Banking ombud ain’t broke, it works very well — so don’t fix it
• Financial reforms could affect the speed and manner in which clients’ problems are resolved
The Banks Act makes little mention of market conduct, and to date the industry has enjoyed the benefits of self-regulation. The banking watchdog was historically not the Financial Services Board but the industry’s own voluntary ombudsman scheme, funded by the industry and costing customers nothing.
The nature of this scheme could change radically with the launch of the Financial Sector Conduct Authority. It finally aims to interfere with banks as much as insurers, unit trusts and asset managers have been interfered with for decades. But a victim of the reform could be the Ombudsman for Banking Services, which could eventually be subsumed into the super ombud scheme that will be part of the civil service.
It is certainly not an appropriate time for change. The phrase “if it ain’t broke, don’t fix it” comes to mind. Mostly because of the increase in cases around online banking, the ombudsman has seen a 35% increase in cases to more than 7,000 a year. The new ombudsman, Reana (pronounced Rihanna) Steyn, says this increase is a reflection of the increased complexity of complaints.
Referrals, those instances when the office helps customers file their complaints to banks, are up 26% to 7,200. There is also increased demand for financial information; inquiries at the call centre are up 35%.
Perhaps the strongest argument for keeping the office in the private sector is the turnaround time. On average, cases are closed within 34 business days. If this doesn’t look impressive, just think of some of the staterun regulators. It could take a year or more for a section 14 transfer between pension funds to take place, for instance.
Just over 70% of banking ombud cases are resolved within two months and almost 99% within four months. Consumers could do far more to make use of their rights in the scheme.
There are very few complaints from the Northern Cape and the North West, which are serviced by the same banking systems and ATM networks and have access to the same apps as everyone else.
It is worth mentioning briefly how to lodge a complaint: make a formal complaint directly with your bank’s dispute resolution department (until legislation banned it, these were often called the internal ombudsman’s office) and be sure to get a complaint reference number. You should get a written response from your bank within 20 working days. If you don’t, or if you are not satisfied with the response, contact the office of the ombud for free assistance.
Ombud investigations manager Nerosha Maseti says the office is largely staffed by lawyers but it also has latitude to bring issues of fairness and equity into play.
However, it hasn’t been very helpful to customers who have fallen victim to phishing fraud after clicking on links in e-mails purporting to be from their banks, or anybody who has given their PIN to a stranger on the phone. Only 23% of internet banking cases and 18% of ATM cases have been resolved in favour of the customer, while 52% of debit order cases and 50% of surety cases went the client’s way.
Maseti says that in cases of fraud where the perpetrator has been able to draw more than the agreed daily limit there must be a refund since the bank has breached its contractual duty of care towards its customer. And in cases where the card is retained in the ATM and this is reported immediately, the bank will be responsible for any unauthorised withdrawals.
Another area where the ombud can help is when banks take unduly long to register properties. It has ruled that banks must reimburse customers for the loss of interest.
There is a wall of shame in the ombud annual report, topped by Standard Bank with 1,669 cases, though it was also given the award for best dispute resolution at the annual ombudsman awards.
FNB had 1,422 cases, so perhaps it is time it lived up to its slogan “how can we help you?”.
On a complaints per billion rand in assets basis the worst offender would be Capitec with 1,225 cases, 100 cases more than Absa. Investec had just 17 complaints, which is remarkable considering the financial sophistication of most of its clients. Interestingly, VBS Bank, for all its financial problems, had just I two complaints. There will presumably be more now. t’s good to see some new faces in the institutional balanced surveys. Over the past year the top performer has been the ClucasGray Equilibrium Fund.
In absolute terms, its return does not look exciting at 10.8%, but it was almost double the median return.
ClucasGray Asset Management is a fledgling diversification into the financial advisers and institutional market by a leading private client investment manager. The fund is run by Andrew Vintcent, a former portfolio manager at RMB and Stanlib, and is co-managed by Grant Morris. It leverages off a team of 10 analysts.
Don’t confuse this fund with the long-established ClucasGray Future Titans fund, which is run by Brendan Hubbard and has won several industry awards. I wouldn’t advise anyone to put their pension savings into that fund though, since it aims to score sixes through shares you probably haven’t heard of, such as Sirius Real Estate. It is definitely a punter’s fund. It is not nearly as much fun to write about the equilibrium fund (even its name is a bit dull). The fund puts an emphasis on not making mistakes, rather than trying to shoot the lights out. It did not hold Steinhoff and avoided property shares, the Resilient stable in particular. Equilibrium’s largest shares are Barclays Africa, Sasol and Standard Bank, and as it is still small, with less than R400m under management, it can take chunky positions in mid caps such as Reunert, Clover, RCL, Zeder and Adbee, a security set up to facilitate the Adcock Ingram empowerment deal.
Vintcent has been a patient investor in Old Mutual and he should finally benefit from this. Recent rand weakness has also helped his holding in BHP.
Steinhoff certainly hurt some managers, notably Truffle. The Nedgroup balanced fund it manages was the only balanced portfolio to give a negative return for the year.
THE STRONGEST ARGUMENT FOR KEEPING THE OFFICE IN THE PRIVATE SECTOR IS THE TURNAROUND TIME