This is how your bank has to treat you from now on

Customers don’t know what they don’t know, and that’s why the conduct standards are necessary

South African banks are not known for treating their customers fairly, but this is about to change.

New standards hold banks to treating you fairly. Picture: 123RF/ALEKSANDR DAVYDOV
New standards hold banks to treating you fairly. Picture: 123RF/ALEKSANDR DAVYDOV

Established South African banks that dominate the market have not crowned themselves in glory when it comes to how they treat their customers. But this is about to change, thanks to new standards that will regulate their conduct into the future.

The Financial Sector Conduct Authority (FSCA), which regulates the way banks behave, has released a draft of the conduct standards with which the banks will eventually have to comply.

The regulator is currently evaluating comments from the public to the draft standards. Sindiswa Makhubalo, the head of bank and payment providers department at the FSCA, says the regulator will then monitor compliance with the draft conduct standard by way of “proactive supervision”.

In an article on the regulator’s website, Makhubalo says the regulator’s emphasis will be on pre-empting things the banks do that lead to bad outcomes for you.

She says the regulator will test the experience you get at a bank by “mystery shopping”, interacting with banks and surveying customers. It will also visit banks to examine and assess their processes and information to see if they treat you fairly.

This is welcome news, especially now amid the Covid-19 pandemic when consumers are battling to keep their heads above water, while making difficult decisions relating to their banks. 

A financial adviser last week told Sowetan Money he received notification from his bank stating that he may qualify for an increased limit on his revolving credit facility. “Given everything that’s happening in the economy I thought it prudent to increase my limit, even though I haven’t used up the existing limit.”

Conduct can’t be defended

A bank offered an adviser, a client of 15 years, a term loan at prime plus 12% - a rate he says 'that would make a loan shark blush'. 

However, after going through the application process, his bank declined his application for an increased limit but approved him for a term loan at prime plus 12%. 

“This is significantly higher than the rate I pay on my revolving credit facility.” 

The adviser has been a private client of this bank for the past 15 years and is offended by a rate “that would make a loan shark blush”. 

He says banks appear to be trying to exploit people’s desperation. 

Greg Illgner, the chief strategic officer at TymeBank, says this type of conduct can’t be defended.

Heidi Stoffberg, the head of compliance at TymeBank, says the bank has paused all lending because consumers are desperate and don’t have the requisite affordability to service debt. 

Many consumers of credit don’t know how to use credit in a savvy way, so as to make sure that they use the right credit for the right purpose and at the right price. 

Marius Pentz, FNB’s head of Private Wealth in the Western Cape and Southern Cape, says “customers don’t know what they don’t know”, and that’s why these conduct standards are necessary.

FNB’s focus is to look after customers in the appropriate segment, offering them a holistic service, engagement model and value proposition that are contextual and relevant to each specific customer’s needs, expectations and requirements rather than pushing products, he says. 

This is in line with the conduct standards, one of which holds the bank responsible to ensure that the product or service sold to them is appropriate for their needs. 

The conduct standards give you the right:

  • To be treated fairly. A bank should have the fair treatment of its customers at the centre of its culture. 
  • To be offered products and services that are suitable to your needs. Banks should only sell  you products and services that meet the needs of the customer groups to which you belong. 
  • To clear (non-jargon and legal filled) information before, during and after point of sale. The conduct standards oblige banks to be clear, fair and not misleading in their advertising and to make disclosures to you to ensure you’re aware of and understand all the relevant facts that could influence your decisions about a product or service.
  • To full disclosure and advice about the complexity of a financial product. Your bank must tell you certain things, about, for example the nature and complexity of the financial product before you take it out to ensure that you make good decisions about entering into, using, or maintaining the product or service.
  • To products that perform as promised. Your bank must ensure that the product or service performs in line with the expectations it creates through its advertising and disclosures. The standards also prohibit banks from using unfair terms and conditions. 
  • To a means to submit a claim or make a complaint. Your bank must establish, maintain and operate an adequate and effective system for dealing with your complaints that does not make it unreasonably hard for you to complain; and it must regularly review how it deals with your complaints.
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