Rather
cause delay than rue signing at leisure Consumers who sign banking contracts without first reading and understanding them cannot expect the Ombudsman for Banking Services to come to their rescue. That's the word
from Ombudsman, Neville Melville, who this week cautioned consumers to
read contracts before they sign them. "Complaints regarding these areas of banking are a recurring theme in this office." Although the office of the banking ombudsman based its decisions on fairness and the standard of good banking practice, it was guided primarily by the law, said Melville. "The general rule in contract rule is that the person signing a contract is presumed to know what it contains, and is bound by it. "The signature serves as an acknowledgement that the person signing has read through the terms and conditions of the contract and has agreed to abide by them. There are exceptions to the rule, but they seldom apply. "It will not usually help a complainant to reply merely on the obligations of the contract being very onerous or even unfair." Ask for a copy of the contract to study before signing, cautioned Melville. "The banks are obliged by the Code of Banking Practice to use simple language and to explain any legal terms. Customers should resist the 'sign here, here and here' approach if at all possible, especially when making a major financial commitment. "Under no circumstances should they sign incomplete documents. Causing a delay is better than repenting at leisure." Melville quoted various examples to illustrate the need to read before signing. For instance, a bank customer signed as surety for her son's personal loan of R26 000, thinking the surety applied to a limited amount, and to the personal loan only. But the bank later held her liable for her son's overdrawn cheque account of R5 537 after he settled the personal loan. The surety agreement clearly stated that it was for any of her son's debts (whether now or in the future ) limited to an amount of R26 000. The lesson for consumers was that anyone intending to sign surety only for a specific debt or amount, should ensure that the debt or amount was specified in the contract, as the agreement would have unlimited application if it was not. A case involving the terms and conditions of a credit card involved a member of a close corporation (CC), whom the bank held liable for R5 000 outstanding on the CC's credit card. The member argued that the card was in the CC's name and he could not be held responsible for its debts. The application form for the card was found to have been signed by the complainant. The terms and conditions confirmed that he accepted liability as co-principal debtor for all purchases and withdrawals made with the card. The bank chose to recover from the member about R5 000 spent on the card, as the business had become dormant. The member argued that he was unaware that he had signed in his personal capacity. But his claim was repudiated. The bank had to take a portion of the loss because it had not proceeded against the CC while it was still operational. The complainant's application for a review of the ombudsman's decision was turned down by the review panel judge that considered it. The lesson was that anyone who signed as surety for a business's debts should ensure that they were released from their obligation by the bank when the business was sold. Yet another customer asked that his bond of R500 000 be cancelled and transferred to another bank. The bank charged penalty interest, as the customer had not given the bank 90 days notice in keeping with the terms and conditions of the mortgage agreement. The bank customer claimed that he was not aware of such a clause and should not be held liable for the penalty interest. He also argued that the bank was taking revenge on him for transferring his account. His signature, however, appeared on the mortgage agreement and the ombudsman found that the bank was not wrong in charging penalty interest. The lesson was that, apart from reading the contract, consumers should ensure that the bank was asked to do the transfer after the notice period had elapsed. Melville said that his office dealt with numerous cases of bank customers complaining that investment brokers did not disclose fees, charges, and commissions up front. "Investigations have revealed that the bank customer' signatures appear on the quotes, application forms or contracts and other documents containing specific references to these costs. "In these cases, the ombudsman usually finds in favour of the banks." For instance, a complainant alleged that she was never informed of any costs when investing R300 000. She admitted signing some forms but did not read them properly. The bank produced the investment contract, signed by the complainant. It referred to the various fees and charges involved in the investment, expressing them as a percentage of the total investment. The complainant was held liable for the fees charged. Melville said bank customers sometimes alleged that the broker had made specific guarantees concerning investment performance. The customers, however, signed all the relevant investment documents which did not mention guarantees. "Generally, if these guarantees are not mentioned in the documents signed by the parties, the ombudsman will not find in favour of a bank customer." In one matter a complainant invested R50 000 on the advice of a broker. The complainant alleged that the broker had promised a 15% return on the investment. He trusted the broker and had not asked for confirmation in writing. Years later the investment had lost 25% of its value. The investment contract did not refer to any guarantees and the broker denied giving the complainant any. The bank was not found to be liable for the loss. "You, as the investor, have the right to safeguard your income by asking for more information and seeking clarity before you sign any documents," says Melville.
|