“We define a vulnerable consumer as someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a bank is not acting with appropriate levels of care,” says banking ombudsman Reana Steyn. Factors that determine whether you are a vulnerable consumer include your age, life events (such a death, divorce, retrenchment or crime perpetrated against you), literacy levels and physical disabilities.

A case study in the banking ombud’s annual report for 2020 ties in with the vulnerable consumer policy. The 78-year-old complainant fell victim to fraud to the amount of R6,765.63 and immediately reported it to his bank.

The bank agreed to block the account and refund the amount of R6,765.63 as a gesture of goodwill. However, the bank failed to block the account and there were further disputed transactions totalling R26,338.24.

At this point, the bank attempted to limit its liability by reversing the previous goodwill transaction and taking the R6,765.63 out of the complainant’s account. Steyn’s office found that the bank had not acted in good faith, particularly given the vulnerability of the complainant.

“Banks are not courts of law and cannot debit and credit a customer’s account purely on the basis that they have the means to do so. 

“A bank must ensure it always acts within its mandate when dealing with consumer’s bank accounts,” Steyn warns. 

Conduct standard for banks 

This ruling also falls in line with the Conduct Standard for Banks, which was made law in July 2020 with full implementation by July this year. Kedibone Dikokwe, divisional executive for conduct of business at the Financial Sector Conduct Authority (FSCA) says the conduct standard was introduced to ensure that customers experience positive outcomes when engaging with the various banks.

“We are seeing positive attitudes from the banks with a big shift towards a customer focus. The FSCA now also has representation at board level with all the banks to ensure that the customer-focused conduct is driven from the top,” she says. 

However, the FSCA has identified the following gaps in terms of banks’ conduct:

• Termination of customer relationships without proper engagement processes or clear reasons given to the customer.
• Minimal assistance where customers have fallen victim to phishing, vishing or other fraudulent incidents.
• Increased digital platform downtimes negatively affecting customers.
• Accelerated digitisation strategies without sufficient consumer education to ensure consumers are not left behind.
• Delayed clearing of electronic payment transfers between banks including in cases where immediate payment has been requested for an attached fee.
• No proper communication process in cases of dormant accounts with positive balances so that money can be paid over to customers.

Sindiswa Makhubalo, head of banks and payment providers at the FSCA, says an attitude change from banks is key to facilitating meaningful change and banks will be fined for non-compliance with the Conduct Standard.

Lockdown sees banking complaints almost double 

Banking clients battled to resolve disputes with their banks last year amid Covid shutdowns with the Ombudsman for Banking Services reporting that the number of case referrals almost doubled from 4,709 in 2019 to 8,389 in 2020.

Case referrals are complaints that the office of the banking ombudsman, Steyn, would send to banks where the banks have not already been given an opportunity to resolve the dispute. “Due to the lockdown and subsequent ripple effects, some bank customers were desperate and came straight to our office before contacting the bank,” she explains. Her office has been fielding more than 4,500 calls a month. If the problem is not resolved directly with the bank, the matter is converted to a formal case which forms part of the reported statistics.

However, it was not just the case referral numbers that were up. There was a 19% increase in complaints with a record total of 7,719 formal cases. The good news is that despite a likely increase in the use of internet banking over the past year, this was not the largest category of complaints. Steyn says internet banking complaints had been the biggest complaint category for two years running, but the biggest complaint category in 2020 was current account complaints related to fraud, fees and charges.

One of the biggest reasons (80%) for current account complaints was banks’ failing to give prior notice of account closures.  

Steyn attributes the decrease in the number of internet banking complaints to increased education and awareness by the banking industry about fraud and scams in this space. Of the 981 internet banking fraud cases closed in 2020, 73% were resolved in favour of the banks with just 27% resolved in favour of bank customers. 

“A common thread in all complaint categories was that consumers fell victim to fraudulent scams. In the majority of cases and following full investigations, our office was forced to conclude that the fraudsters managed to manipulate consumers into transferring funds into their account or into giving them their confidential banking details which then enabled the fraudulent transactions,” she says.

However, a total of R16-million mostly related to direct monetary losses was paid back to consumers. Steyn explained that most of these funds were direct monetary losses. 

Other complaints related to home loans, car loans, loan term extensions of Covid-19 relief plans.

One of the more interesting case studies in the banking ombud’s annual report revolved around the illegal sale of cigarettes during the lockdown. Following the Level 5 lockdown and the banning of cigarette sales, a complainant continued selling cigarettes despite the ban. His customers would transfer funds into his bank account and he would deliver the cigarettes.

However, a disgruntled customer who did not receive her cigarettes lodged a complaint with the bank. On learning that he was conducting illegal cigarette sales, the bank blocked his bank account and terminated the relationship.

The complainant wanted the bank to unblock the account. The ombud ruled that banks have a responsibility to block accounts and terminate relationships if customers are involved in fraudulent or illegal activity. DM/BM