interest calculations are based on the reducing balance method.
Disclosures

    Profit to be disclosed in consumer agreements: This amendment requires financial service providers to disclose, in consumer agreements, 'profit or return' in addition to fees, charges and costs. While not clearly stated, we consider this to extend to both credit and deposit arrangements. Financial service providers will need to review and possibly revise their consumer agreements, product documentation, and disclosure processes. Similarly, systems may need to be updated to calculate and present profit or return figures accurately and consistently.
    Transaction fees: While disclosure of the transaction fees was already market practice for most financial service providers, the amendments introduce an express obligation for financial service providers to disclose all applicable transaction fees to consumers prior to the execution of any electronic or other transaction. This could necessitate system changes, especially for digital channels, to ensure that fee information is presented clearly and unambiguously at the appropriate stage.

Enhanced complaint handling and redress
Complaint handling mechanisms must be efficient, with clear escalation procedures if consumers are dissatisfied with a provider's response.
The BOT will deliver determinations on complaints within 60 days, and providers face daily fines of TZS 1 000 000 (about USD 395) for non-compliance with the BOT's decisions.
Data protection and use of information
Providers must comply with the Personal Data Protection Act, ensuring robust safeguards for consumer information.
Consent for use of consumer data in promotions can now be obtained electronically or otherwise.
Conclusion
The amendments present both opportunities and challenges for banks and financial service providers. Institutions will need to adapt their systems, processes, and documentation to comply with the new requirements, particularly in areas such as interest calculation, fee disclosures, and complaint handling. While this may involve additional operational and compliance costs in the short term, aligning with these enhanced standards can ultimately strengthen market confidence, reduce the risk of disputes, and support the long-term stability and reputation of the financial sector in Tanzania. From a consumer perspective, the changes implemented enhance consumer rights, improve transparency, and generally represent a significant step forward for consumer protection in Tanzania's financial sector. Most importantly, these reforms foster a greater sense of trust between consumers and financial institutions, contributing to a more secure and reliable financial environment.

By Lameck Muganyizi, Senior Associate, Bowmans Tanzania