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The OBS champions consumer financial protection within the banking industry

28 April 2023 The Ombudsman for Banking Services

The need for trust within the banking sector has, in recent years, never been more important than it is today.

Recent times have seen the South African banking public being exposed to news of bank failures elsewhere and if that was not enough worry for the consumers, their stresses are further aggravated by their inability to meet their repayment obligations to their creditors brought about by the rising global cost of living crisis and the ongoing energy crisis.

More than ever before, there is a general feeling that consumers need banks that they can rely on. They need banks that are approachable and that are amenable to assist them in times of economic crisis. “Consumers must trust that the banks will act in the best interests and expectations of their customers. This is essential for the subsistence of a healthy bank-customer relationship and the protection of the integrity of the banking sector as a whole,” says Reana Steyn, the Ombudsman for Banking Services.

Steyn advised that one of the core mandates of her office is to ensure that the banks comply with their undertakings to provide South Africans with safe, secure, and reliable banking products and services. In the Code of banking Practice, the banks also undertook to act fairly, reasonably, and ethically towards their customers.

What happens if your bank fails to act in line with its undertakings under the Code of Banking Practice?

Instances where consumers have been failed by the banks, the Ombudsman for Banking Services has, for over 20 years, been there to provide relief to aggrieved bank customers thus maintaining the much-needed confidence and trust within the banking sector. According to Reana Steyn, the free service offered by her office is vital to ensuring that all South Africans, irrespective of financial means, are afforded the opportunity to have their complaints investigated and resolved by experts, with proven alternative dispute resolution record, in the field.

How does the OBS resolve bank disputes?
At the core of the South African banking system is the expectation by consumers to be treated fairly. "With this comes the legitimate expectation that, when consumers are wronged, the bank concerned will (within reason) go out of its way to recompense the consumer," says Steyn.

This means that the customer is put in the position they would have been in had the bank not acted in error. When the bank fails to do this, customers have recourse and are encouraged to lodge complaints with the Banking Ombudsman.

“Investigating and resolving banking complaints is the mandate of the OBS, and our office will go out of its way to amicably resolve any dispute. However, it is important to note that the OBS does not have the mandate to enrich customers," warns Steyn.

The role of good faith in resolving disputes
It is important to note that consumers and banks must try and settle any dispute they may have before approaching the OBS. Steyn says that it is crucial to approach this resolution in good faith. This good faith needs to extend to complaints bought before the Ombud as it will ensure a speedy and satisfactory resolution. "A bank's biggest asset is its customers. Therefore, there is an inherent need to ensure that they are treated fairly to ensure customer retention," says Steyn.

She adds that while banks strive to provide a perfect service and product delivery, there have been no instances where a bank has made an undertaking that mistakes will not happen. Therefore, expectations that banks are infallible would be unreasonable as human error and technological failures within the banking system will always exist.

What should bank customers remember?
The South African banking public must be aware that, in these difficult economic times, the OBS provides a much-needed solution to their challenges, especially in instances where they have been wronged by their banks.

“Our role is essentially to ensure that banks are held accountable whenever they have acted short of what is considered fair and reasonable banking practice,” advises Steyn.

Delays in the finalisation of a deceased estate
The complainant in one of the cases that the OBS delt with had to deal with the passing of this parents in 2016 and 2021. The bank was appointed Executor of the deceased estates.

There was a delay in the estates' winding up, and the complainant lodged a complaint with the OBS. He wanted the bank to waive its professional Executor's fee due to the inadequate professional service received. In response, the bank advised that the delays were due to the resignations of staff members within its deceased estate department as well as delays experienced in the Master of the High Court's Office (which were beyond their control). Accordingly, the bank offered to make a 10% (on the first estate) and 25% (on the second estate) concession on their fees for the delays.

"Upon investigation, the OBS discovered that, for three years after one of the bank's staff members resigned, nothing was done on the 2016 deceased estate account. Further, the bank did not provide any updates to the complainant on the progress of the winding up of the estate. The delays on the 2021 deceased estate were less severe as it was more recently reported to the Master of the High Court. The OBS ruled that the bank's actions were prejudicial to the complainant in that there was a clear breakdown of communication and service delivery to the complainant. We recommended that the bank made a higher concession of 50% on the Executor's fee on the 2016 deceased estate account, to which the bank agreed," says Steyn.

Failure by a bank to act timeously to prevent loss
The complainant in this case was a victim of fraud. She paid R8 758 to a fraudster's nominated bank account, believing she was purchasing a food truck. However, she later discovered she was defrauded and approached her bank to request a reversal of the funds.

In its response to the OBS, the bank advised the complainant to log a case of fraud to the bank's fraud department. The branch where the complainant asked for the funds to be reversed provided no further assistance. The complainant called the bank's fraud department two days later to report the matter.

"Fraud cases are regarded as time-sensitive by the OBS. However, it was uncertain why the branch did not urgently assist the complainant in contacting the bank's fraud department to open a case of fraud. Upon investigation, it was discovered that, had the branch assisted the complainant, her funds would have been recovered as the fraudster had not withdrawn them. Therefore, we recommended that the bank offer the complainant a full refund," says Steyn.

Incorrect advice
The complainant bought a vehicle that the bank financed. He was later involved in an accident where the vehicle was written off. After claiming from insurance, the complainant was left with a shortfall of R27 713 on his vehicle finance.

An arrangement was concluded with the bank regarding the financing of the shortfall. In this arrangement, the bank informed the complainant that interest would accumulate on the decreasing shortfall balance.

After a few months, the complainant approached his bank and complained about being overcharged. He pointed out that the interest levied on the account did not correspond with the interest agreed to in the arrangement. In response, the bank advised that the advice given to the complainant in the arrangement was incorrect.

"Upon investigation, the OBS pointed out that it did not matter if there was an error in the original advice given to the complainant as the bank's failure to provide the correct advice should not be prejudicial to the complainant. Therefore, it was recommended that the bank should adhere to the terms of the original arrangement. As a result, the bank paid back R17 465.35 to the complainant following our recommendation," says Steyn.

Tips to improve your relationship with your bank
Steyn points out that, given the tough economic climate that most South Africans face, there are a few tips that consumers can follow to improve their relationship with their bank:

• now, more than ever, it is important to live according to a budget. "As a family, it is important to sit down and have a frank discussion about the money available to the household (after debts have been paid). Family members can reach a consensus about what can be included in the budget, and what needs to be cut,” says Steyn;
• if it is financially possible, consumers should settle their debt as quickly as possible. This will reduce/negate the accumulation of interest;
• if you do need to make use of credit to make it to the end of the month, make sure that you use a reputable credit provider;
• it is becoming increasingly difficult for consumers to service debt. I.e. make bond repayments, car repayments, and debt repayments (loans and credit card payments). Steyn points out that if families find themselves in this situation, they need to contact their bank and have a discussion about the options available to them. "Banks offer a number of services such as restructuring debt, payment holidays and debt consolidation," says Steyn;
• if you do have a dispute with your bank, follow the correct procedure. Draw the dispute to the banks attention and allow them 20 days to respond to your query. Consumers can also approach the OBS who will raise a dispute with their bank on their behalf;
• "Consumers need to give the bank every opportunity to address and settle the dispute amicably. Consumers should only approach the OBS to make a complaint after the bank refuses to settle a dispute," says Steyn;
• finally, it is important to note that making a complaint with the OBS is a free service.

“It is important for consumers to know that the OBS exists to help South Africans and provide them with the protection that they need,” says Steyn.

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