Keep it simple, lucid, Ombudsman urges banks
In terms of the Consumer Protection Act, contracts must be drafted in simple, understandable and unambiguous language, yet South African banks seem to be falling short of the stipulation.
Ombudsman for Banking Services (OBS) Clive Pillay is urging banks to review the wording of their contracts with the need for lucidity in mind.
"We receive complaints from consumers who are not sure what they have signed and, consequently, find themselves in disputes with their banks," says Pillay. "Consumers sign a loan agreement, for example, when, as a result of woolly language and legalese, they think they are signing a vehicle financing agreement.
"Writing contracts and forms in plain English would help to reduce the number of complaints of this nature. This has become even more important recently, as it is also one of the requirements of the Treating Customers Fairly initiative of the Financial Services Board (FSB)."
The OBS 2013 annual report launched in Sandton, Johannesburg, today (16 April), reveals the vast scope of complaints handled by the office over the year. During 2013, 4 950 cases were dealt with, concerning issues ranging from mobile banking and credit cards to ATMs, mortgages and car finance.
As in previous years, ATM-related complaints dominated the caseload, with more than 1 800 complaints compared to 1 100 in the previous year, which accounted for 23% of all complaints. This increase, ironically, can be attributed to the stepping up by banks of security measures to prevent electronic banking fraud. Criminals are returning to the 'easier pickings' of automatic tellers, resorting at times to removing the toll-free numbers from the machines to delay victims' alerts to the banks.
That said, the office investigated about 200 more internet banking complaints than in 2012, which is to be expected given the surge in electronic banking and the rapidly growing numbers of bank customers.
Encouraging, says Pillay, is the increasing number of complaints resolved at initial assessment stage, when the matter is referred back to the bank with an OBS recommendation. "This reflects the willingness of the banks to abide by our rulings, which are seen as bias-free," says Pillay.
Among the more involved and complex disputes, there were 200 more cases across the board escalated for further investigation.
In his chairperson's report, Advocate John Myburgh SC, stressed the importance of banks' security measures remaining one step ahead of the devious minds of fraudsters (the number of cellphone phishing cases rose by 27% during 2013).
"Bank information technology specialists need to work with mobile application developers and wireless network service providers to address the challenges associated with security of financial transactions and transmission of financial information electronically and continually update systems to counter new threats," wrote Myburgh.
"Security should address the physical part of the device, any thick-client application running on the device in the case of phone theft, authentication of the device with service providers before initiating a transaction, user ID/password authentication, encryption of data being transmitted and data held on the device for reference later."
However, he lauded the banks for their heightened attention on security, which he described as ''encouraging for us and reassuring for consumers".
Of the total number of cases for the year, just over 1 900 were found in favour of the consumer, which represented a recovery of about R16 million from the banks. Among these were 72 debit order issues, dealing particularly with unauthorised debits, 38 (53%) of which went the way of the complainant. On the other hand, the majority of ATM cases were deemed to be the result of consumers compromising their personal details, resulting in a greater number of findings for the banks.
The report details the advocacy role played by the OBS, which saw it host several African and international delegations looking to observe the South African regulatory environment and learn about best practice when setting up an ombuds scheme. These included groups from Tanzania, Senegal, Saudi Arabia and Ireland.
During 2013, the OBS complemented its roles on the Treating Customers Fairly Regulatory Framework Steering Committee of the FSB and the National Consumer Financial Education Committee of National Treasury, with election onto the executive committee of the African Ombudsman and Mediators Association, which promotes good governance, the rule of law and human rights to further the ombudsman institution across the continent.
The office also continued its well-established consumer education and communication drive, using multimedia to warn consumers against falling prey to the tactics of fraudsters and criminals, and to create awareness of the role of the Ombudsman as an impartial, fair and independent arbiter of disputes.
The efforts are bearing fruit, says Pillay, as is seen in the significant increase in the number of referrals, from 2 040 in 2012 to 3 802 last year. "It is most heartening that members of the public feel sufficiently confident in the OBS that they are happy to refer friends, family members and associates to us when they need a banking problem resolved."