Keeping the banking industry in check…free of charge

We are living in a world of disruption. Many businesses have had to come to terms with the enforced change that the Covid-19 Pandemic has introduced. 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 trying to bring them up to date with the technological requirements that are placed on them by consumers.

At times, this may result in unfair treatment on the part of banks. This is where the free service that is offered by the Ombudsman for Banking Services (OBS) is important.

20 years’ experience
The OBS was established over 20 years ago with the sole 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 which is being caused by Covid-19 and often cannot afford lengthy legal battles that can cost a lot of money. Reana Steyn, the Banking Ombudsman, consumers that her office is best placed and equipped to resolve disputes.

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

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

Immovable property
Over the years, the OBS 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 that is 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 the R100 000 will be paid back to the bank customer,” explained Steyn.

However, Steyn noted that there have been instances where the banks have exercised their commercial discretion and bought-in a property that would have otherwise sold for a ridiculously low amount. According to Steyn, in these instances, banks are required to credit the debtor’s account with the sale price.

Prior to the OBS’s intervention, some banks would on-sell the property for more than what they bought it in for and not credit the debtor’s bond account with the amount that was due to them. “Through the efforts of the OBS, this issue has been addressed with the banks. All of them agree that the debtors 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 OBS has received over 460 vehicle finance related complaints. With repossession, Steyn advised that she has heard of instances where people advise that they have been approached at shopping malls by people advising they work for the bank and were there to repossess their vehicle due to non-payments. Some have advised that they were coerced into giving the vehicle back to the bank.

The OBS expressed her displeasure for such actions by some of the bank’s tracers. Steyn cautioned people against giving away their movable properties to people unless the person provides proof that they are the Sherriff of the Court and provides an original court order authorising them to repossess the asset.

In the absence of a court order, Steyn advises South Africans that the only other way that moveable assets (such as vehicles) may be repossessed is if the customers voluntarily give the property back to the bank by signing a Voluntary Termination Notice.

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

In previous adjudications by her office, Steyn advised that the OBS received and investigated numerous complaints where bank customers alleged that the bank repossessed their vehicles without a court order nor a written/signed voluntary termination notice by the bank customer. In some instances, the bank would have obtained a signed VTN letter but failed to comply with the requirements as set out in terms of Section 127 of the National Credit Act.

Where the OBS found that the vehicle was sold without the bank following the prescripts of Section 127 of the National Credit Act (such as sending a letter to the customer advising of how much the vehicle/asset was valued for), the OBS recommended that the bank writes off the outstanding balance and/or pay a distress and inconvenience award to the impacted consumer.

“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,” advised Steyn.

Unlawful repossession
In a recent matter that was handled by the OBS, the consumer advised that his car was forcefully taken away from him by the bank without his consent. Upon investigation of the complaint, it was noted that the consumers attorneys had addressed letters to the bank challenging the lawfulness of the repossession by the bank. The bank’s lawyers had responded advising 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 OBS requested that the bank to provide a written voluntary termination notice complying with the prescripts of Section 127 of the National Credit Act. The bank then advised that the vehicle had been taken from the complainant’s son and that no written voluntary termination notice was obtained from the complainant (accountholder). In this matter, 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 OBS’s recommendation, but the consumer refused to take back the vehicle and advised the OBS that he would be signing the voluntary termination notice.

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

Steyn advised that consumers must remain aware that, in the OBS, they have an organisation, that is there to ensure that the banks act and treat consumers fairly. This is especially relevant in these trying times.

The effectiveness of the OBS lies in the well-developed and streamlined process that has been developed to cater for the speedy and efficient way of resolving disputes between bank and consumers at no charge to the consumer. This is the reason why the OBS is able to resolve very complicated and litigious matters quickly and where the facts warrant it, to the satisfaction of consumers.

Recent wins by the OBS
The OBS continues to be a game changer when it comes to consumer protection. This is demonstrated in some of the recent cases handled by the OBS.

Mr Banker, your actions will not go undetected by the OBS…
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 OBS, and it was ascertained that 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.

“It was our recommendation that the bank should reimburse the sum of R720 000 to the complainant. The bank accepted the OBS’ recommendation,” says Steyn.

Failure to comply, a costly affair
The complainant was a beneficiary on her father’s life policy that was held with the bank. Her father passed on and she lodged a claim against the policy. The bank refuted the claim on the basis the policy lapsed.

The OBS investigated the issue with the bank and found that the bank failed to furnish proof that the non-payment notice and cancellation notice was 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 (52 of 1998) 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 (insured life) was made aware of the missed instalments and the cancellation of the policy. back as such, the deceased was not afforded an opportunity to rectify the default which resulted in the lapsed policy.

“The OBS recommended that the bank approve the claim of R 60 000 and deduct the missed premiums from the claim pay-out. The bank accepted our recommendation and paid out the sum of R60 000 to the deceased daughter,” says Steyn.

Bank’s process to assist customer created an even bigger risk
In January 2021, the OBS 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 such as her cell phone, bank cards and medical aid card were stolen from her car. The thieves, clearly knowing the potential shortcomings of this specific bank 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 OBS recommended that the bank should refund the complainant’s loss. However, the bank refused to do so arguing that the complainant’s phone was compromised. It was the OBS’s argument 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 was stolen along with her other belongings, the real issue that needed to be addressed was how her PIN was compromised.

In this matter, the OBS 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 OBS’ 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 pointed out.

Steyn also stressed that the above case studies are not an exhaustive list of the wins as they closed over 6000 cases for the year to date.

Education is key
While the service that is offered by the OBS is a free service, consumers need to be aware of the conduct of their bank and what constituted fair customer treatment.

Before a complainant approaches the OBS, they must provide the bank with every opportunity to settle the dispute in an amicable manner. This is the recommendation of the OBS which is the last point of call if the bank refuses to settle the dispute.

Steyn advised that the OBS offers an important service to the public in a country where customer service can be severely compromised.