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Covid disrupted the traditional banking model and brought serious financial challenges for SA consumers

Ombudsman for Banking Services (OBS) Reana Steyn. Supplied

Ombudsman for Banking Services (OBS) Reana Steyn. Supplied

Published May 11, 2022

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The Covid-19 Pandemic experienced over the past two years has disrupted the traditional banking model testing it to its limit bringing with it some serious financial challenges for most South African banking consumers last year, according to the Ombudsman for Banking Services (OBS) Reana Steyn.

She said that the country’s banks were battling to address this thereby forcing consumers to turn to the OBS for intervention against their banks. “This is evidenced by the record number of complaints received and investigated by the OBS in 2021 where the number of complaints adjudicated by the OBS increased by 7 percent as compared to 2020,” Steyn said.

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She added that the number of cases finalised last year increased by 9 percent from 7 230 in 2020 to 8 039 closures.

Releasing the OBSSA annual report on Wednesday, Steyn advised that in 73 percent of the matters resolved by her office last year, the findings were in favour of the banks. This meant that in 5 846 (72.7 percent) cases, it was her office’s findings that there was no legal nor fair grounds to uphold the complaint against the bank. She added that her office’s findings were always be guided by the facts, the law, fairness as well as considerations of best banking practices (national and international).

The OBS confirmed that, through its intervention, the concerned banks were held 100 percent liable for the complainant’s claims in 15.9 percent (1 276) of last year’s complaints. In 4.5 percent (363) of these complaints, the banks were found partially liable. This meant that in 1 639 (20.4 percent) matters adjudicated in that period, the OBS concluded that there was some wrongdoing on the part of the banks.

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“Of the matters concluded in favour of the complainants, over R19 400 000 was awarded and offered because of the OBS’s direct intervention,” Steyn said. In 6.60 percent (530) of 2021 complaints, no award was made to the complainant. However, the OBS was able to provide them with information on why this had been the case.

Steyn advised that despite this increase, the OBS was able to resolve these complaints efficiently. Further, she encouraged all consumers who have been wronged by their banks or who have suffered losses, or some serious distress and inconvenience due to a bank’s maladministration, to contact her office for the free dispute resolution service it offers.

The OBS said that yet again, last year saw a notable increase in cases for most Banks compared to the previous year. While in 2020 Absa Bank (ABSA) recorded a reduction in the number of complaints (down 36 percent year-on-year), it was the opposite last year. Only First National Bank (FNB) recorded a significant decrease in the number of cases opened in 2021.

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According to Steyn, this dramatic decrease from FNB can largely be attributed to the initiatives implemented by the bank’s chief executive and staff to ensure that the bank aligned itself with the Treating Customers Fairly (TCF) principles and the requirements of the Conduct of Financial Institutions (COFI) Act. She said that they made a concerted effort, to look past the black letter of the law in respect of the merits of a complaint, and to apply considerations of fairness and reasonableness where the facts of the particular matter allowed for such considerations. According to her, specific attention was also given to the vulnerability of some customers and often settlements were made based on those considerations. She added that this approach had certainly proven to be fruitful for the bank and had resulted in the reduced numbers that the OBS had to deal with.

According to the Ombud, individual increases should be seen in light of the overall increase in the number of complaints received by the OBS.

Among the 5 Big Banks last year, FNB saw a significant drop from 2 197 complaints in 2020 to 1 452 complaints in 2021 (a 34 percent decrease). Standard bank saw an increase of 31.6 percent in the number of the complaints with a total number increasing from 1 572 complaints logged in 2020 to 2 070 last year. Capitec bank also saw an increase in complaints from 1 259 cases in 2020 to 1 651 in 2021 representing a 31.1 percent increase. ABSA had an increase from 943 cases in 2020 to 1 068 cases in 2021 (a 13.3 percent increase) and Nedbank accounted for 1 273 of the cases opened. This was an increase of 4.3 percent.

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TymeBank, saw a major increase in the number of complaints logged last year with an increase of 870.8 percent. However, the public must remember that these complaints came off a very low base of only 24 complaints in 2020 to 233 complaints in 2021. Discovery Bank decreased by 26.7 percent.

Steyn reminded the public to be cognisant of the fact that the number of files opened against a bank should not be regarded as an indication of that Bank’s overall performance or the way that they deal with complaints. “Consideration must be given to the fact that Banks vary in size, client profile and product mix. With fraud, the OBS has seen over the years that the fraudsters move from bank to bank targeting a certain group of consumers through phishing emails, vishing calls, etc. All of these factors impact on the number of complaints made against any bank,” Steyn said.

According to Steyn, many of the complaints opened and investigated by her office in 2021 involved instances where bank customers became victims of various types of fraud. However, internet banking complaints reclaimed their pole position as the category with the most complaints in 2021 accounting for 19 percent of the total complaints opened. “This is an alarming 6 percent increase from 2020 and a worrying statistic as it goes against the progress made in 2020 where the number of internet fraud victims had dropped significantly to a record low of 13 percent of the total complaints.”

Secondly, the OBS dealt with many service-related complaints, maladministration by banks, consumers being debt stressed, account closures by banks and consumers disputing the fees or interest rates applicable to their agreements. Current Account complaints accounted for 16 percent of total cases opened. This was a 3 percent decrease from 2020.

Personal loan and mortgage finance complaints remained constant at 11 percent and 8 percent (respectively) for the past 3 years while credit card complaints reduced from 11 percent in 2020 to 9 percent in 2021. There was an increase of 2 percent (from 6 percent in 2020 to 8 percent in 2021) in the number of complaints opened for Vehicle finance related issues.

ATM related complaints continue their decline with the total number of complaints opened accounting for 7 percent. This was a 2 percent decrease from 2020 and a further 6 percent decrease from 2019.

According to Steyn, the majority of these complaints, the losses suffered as well as the inconveniences experienced could have been avoided had consumers been more sceptical of fraudsters posing as bank personnel. “It is important that consumers protect their confidential banking information. Further, consumers should never accept assistance from strangers at the ATM, Finally, consumers should become more involved in the management of their accounts by constantly going through their account statements and engaging with the banks for assistance at the first sign of financial distress,” Steyn said.

The office said that last year, it had implemented a whatsapp line manned by one person on a full-time basis to accommodate more people. This year, the office said that it would start working with the Banking Association South Africa to create presence in member facilities. It said that this would make banking clients more aware about the office and their role.

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