Here’s what you can learn from the most common banking complaints

Consumers can learn from banking complaints resolved by the Ombudsman for Banking Services to prevent it happening to them. It is important to know your rights as a bank customer to ensure you make informed decisions and keep your money safe.

The ombudsman released its annual report for 2022 last week and the report shows that most consumer complaints about banks were about fraud that specifically targeted current accounts and digital banking.

Looking at the case summaries in the report, it is clear that consumers have a lot to learn.

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Beware of this expensive mistake

A consumer’s building loan was approved for R2 283 516.00 at prime minus 0.50% (6.50%) and he proceeded with his building project. However, five months later, when he approached the bank for his first withdrawal from the loan facility, the bank said there was no loan facility in place.

The bank investigated and found that the consultant misinterpreted an email from the consumer at the time of acceptance and withdrew his loan application. No communication was sent to the consumer to inform him that the application was withdrawn either.

The building on his house had already started and the consumer now had no money to pay contractors and to continue with the project. He was forced to reapply for a building loan, which was approved, but on less favourable terms.

The bank granted him a lower loan amount, with a difference of R912 543 less than the initial amount. His interest rate was also higher and the bank says the reduced offer was due to the consumer’s ability to afford the loan.

Although it was a clear error on the side of the bank, the ombudsman noted that it caused the consumer severe distress and inconvenience. If the bank communicated with him at the time that the application was withdrawn, the issue could have been avoided.

Unfortunately, the ombudsman could not force the bank to reinstate the original offer or make an offer on the original terms, as it was not disputed that the consumer’s affordability changed during the five months.

However, the ombudsman considered the distress and inconvenience the consumer suffered and made an award of R50 000 against the bank.

The principle here was that in instances where a bank’s error caused a customer distress and inconvenience, an award for the distress and inconvenience should be considered after considering the facts of the matter and the consequences to make amends for its error. This is in line with what the Conduct Standards for Banks envisages.

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Pay back my money!

A consumer was scammed into making an EFT payment for a holiday. After realising he was scammed, he asked the bank to do a chargeback. However, the bank said it can only process chargebacks when the payment was done with a card, authorised and approved through a merchant terminal, including a POS device or e-commerce gateway, and not when paid by EFT.

The ombudsman had to decide if the bank should have done a chargeback on the transaction. Chargebacks are created to regulate merchants who initiate payments from cards issued by banks and provide for how a merchant can process a payment using the card or card details. When a merchant fails to comply with the rules there will be a chargeback right.

Only when a merchant uses your card, for example, via a point-of-sale device or online payment service and does not comply with the card rules will you be entitled to request a chargeback. Card disputes do not deal with EFTs that are considered cash transactions where the payment method used transfers the funds directly to the party you intend to pay.

EFTs are regulated by the Payment Association of South Africa which provides that a bank cannot reverse funds without the account holder’s consent, while a reversal of the funds is also not possible if the funds have been fully or partially used.

The principle here was that there are specific rules governing chargebacks and banks are obliged to adhere to these rules only.

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Stealing from deceased estate

The executor of a deceased estate complained that fraud was committed using several accounts while the deceased was severely ill and in the intensive care unit (ICU) of a hospital. The fraud continued after his death.

Fraudulent transactions were done using the deceased’s credit card and other bank cards issued after his death. The fraudsters telephonically applied for and obtained new cards from the bank by pretending to be the deceased. The bank was at that time not aware of the deceased’s death.

When the ombudsman investigated the matter, the bank accepted that, as the cards were issued after the deceased’s death, it was clearly not the deceased who performed the transactions. The bank agreed to refund these fraudulent transactions of R3 200.

Fraudulent debit orders were also processed on the deceased’s account while he was alive but in ICU. The total fraud value was R925 000.

To process these debit orders, the bank sent several Debi Check mandates via USSD messages to approve the debit order. The bank provided evidence to confirm that all the debit orders were approved via Debi Check and therefore there were no grounds on which the debit orders could be disputed with the merchant.

