Banking fraud, related to current accounts and internet banking, remains high on the list of complaints to the Ombud for Banking Services South Africa, although banks appear to be making greater efforts to resolve some types of consumer disputes internally.
This information is contained in the Ombudsman for Banking Services (OBBSA) annual report released this week.
According to the OBBSA, continuing the trend from previous years, complaints about current accounts and Digital Banking made up the two largest categories of cases opened in 2022, and the majority of cases in both categories involved fraud of one type or another.
“Digital Banking cases also increased by 3%, to 17%. Current Account cases increased by 3% to 22% of total cases. Almost two-thirds (65%) of these were related to fraud,’’ the report found.
Ombudsman for Banking Services Reana Steyn said: “The biggest subcategories of complaints in this regard are mobile banking fraud and phishing’’.
OBBSA described phishing, or voice phishing, as when a fraudster calls a customer by phone or leaves voice messages purporting to be from a reputable company in an attempt to glean personal information, such as bank details and credit card numbers.
Ombudsman for Banking Services chairperson John Myburgh said: ‘’As always, the types of complaints that the OBBSA had to deal with covered a wide spectrum, with digital banking, current accounts, and personal loans at the top end and Covid-19 complaints and business banking amongst the bottom categories.
According to the report, complaints about Personal Loans made up 13% of total cases opened, while credit cards were the subject of 7% of total complaints.
Steyn said it appeared that the banks were settling more of the credit card-related matters themselves, as her office opened 7% fewer of these cases in 2022.
The report found that the ATM-related complaints, which in pre-Covid years featured among the top categories, dropped even further, from 8% in 2021 to 5% of complaints in 2022, an indication that fewer consumers make use of this channel and the fraudsters moved their targets elsewhere.
Estates and Trusts were also hot topics of discussion in the OBBSA in 2022, Steyn said.
“We received 257 complaints regarding delays in the finalisation of estates, compared with 120 the year before, an increase of 114% year on year.”
Despite this, its complaints were resolved mostly in favour of the customer. There were 135 cases, of which 55% went the way of the complainant.
She said complaints about banks collecting on prescribed debts increased substantially year on year. In 2021, this category made up 1,4% of complaints, while in 2022, it made up 4,5% of all complaints.
Meanwhile, the OBBSA said it managed to recover more than R30 million for consumers last year, about R10 million more than in 2021.
The report said on cases in favour of consumers, of the cases closed in 2022, just under one quarter, 23% were resolved in favour of the customer.
“16,1% of cases were fully or partially upheld in the complainant’s favour, and in 6,4% of cases, no award was made, but information or an explanation was provided,’’ OBBSA said.
“Overall, the ombud’s office recovered R30,350,173 for customers. The total amount recovered for consumers increased by about R10 million, largely because of the increased complaints concerning deceased estate delays and internet banking, each of which involves large amounts,’’ Steyn said.
In one of the examples given in the annual report, a complainant complained to the OBBSA office and raised the issue of reckless lending.
“According to the complainant, the bank approved a Revolving Credit Agreement of R110,000 in 2013. Soon after the loan was approved, his contract with a company ended, and he became unemployed.
‘’The bank kept the account open, which resulted in the debt accruing to over half a million Rand. The complainant’s claim for reckless lending, however, in terms of a section of the National Credit Act, had been prescribed.
“A complaint in terms of this may not be referred or made to the Tribunal or to a consumer court more than three years after – the act or omission that is the cause of the complaint, although his claim for reckless lending had prescribed as the loan was granted more than three years ago, looking at the account statement it became clear that the bank has transgressed the in duplum rule,’’ OBBSA said.
Literally translated, in duplum means ‘double the amount’. This common law rule provides that interest on a debt will cease to run where the total amount of arrears interest has accrued to an amount equal to the outstanding principal debt.
The OBBSA said during its investigation, it ascertained that the complainant had stopped paying the account for more than three years, and the bank had not taken judgment against the complainant.
“It, therefore, meant that the debt has been prescribed. Prescription is the process by which legal rights are lost as a result of lack of action. Should you want to enforce a right or claim, one should do so within three years of the date on which your cause of action arose,’’ OBBSA said.
Another example given in the report was that a complainant 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 then handed over to the complainant’s private banker, who managed the complainant’s transactional account.
“The banker could not open the transfer instruction and informed the complainant to send the instruction to another banker. Unbeknownst to all parties, 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 to all parties that emails had been intercepted, and the bank had been provided with incorrect banking details,’’ OBBSA said.
According to OBBSA, the bank argued that the complainant’s emails were intercepted, and as such, there was no fault on their part, which meant that they should not be held responsible.
“Our investigation of the matter ascertained that when the email instruction was received from the complainant to pay the funds into the cheque account. There was no signed email indemnity on the file, which authorised the bank to act on an email instruction.
“We also note that before the email instruction, the complainant alerted her bank that she received a scam email about email spoofing and a change of banking details scam and that they should be aware of potential scams,’’ it said.
The report said the bank agreed to refund the complainant her financial loss of R2 million.
In an interview with Personal Finance, Steyn said one of the key takeaways from the report was that more consumers contacted her than ever before.
“That, to me, says that more people know about my office, and that’s a good thing because we do want consumers to know about our office and that we are there as a free resource for them to help if they’ve got questions and issues to refer back,’’ she said.