Customers get cushion against e-banking frauds
The banking regulator this month made two important moves aimed at protecting consumer interest. While one pertained to limiting the liability of consumers in case of fraudulent electronic transactions, the other was to bring under the ambit of the banking ombudsman scheme, a number of hitherto excluded issues pertaining to the banking operations.
Last week I wrote on the first initiative and this week I thought I must write about the second, for two important reasons. First, the 2017 amendments to the banking ombudsman scheme finally provides a platform for redress of a large number of highly vexatious problems faced by bank customers in recent years such as fraudulent withdrawal of money through electronic banking as well as stolen and cloned debit and credit cards, besides mis-selling of insurance, mutual funds and other investment products.
Second, given the banks’ track record, I expect considerable resistance from banks to the instructions of the RBI on ‘unauthorized electronic transactions’. In other words, the compliance rate will be poor, at least in the beginning and consumers may well need to seek the intervention of the ombudsman. So they need to be well versed with the amended ombudsman scheme.
I must point out here that the banks’ failure to comply with the ‘Fair Practices Code’ and the ‘Code of Banks Commitment to its customers’, constitutes the biggest chunk of complaints before the Ombudsmen. And this number is growing over the years. While during 2013-14, such grievances constituted 26.6 per cent of the total complaints, the percentage went up to 29.2 per cent the next year and to a whopping 33.9 per cent during 2015-2016.
Coming back to the positive changes in the Ombudsman scheme, I would put first in the list, the provision to award compensation for harassment and mental anguish, besides loss of the complainant’s time and other expenses, up to a limit of ₹1 lakh. Despite the low limit, I really welcome this because earlier the scheme provided for such compensation only in cases of credit card operations. So extending this to all complaints is really good. Second, the compensation awarded for any loss suffered as a direct consequence of the bank’s omission or commission (or the pecuniary jurisdiction to pass an award) has been raised from 10 lakh to 20 lakh.
But the most important provision is to allow complaints pertaining to unauthorized electronic transaction. This was long overdue . So also issues pertaining to mis-sale of financial products by banks and erroneous reporting of credit information to the Credit Information Bureau and the failure to rectify such factual inaccuracies. These are all issues on account of which consumers have for long suffered not just financial loss but also harassment and mental anguish. And in the absence of any redress at the ombudsman level, they have had to fight long battles before the consumer court.
The revised ombudsman scheme, which came into effect from July 1 this year, includes in the list of ‘Grounds for complaint’, non-adherence to the instructions of the Reserve Bank vis-à-vis mobile banking/electronic banking services in respect of delay or failure to effect online payment or fund transfer and unauthorized electronic payment/fund transfer. Similarly, one can complain against banks for sale of unsuitable, improper financial products such as insurance and mutual funds, besides lack of transparency in such sale and delay in facilitating after sales service.
However, one condition that has remained unchanged is the requirement of the complainant going to the Ombudsman only after exhausting the complaint redress system available with the bank. The scheme requires the complainant to first write to the bank (preferably the nodal officer) and approach the ombudsman only if there is no response within a month or if the response is not satisfactory. So consumers must remember this.