The investigation also revealed that the deceased did not have his cellphone with him while he was in hospital and as a result, the fraudsters had access to his registered cellphone number and could approve the Debi Check mandates.

The ombudsman could not find any negligence on the part of the bank as the debit orders were approved. Also, at the time that they were approved, the bank was unaware of the deceased’s circumstances and therefore had no reason to believe that the debit orders were fraudulently approved.

Despite no evidence of negligence on its part, the bank made an offer to refund the estate R296 000, which the executor accepted.

The principle here was that to hold the bank liable for a loss, you must prove negligence on the bank’s part. Awards banks make in the absence of any evidence of negligence on its part are considered goodwill gestures.

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When fraudsters intercept your email

A consumer instructed her investment banker to close her investment account and transfer the funds to her cheque account. Once the investment account was closed, the account was handed over to the complainant’s private banker who managed their transactional account.

The banker could not open the transfer instruction and asked the consumer to send the instruction to another banker. However, nobody knew that the emails were intercepted and the second banker received fraudulent banking details. The bank then processed the payment to the fraudulent banking details.

A few days later it became clear that the emails were intercepted and the bank received incorrect banking details. The bank argued that the consumer’s emails were intercepted, which was not the bank’s fault and therefore it could not be held responsible.

However, when the ombudsman investigated, there was no signed email indemnity on the file that authorised the bank to act on an email instruction when it received the email to pay the funds into the cheque account.

In addition, the first banker received the correct instruction. Due to her inability to open the email, the complainant was asked to resend the instruction to another banker, who then received the intercepted email.

The ombudsman also noted that prior to the email instruction the complainant alerted her bank that she received a scam email in relation to email spoofing and a change of banking details scam and that they should be aware of potential scams.

South African courts say it is the duty of the person who pays or makes the deposit to ensure that they pay the correct recipient. If someone makes a payment and the funds are credited to an incorrect account, whether because of a change of banking details scam or incorrect account number, the depositor has not fulfilled his obligations to the correct beneficiary.

It is irrelevant whether there was a change of banking details scam and the depositor’s claim will be against the fraudulent beneficiary. Therefore, the ombudsman recommended that, without proof from the bank that it paid the correct beneficiary, the bank did not fulfil its obligations towards the consumer. The bank agreed to refund the complainant for her full financial loss of R2 million.

The principle here was that banks must ensure they have the necessary mandate in place before taking an instruction from a customer. Banks must also ensure that they act in line with the position of our courts when investigating or assessing a matter.

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‘Buyer’s remorse’ not grounds for termination

A consumer who obtained vehicle finance from his bank and bought a car found out that buyer’s remorse is not a reason to force a bank to stop a transaction. After taking delivery of the car, the consumer noticed that it had defects and may have been involved in an accident.

The dealership then agreed with the consumer that the consumer will have the defects fixed and the dealership would pay him back for the repairs. When the consumer confirmed that the car was fixed, the dealership paid the money into his personal account. The consumer essentially chose to repair the car in terms of the Consumer Protection Act.

A few days later, the consumer wanted the bank to cancel the finance agreement because he was not happy with the vehicle and the price he paid for it. The dealership refused to cancel the agreement because the complainant chose to fix the vehicle and was paid for it.

The ombudsman’s office found that the consumer was given the option to replace or fix the vehicle, but he opted to take money from the dealership and fix the car. He confirmed that the vehicle was fixed.

He also saw the finance agreement and the cost of credit before accepting the vehicle and he signed the agreement acknowledging that he agreed with the costs. The ombudsman then found that there was no legal basis to compel the bank to terminate the contract because he was not satisfied with the costs of the vehicle.

The principle here was while the bank has an obligation to exercise fairness in its dealings with a customer, a banking customer also has a duty to ensure fair dealings with the bank and buyer’s remorse is not a legal basis to terminate a contract.