A CASE OF CUSTOMERS STILL COMING LAST?
Financial services company Momentum has again been caught out hammering policyholders by applying confiscatory penalties – and treating policyholders with contempt when they query why the penalties have been applied.
Earlier this year, after the intervention of Personal Finance, Momentum was forced to pay back R800 000 of more than R1 million it levied in penalties against two brothers who had been mis-sold Momentum retirement annuity (RA) products.
The repayment followed one of four important determinations against Momentum and/or its product floggers by Pension Funds Adjudicator Muvhango Lukhaimane and financial advice ombud Noluntu Bam in the wake of complaints about penalties. The penalties are applied when RA or endowment policyholders stop paying or reduce their premiums or cash in their policies before maturity.
There have also been complaints about the unacceptable multiple application of the penalties.
But Momentum continues to apply the penalties, despite the exposure of the R800 000 mistake, the determinations, and a statement in June this year by Mark van der Watt, chief executive of Momentum Retail, that the company would mend its ways.
In June, Van der Watt said, among other things, that Momentum recognises that the company is “the custodian of our clients’ financial wellbeing and our purpose is to help them achieve this”.
Well, last month when a Cape Town attorney transferred his Momentum RA to Liberty Life, his accumulated savings of R99 947 were reduced by R11 517 (11.52 percent). When he and his financial adviser, Arthur Weinburg, challenged the amount and its calculation, Momentum responded: “Unfortunately we cannot provide you with a breakdown of this cost that will be deducted. Please be advised that it is in line with legislation according to the Association for Savings & Investment SA (Asisa) ruling.
“These contracts costs is group based and not on individual based [sic]. It is also spread over the full term of the contract. We trust you find the above in order.” Momentum said.
The attorney and Weinburg appealed to Personal Finance to intervene. We did so, also involving the Financial Services Board (FSB) and Asisa. Suddenly, Momentum found it had made yet another mistake.
Asisa, as the industry organisation, denied it has anything to do with regulating the confiscatory penalties. The FSB has confirmed it will be investigating
In responding to Personal Finance, Marius Kock, Momentum Retail Insurance client care complaints officer, argued that Momentum was entitled to deduct the penalty, even though a penalty had been levied previously, saying the halt to double-dipping was only effective from January 2001. He did not provide the date or amount of the first penalty
But he says Momentum will refund the penalty.
Kock says: “Momentum is committed to transparency and the principles of treating customers fairly.”
I would suggest that Kock informs the rest of his Momentum colleagues of this commitment, because judging from the initial response to the attorney, they do not seem to know about it.
The question must now be how much longer the FSB is going to continue to allow Momentum and other life assurance companies to treat the savings of consumers as they do and respond with such utter contempt when RA members challenge its decisions.
The FSB has extensive powers to deal with misbehaving industry participants, including being able suspend licences to do business. It does not have to wait for the new “twin peaks” legislation. It is time for the FSB to start using its powers to stop this ongoing abuse of the savings of ordinary people.