KEEPING THE BANKING INDUSTRY IN CHECK

The free service offered by the Ombudsman for Banking Services is important in protecting your rights as a consumer.

We are living in a world of disruption. Many businesses have had to come to terms with the enforced change introduced by the Covid-19 pandemic. With social distancing being a national battle cry during the pandemic, many consumers have migrated to online platforms to do their shopping and banking.

This disruption is not without its challenges. Banks are working tirelessly on their systems to bring them up to date with the technological requirements placed on them by consumers.

At times, this may result in unfair treatment on the part of banks. This is where the free service offered by the Ombudsman for Banking Services is important in protecting your rights as a consumer.

20 years’ experience

The Ombudsman for Banking Services was established over 20 years ago with the purpose of receiving, investigating, and resolving disputes from consumers who are unhappy with the service, or the products, provided by their banks.

Consumers are facing a lot of financial pressure as a result of Covid-19 and often cannot afford lengthy legal battles that can be very costly. Reana Steyn, the Banking Ombudsman, says that for consumers her office is best placed and equipped to resolve disputes.

“In the many investigations we have conducted, we have uncovered many instances where, if it weren’t for our intervention, the banks would have treated their customers unfairly and got away with it,” says Steyn.

There are a number of alarming trends that the ombudsman has taken note of and urges consumers to be aware of.

Immovable property

Over the years, the ombudsman has seen instances where banks have obtained judgments against a consumer’s immovable property and the said property was declared executable.

In these instances, the property secured by the bank is auctioned to the highest bidder and the proceeds are used to recover the financial loss the bank suffered.

“If the property is sold for more than what was outstanding, the consumer does get something back. For instance, if R900 000 was outstanding to the bank (including the legal costs) and the property is sold for R1 million, then R900 000 will be credited to the bond account and R100 000 will be paid back to the bank customer,” explains Steyn.

However, Steyn notes that there have been instances where the banks have exercised their commercial discretion and bought a property that would otherwise have sold for a ridiculously low amount. The banks would then on-sell the property for more than what they bought it for and not credit the debtor’s bond account with the amount that was due to them.

According to Steyn, in these instances, the banks are required to credit the debtor’s account with the sale price. “Through the efforts of our office, this issue has been addressed with the banks. All of them agree that the debtor’s bond account must always be credited with the sale proceeds,” says Steyn.

Movable property

Steyn points out that her office also receives many complaints from people alleging that their vehicles were repossessed without them signing a voluntary termination letter or being shown a relevant court order.

To date, the ombudsman has received over 460 vehicle finance-related complaints regarding repossession. Steyn says she has heard of instances where consumers have been approached at shopping malls by people saying they work for the bank and are there to repossess their vehicle due to nonpayment. Some complainants have said they were coerced into giving the vehicle back to the bank.

Steyn says such actions by banks’ tracers are unacceptable. She cautions against letting anyone take your vehicle unless that person provides proof that they represent the Sheriff of the Court and provides an original court order authorising repossession of the asset.

In the absence of a court order, Steyn says the only other way that a moveable asset such as a car may be repossessed is if you voluntarily give the asset back to the bank by signing a voluntary termination notice.

“Consumers must make sure they understand exactly what they are signing before committing their signature to any documents, particularly when they are in default with their vehicle finance agreement,” cautions Steyn.

She says her office has received and investigated numerous complaints in this regard. In some instances, the bank obtained a signed voluntary termination notice but failed to comply with the requirements of Section 127 of the National Credit Act.

Where the ombudsman found that the vehicle was sold without the bank following the requirements of the Credit Act (such as sending a letter to the customer advising of the value of the vehicle/asset), the ombudsman recommended that the bank write off the outstanding balance and/or pay a distress and inconvenience award to the affected customer.

“In these matters, each case is decided on its own merits and the distress and inconvenience awards given are intended to ensure that similar instances are avoided by banks. These payments are not aimed at enriching consumers,” says Steyn.

Unlawful repossession

In a recent matter that was handled by the ombudsman, a consumer said his car was forcefully taken away from him by the bank without his consent. On investigation of the complaint, it was noted that the consumer’s attorneys had addressed letters to the bank challenging the lawfulness of the repossession. The bank’s lawyers had responded saying that the bank’s actions, including how the vehicle was taken, were legal.

