Bulletins to the banks
During the past 6 years the Ombudsman for Banking Services (OBS) has issued a
number of bulletins to the banks regarding various types of complaints and our approach when resolving them. This
document serves as a summary of the bulletins issued.
Bulletin 1 - Clearance of cheques at ATMs
The bulletin dealt with losses incurred by clients who have been victims of
Automatic Teller Machine (ATM) crime. At least one major bank allows for the immediate clearance of cheques deposited
at ATMs. As the ATM is unable to confirm whether the deposited cheque is valid or not this would allow a confidence
thief, who has stolen a client's card and Personal identification Number (PIN) at an ATM, to make fictitious deposits
into the account and to withdraw the funds. The clients often allege that they were not aware of this facility on
their accounts and were thus exposed to substantial risk without them being informed.
The bulletin advised the banks that it is good banking practice for a bank not
to allow the immediate clearance of cheques deposited into a client's account through a teller or ATM without having
informed the client clearly that this facility exists on their account and the implications thereof.
Bulletin 1 here (Adobe Acrobat PDF format)
Bulletin 2 - Pin Pad withdrawals
Criminals use confidence tricks to obtain a client's card and PIN while
transacting at an ATM. Once the thief has obtained the customer's card and PIN he then can withdraw more than the
client's daily ATM withdrawal limit using only the card and PIN at a bank branch teller Pin Pad. The clients often
allege that they were not aware of this withdrawal facility on their accounts and were thus exposed to substantial
risk without them being informed. The bulletin advises that it is good banking practice for a bank to not allow
withdrawals from a Pin Pad facility within a bank branch in excess of the client's daily ATM withdrawal limit, without
verifying the client's identity document or similar form of identification, unless the client has specifically been
informed of the facility, its procedure, limits and the risks inherent in such a facility. Any complaint relating to
the abovementioned scenario, reported to our Office, will be evaluated with due regard to this finding and any other
Bulletin 2 here (Adobe Acrobat PDF format)
Bulletin 3 - Closure of bank accounts
Banks often summarily close accounts after repeated warnings to its customer
that the account is not being conducted in a satisfactory manner. Banks must however give written notice to a client
of its intention to close an account. The notice must be sent a reasonable time before the account will be closed and
must contain the date on which the account will be closed. As far as what would constitute a reasonable period, each
matter would be looked at on its merits, a period of between 2-4 weeks for individual accounts and of between 1-2
months for business accounts would generally be considered reasonable, depending on the nature of the accounts and the
number and nature of transactions on the account. Summarily closing an account after one or more warnings to the
client that the account will be closed if the account is not conducted satisfactorily does not constitute reasonable
Bulletin 3 here (Adobe Acrobat PDF format)
Bulletin 4 - Bank cheques
The office noted a number of complaints based on the banks dishonouring
payment of bank cheques.
The bulletin suggested that the banks adopt the following policy regarding
- That the requestor of a bank cheque be informed that a bank cheque will
only be stopped in special circumstances such as fraud, material alterations to the cheque, where it is lost or
- That the banks themselves adopt a policy of only countermanding bank
cheques under limited circumstances.
- Due to the high incidence of cheque forgeries, banks should advise their
clients generally that it is best not to treat bank cheques as equivalent to cash, but to contact the bank issuing
the cheque for confirmation that it will honour it.
- Banks should obtain an appropriately worded indemnity from the requestor of
a bank cheque against a claim from the payee before any countermand is made so as to protect the interests of the
bank. In the event that funds were reversed for the purpose of covering the bank cheque, such funds should not be
released until the bank is fully satisfied that no claims will be submitted by the payee.
These facts should be communicated to the requestor of the bank cheques prior
to the cheques being drawn.
Bulletin 4 here (Adobe Acrobat PDF format)
Bulletin 5 - Awards for distress and inconvenience suffered
The Terms of Reference of the OBS allows it to make an award (maximum R50 000)
to the complainant for distress and inconvenience suffered. Awards of this nature are however rarely made and only in
exceptional circumstances. In accordance with international financial ombudsman trends the majority of awards made do
not exceed R1000. In exceptional cases awards exceeding R5 000 have been made. Claims of this nature are assessed
conservatively. The OBS does not deal with claims for consequential loss as this is more appropriately dealt with by a
court of law.
In assessing such awards, the Office expects complainants:
- To be moderately robust in the way in which they deal with a problem:
- To take responsibility for ensuring that their financial affairs are in
order in the ordinary course of the transactions concerned:
- To bear the ordinary and normal degree of inconvenience associated with
correcting an unexpected problem: and:
- To take reasonable steps to minimize the inconvenience suffered.
Bulletin 5 here (Adobe Acrobat PDF format)
Bulletin 6 - Responsible lending
The OBS has received complaints against the banks based on the allegation that
the complainant was granted a loan amount that exceeded his ability to repay at that time.
We may then deem it necessary to investigate the circumstances surrounding the
assessment of the loan application and the application of the bank's lending policy in assessing the complainant's
ability to afford the repayments on the loan. It must be stressed that the OBS is only concerned with any
maladministration that may have occurred in the process and not with the bank's commercial decisions. The term
"maladministration" is defined in the Terms of Reference as "an act or omission in breach of any
obligations or duty owed by the bank to the complainant for banking services between a bank and its customer."
