Check your statements for hidden funeral policy deductions on store accounts

The Ombud for Financial Services Providers (Fais Ombud) has warned consumers to check their clothing store account statements for insurance policy deductions they may not recall authorising, particularly funeral policy deductions.

The ombud received a number of complaints against a clothing retailer about disputed funeral policies. In some cases the deductions continued for years before being noticed by the consumer.

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Fais Ombud John Simpson said on Monday the monthly deductions are generally in the region of R60 to R100 per policy and the refunds can amount to thousands of rands in some cases.

Consumers have claimed they did not know about the funeral policies or were told it was a free benefit for account holders.

The office of the ombud advises consumers:

• To listen carefully to what they are told by a salesperson and be very wary of products being sold or added to their accounts;
• Not to be pressured or misled into adding any products they do not need or want to their account;
• If they have any doubts, not to agree to any added product or policy because they can always add products and policies at a later stage;
• The financial services provider must be able to prove that the consumer consented to the policy and the monthly premium; and
• If the financial services provider is unable to provide this proof, the policy must be cancelled and the premiums refunded to the clothing account.

Simpson said his office has received various complaints against various retailers but has noticed some specific complaints regarding funeral policies against a specific retailer – with the numbers relatively low and not indicative of any systemic issue at this stage.

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He declined to name the specific retailer mentioned in the complaints.

“In accordance with our rules, all complaints lodged are confidential. We do not disclose the identity of the parties involved in any settlements or closures … We also do not disclose any information relating to the respondents in our annual report. The only exception is if we issue a determination, which has the effect of a court order.”

Complaints

Simpson said his office received 62 complaints against retail stores in the 2023/2024 financial period, with 47 of these not registered as justiciable (capable of being decided by a court).

The bulk of the latter were referred to the National Consumer Commission (NCC) or National Credit Regulator (NCR) because they related to account-specific complaints and credit or loan queries.

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Simpson said the remaining 15 complaints involved claims that the nature of the policy was misrepresented to the consumer, or that the consumer did not authorise the policy.

He said these types of complaints are referred to his office by the National Financial Ombud Scheme and also directly by consumers.

“We try to assist consumers where possible. In most of these cases, the matter is resolved when we refer it to the respondent [retail store] as a premature complaint, which is where the complainant has not lodged a formal complaint with the respondent yet.

“We send the complaint to the respondent and provide them with a six-week period to resolve the complaint before it is allocated for formal investigation.”

Simpson said responses to these referrals come from the issuers of the policies, who are registered financial services providers.

ALSO READ: FSCA warns insurers about unfair increases on funeral policy premiums

“We are always open to engaging with any regulatory entity to advance dispute resolution.”

Policy transactions

Simpson said based on the complaints received, policies are either sold face-to-face in the store, which would require the client’s signature, or telephonically where verbal confirmation is provided during a recorded discussion.

He said most complaints where the transaction was concluded in-store are resolved in favour of the complainant, and a full premium refund is made to their store account.

These refunds include interest calculations that affected the store account.

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However, complaints where the transaction took place telephonically are often dismissed as the recorded conversations generally support the respondent’s version of events.

Simpson said those policies sold telephonically appear to be post-sale transactions after an account has been opened at a store, with the policies sold by salespersons who act as intermediaries, not representatives.

These salespersons do not provide any form of financial advice or financial expertise but only perform the administrative function of offering specific financial products that the consumer can either accept or reject.

Generic products, not financial advice

A record of advice, which financial services providers are required to keep, is not required for these transactions.

Simpson said in his office’s experience it is normal for intermediaries to offer specific financial products such as funeral policies, but only the basic elements of the product will be explained for information purposes.

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“The intermediary would not be permitted to provide any advice or recommendations or do a comparison between products.

“In general, these products appear generic in nature and relatively low-cost.

“It would be difficult to justify the additional cost that a representative would charge for reviewing each person’s financial situation and preparing a complete advice proposal in terms of the Code [general code of conduct for authorised financial services providers].”

Funeral policies: Be vigilant

The office of the ombud encourages consumers to:

• Review statements regularly to identify any discrepancies in amounts, particularly those related to insurance policies they did not authorise;
• Check balances and their purchase/s and the amount due to ensure there are no hidden fees;
• Question suspicious charges by contacting the retail store for clarification; and
• In the event of a dispute or dissatisfaction with the response received, lodge a formal complaint with the retail store.

ALSO READ: Funeral parlours facing backlash over excessive pricing claims

Consumers are urged to lodge a written complaint directly with the service provider if they believe they have been financially prejudiced because of the financial service rendered to them for a regulated financial product.

If the complaint remains unresolved after six weeks, consumers are advised to visit the Office of the Fais Ombud’s Complaints Portal or submit a complaint to info@faisombud.co.za.

This article was republished from Moneyweb. Read the original here