Banks are listening to your complaints

15 May 2004 - Saturday Star

The banking ombudsman says the major banks have become more concerned about how you, their clients, perceive them.

Despite a 26 percent increase in the number of complaints to the Ombudsman for Banking Services last year, there was a decline in the number of cases that required adjudication by the ombudsman, Neville Melville said in his annual report for 2003.

Melville says the decrease is a result of banks improving their complaint resolution systems.

He says that there has been a discernable change in the banks' attitude towards customer complaints. The banks paid greater attention to their reputations and to dealing with dissatisfied customers last year.

Less often, he says, does his office hear of banks adopting the approach of "because we say so" or "if you don't like it, sue us".

Melville says that this change in attitude may have resulted from the demise of Saambou and BoE banks, as it "certainly must have made the banks realise just how vulnerable they are to negative public perception or sentiment".

Here is a selection of the rulings made by the Ombudsman in 2003:

Homeowner's Insurance

Melville found against a bank that tried to recover excessive insurance and interest from a client who defaulted on his home loan.

The client took out a R45 000 loan in 1989 and made regular payments for 22 months as well as lump-sum payments totalling R37 000. the client defaulted on his repayments after he was retrenched.

Although the bank did not obtain a debt judgment against the client, in 2002 it held him liable for R103 000, which included R6 000 for life assurance premiums, R6 000 for legal fees, R10 000 for homeowner's insurance and the balance for interest owed.

The homeowner's insurance was based on the property being valued at R600 000 - three times its actual replacement value.

Melville found that the bank was in contravention of the "in duplum" rule because it was charging interest that exceeded the loan amount.

The insured value of the property was much higher than its replacement value, and the annual premiums, which the bank added to the loan amount, were found to be excessive.

The bank wrote off the total outstanding balance of the home loan after Melville's intervention.

Sales in Execution

Melville decided that a bank was acting illegally for not crediting a client's account after it sold her property. However, because the bank went into liquidation, the ombudsman could not force the bank to reimburse her.

When the client's home loan account went into arrears, the bank obtained a judgment against her and bought the house for R100 at the sale in execution of the debt. The bank credited her loan account with R100.

The bank later sold the house, but did not credit the client's account for the amount it obtained. Instead, it held her liable for the total outstanding loan amount.

Melville found that the bank's actions were illegal and contravened the Code of Banking Practice.

The bank responded by saying it was under receivership and could not pay out any claims. It sent forms to the client so she could submit a claim to the liquidator.

However, because the bank had been placed under receivership, it was no longer a member of the Banking Council and therefore not party to the ombudsman's jurisdiction. Melville could not force the bank to reimburse the client.

Credit Card Transactions

The Ombudsman rejected a complaint by an account holder who failed to inform her bank that she had emigrated to Australia.

In May 2002, the client noticed a number of transactions on her credit card statement that she denied authorising. The transactions occurred in May 2001, but she did not notify her bank that she had moved to Australia in that year. 

The bank sent letters to the client's last known address in South Africa, and eventually closed her account in 2002 because it was dormant.

In terms of the conditions governing credit card accounts, clients must report transactions they wish to dispute to their bank within 60 days of receiving their statement. Banks have six months to query disputed transactions with the merchants concerned.

Melville found that the account holder had not reported the allegedly unauthorised transactions within 60 days, and so her bank could not take them up with the merchants.

Melville says the account holder should have either notified the bank that her address had changed or closed her account. Furthermore, it was reasonable to expect that she should have become aware of the transactions sooner.

Mistaken Credit

Even if your bank mistakenly credits your account, do not spent the money that you know is not yours.

A client deposited about R26 000 into his son's student savings account so that he could buy foreign currency.

The bank paid the foreign currency to the son, but failed to debit his account. The bank discovered the mistake six months later, and initiated legal action to recover the money. In the meantime, the son had spent the money in his account, thinking that it was in credit.

The father complained that the bank should write off the money due to its error in not debiting the account in time.

Melville found that while the bank had made an error, any reasonable person would have realised what had happened and would not have spent the money.

The bank accepted the Ombudsman's suggestion that it charge interest on the account only from the time that the bank formally told the father about the mistake.