In evaluating complaints of this nature the OBS may look at the requirements
set down in the Code of Banking Practice (the code), the bank's internal policy and any other relevant factors. The
OBS will further apply the provisions of the National Credit Act 34 of 2005 once it is fully operational in June 2007.
Bulletin 6 here (Adobe Acrobat PDF format)
Bulletin 7 - Property assessments
Bank clients are often under the mistaken impression that the bank's assessor
will assess a new property or a home under construction for the benefit of the home owner or prospective buyer. The
Code of Banking practice however makes it very clear that the bank's assessment of a property for the purposes of a
home loan application or progress payments on a building loan is only for the benefit of the bank. It does not serve
as an assessment of the value of the property, building quality or of possible defects in the property. The banks were
advised to ensure that their clients are made aware of this provision in the Code. This warning may be contained in
the bond agreement or in a separate document.
Bulletin 7 here (Adobe Acrobat PDF format)
Bulletin 8 - Vacant possession
If a client fails to make the required payments on a home loan the bank can
take legal steps against the client. This may involve eventually selling the home at a sale in execution. When selling
the home after the sale in execution the banks however often encounter difficulty in evicting the client or a tenant.
This fact is however not disclosed to a new purchaser. This often results in the new purchaser being unable to move
into the home that he has purchased from the bank. The banks were therefore advised to ensure that the illegal
occupiers of premises are evicted before transfers into the purchasers' name take place. The banks should, by way of
an addendum to the standard purchase and sale contract, specifically alert the potential purchaser to the dangers and
the risks inherent in buying a property sold in execution and the fact that occupation of the property may be a
potential problem. The purchaser should also be alerted to the possibility of the occupiers of the property removing
certain items before they are evicted.
Most of the banks now ensure that the previous owner has been evicted before
the property is sold.
Bulletin 8 here (Adobe Acrobat PDF format)
Bulletin 9 - Sale of properties in possession
The OBS received complaints that banks were holding clients liable for the
full outstanding debt on a home loan despite the fact that the property had been sold by the bank (after a sale in
execution) for a substantial sum.
We recommended that the banks credit the account holder's account with either
the full fair valuation amount or the final purchase price of the property in question. The banks are, however,
entitled to add any charges as provided for in their contract with the client, as long as the amounts of such charges
are reasonable. The basic principle is that the bank must not be enriched at the client's expense. Any complaint
received, based on the principles as discussed, would be evaluated with due regard to this bulletin and any other
Bulletin 9 here (Adobe Acrobat PDF format)
Bulletin 10 - ATM banking
ATM related crime is the major source of all complaints received by the OBS.
The bulletin set out the various types of ATM crime reported and how the office would deal with complaints of this
nature. The bulletin recommended that the banks take steps to prevent customers suffering losses due to ATM crime.
These steps could include the following:
- Informing customers of ATM related crime and methods to prevent it
- The banks taking reasonable physical precautions in making ATMs safe and
secure from crime on an ongoing basis
- The banks settling reasonable claims for losses incurred due to ATM crime
Any complaint received regarding ATM crime will be evaluated on its own merits and in accordance with this
Bulletin 10 here (Adobe Acrobat PDF format)
Bulletin 11 - Internet banking transfers
The OBS was receiving complaints from internet banking users who had
transferred money to incorrect accounts and wanted the bank to assist them in recovering the money or to take
responsibility for the loss. Users of the facility were not aware that the account number entered is not cross
verified with the name of the account holder. If one therefore enters the wrong account number, the transfer will be
made to that account (if it exists). The banks are then not permitted to merely debit the recipient's account without
permission from the account holder. It is therefore up to the user who entered the wrong account number to recover the
funds from the recipient. The banks were however advised to make it clear to users of the system that the account
number would not be cross verified with the beneficiary's name. Most banks now have a warning on their internet pages
advising the customer that the account number is not cross verified.
Bulletin 11 here (Adobe Acrobat PDF format)
Bulletin 12 - Debit orders
The bulletin set out the various rules and procedures applicable to debit
orders. Contrary to popular belief by the public and many bank staff members there are processes to stop and reverse
disputed debit orders. The bulletin advised the banks to apply the proper procedures in every case where they are
applicable. The banks are further able to monitor companies for repeated abuse of the debit order system and to take
appropriate action where necessary. The bulletin encourages the banks to do so in appropriate circumstances.
Bulletin 12 here (Adobe Acrobat PDF format)
Bulletin 13 - Card Cloning
Card cloning has become a serious problem for the banking industry world-wide.
The customer's card is cloned using a skimming device and together with the personal identification number (PIN), can
be used to make withdrawals from the account. While the banking industry constantly makes improvements to protect the
customer from fraud it is also the customer's responsibility to avoid obvious scams. It has however been found that
numerous card cloning scamming techniques are done in such a way that the customer cannot reasonably have avoided the
scam or prevented it. The bulletin discusses the various methods of card cloning and the evidence considered in making
a finding on liability.
Bulletin 13 here (Adobe Acrobat PDF format)