Since no court order had been obtained by the bank to repossess the vehicle, the ombudsman asked the bank to provide a written voluntary termination notice complying with the Section 127 of the National Credit Act. The bank responded that the vehicle had been taken from the complainant’s son and that no written voluntary termination notice was obtained from the complainant.

Steyn said that her office recommended that the vehicle be immediately returned to the complainant and that the interest, storage and tracing fees, and any other charges added to the consumer’s account after the vehicle was unlawfully taken, be written off. The bank agreed with the ombudsman’s recommendation, but the consumer refused to take back the vehicle and advised the ombudsman that he would be signing the voluntary termination notice.

Efficient resolution process

Steyn says the scenarios mentioned above are particularly relevant today as many consumers continue to experience financial challenges and are therefore defaulting on their repayment obligations.

The effectiveness of the ombudsman’s office lies in its well-developed and streamlined process developed to efficiently resolve disputes between banks and their customers at no charge to the consumer. The ombudsman is able to resolve complicated and litigious matters quickly and, where the facts warrant it, to the satisfaction of complainants. That the ombudsman continues to protect consumers is demonstrated in some of the recent cases handled by Steyn’s office.

Case #1: Mr Banker, your actions will not go undetected

The complainant was a victim of online banking fraud. A fraudulent withdrawal amounting to R720 000 was made from her account. The funds were transferred from the complainant’s bank account to a beneficiary account held at another bank. The matter was investigated by the ombudsman, and it was ascertained that the bank should have become aware of the fraudulent transaction at an earlier point in time. This would have enabled the bank to report the fraud to the beneficiary bank timeously, which would then have prevented the loss that was suffered.

Case #2: Failure to comply with insurance legislation

The complainant was a beneficiary on her father’s life policy that was held with the bank. Her father died and she lodged a claim against the policy. The bank refuted the claim on the basis that the policy had lapsed due to the non-payment of premiums.

The ombudsman investigated the issue and found that the bank had failed to furnish proof that the non-payment notice and cancellation notice had been delivered to the policyholder.

“Therefore, it was our position that the policy was not properly terminated in accordance with Section 52 of the Long-term Insurance Act, which is read in conjunction with the Policyholder Protection Rules (Long-term Insurance), which was instituted in 2017 in Section 62 of the Long-term Insurance Act.

“The bank was unable to provide proof that the deceased (the policyholder) had been made aware of the missed instalments and the cancellation of the policy. As such, the policyholder was not afforded an opportunity to rectify the default, which resulted in the lapsed policy.

“We recommended that the bank approve the claim of R60 000 and deduct the missed premiums from the claim payout. The bank accepted our recommendation and paid out the sum of R60 000 to the deceased’s daughter,” says Steyn.

Case #3: Bank’s process to assist customer creates even bigger risk

In January 2021, the ombudsman received and started investigating a claim against a bank that helped reset a complainant’s

PIN over the phone only to compromise the PIN to the fraudsters.

In this matter, the complainant’s belongings, including her cellphone, bank cards and medical aid card, were stolen from her car. The thieves, clearly knowing the potential shortcomings of this specific bank’s system, called the bank pretending to be the complainant and advised the bank that they had forgotten the PIN. They then requested the bank to send them the PIN, which the bank did.

The ombudsman recommended that the bank should refund the complainant’s loss. However, the bank refused to do so, arguing that the complainant’s phone had been compromised. The ombudsman argued that the bank’s reliance on the complainant losing her phone was irrelevant, as the issue was the compromising of the card and PIN. Further, because it was common cause that the complainant’s card had been stolen along with her other belongings, the real issue that needed to be addressed was how her PIN had been compromised.

The ombudsman found that the complainant had not compromised her PIN to the fraudsters and that the compromising of the PIN was due to the bank negligently reading out the complainant’s PIN to the fraudsters. The bank eventually agreed with the ombudsman’s recommendations and refunded the complainant in full.

“Since then, we have noticed that the bank is refunding such matters in line with our recommendations, and there will most certainly be a change in the process,” Steyn says.

She stresses that the above case studies are a small sample of the 6 000 cases they have closed for the year to date (October 2021 at the time of writing).

Education is key

While the service offered by the ombudsman is free, you need to be aware of what constitutes fair customer treatment, and should first approach your bank if you have any complaints. “Before complainants approach the ombudsman’s office, they must provide the bank with every opportunity to settle the dispute in an amicable manner,” says Steyn, whose office should be the last point of call if the bank refuses to settle the dispute. – Supplied by the Ombudsman for Banking Services