Does TCU – treat­ing cus­tomers un­fairly – still pre­vail?

OLD MU­TUAL’S RE­SPONSE

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Are fi­nan­cial ser­vices com­pa­nies gen­uinely im­prov­ing their cus­tomer ser­vice in line with the Fi­nan­cial Ser­vices Board’s Treat­ing Cus­tomers Fairly (TCF) regime, or are they merely pay­ing lip ser­vice to TCF and con­tin­u­ing in their con­sumer-un­friendly old ways? A re­cent om­bud de­ter­mi­na­tion de­scrib­ing the “man­i­festly un­fair” treat­ment of a cus­tomer by Old Mu­tual points to the lat­ter be­ing true.

A re­tiree was given – and acted on – wrong in­for­ma­tion from an Old Mu­tual em­ployee about how much he could with­draw from his re­tire­ment an­nu­ity (RA).

The law had only just changed, so the er­ror is for­giv­able. What is less for­giv­able is what hap­pened next, ac­cord­ing to the de­ter­mi­na­tion: in­stead of go­ing out of its way to make amends, Old Mu­tual ac­cused the re­tiree of be­ing ig­no­rant of the law. It told him it could not rem­edy the sit­u­a­tion with­out the tax au­thor­i­ties’ ap­proval, which, ap­par­ently, it could not ob­tain.

To top it all, the de­ter­mi­na­tion says, Old Mu­tual told the om­bud that if the trans­ac­tion was re­versed, the re­tiree would be “un­justly en­riched”.

The de­ter­mi­na­tion by Nol­untu Bam, the Om­bud for Fi­nan­cial Ser­vices Providers, says that Mr F be­longed to the South African Re­tire­ment An­nu­ity Fund (Saraf), ad­min­is­tered by Old Mu­tual.

In April last year, in an­tic­i­pa­tion of his re­tire­ment from the fund, Mr F dis­cussed the var­i­ous op­tions open to him with his fi­nan­cial ad­viser, who told him that, be­cause the fund value stood at R220 000, Mr F could take the en­tire amount in cash, sub­ject to tax.

When you re­tire, you can with­draw only a third of your sav­ings from an RA as a lump sum, un­less the fund value is be­low a cer­tain amount, in which case you can take the full amount. Un­til re­cently, this fig­ure was R75 000. How­ever, it changed on March 1 last year, when the gov­ern­ment amended the tax laws to bring the treat­ment of prov­i­dent funds into line with that of pen­sion funds and RAs. The fund value be­low which you can take the whole amount as a lump sum was in­creased to R247 500.

When Mr F went to Old Mu­tual’s Mus­grave branch in Dur­ban to with­draw his sav­ings, Roshan Singh, a fi­nan­cial ad­viser em­ployed by Old Mu­tual who was ob­vi­ously not aware of the changes, told him “in no un­cer­tain terms” that he could with­draw only one-third of his sav­ings in cash; the rest would have to be an­nui­tised in the form of a pen­sion.

Mr F re­luc­tantly agreed, tak­ing R70 000, which, af­ter de­duc­tions and tax, left him with only R48 000.

GOT IT WRONG

On speak­ing again to his own ad­viser, Mr F re­alised that Singh had got it wrong. He wrote to Old Mu­tual de­tail­ing the prob­lem and ask­ing it to re­verse the trans­ac­tion and pay him his full amount.

Old Mu­tual ac­knowl­edged that its rep­re­sen­ta­tive had failed to ad­vise Mr F ad­e­quately, but told him that the South African Rev­enue Ser­vice (SARS) was un­will­ing to as­sist in re­vers­ing the trans­ac­tion.

Ac­cord­ing to Bam’s rul­ing, Mr F was told that there had been an obli­ga­tion on him, as a mem­ber of the fund, to have en­sured that he was aware of the con­se­quences flow­ing from his de­ci­sion, and that ig­no­rance of the law was not an ex­cuse Per­sonal Fi­nance in­vited Old Mu­tual to com­ment on this ar­ti­cle. Its chief mar­ket­ing of­fi­cer, Vuyo Lee, pro­vided the fol­low­ing re­sponse:

“Old Mu­tual takes the fair treat­ment of cus­tomers se­ri­ously. In cases where the ad­vice was in­cor­rect or un­suit­able, Old Mu­tual will make ev­ery ef­fort to make good with the cus­tomer.

“We re­main com­mit­ted to work­ing with the cus­tomer to agree a fair and rea­son­able out­come.

“In this par­tic­u­lar in­stance, the for mak­ing the in­cor­rect de­ci­sion. It also emerged that Old Mu­tual had eight such cases where its ad­vis­ers had in­cor­rectly in­formed clients.

At that point, Mr F laid a com­plaint with Bam’s of­fice.

The om­bud re­ferred the com­plaint to Old Mu­tual, invit­ing it to re­solve the mat­ter. Old Mu­tual replied, again stat­ing that it could not re­verse the de­ci­sion with­out SARS’s ap­proval and ar­gu­ing that, if were it to pay the full value as a lump sum, Mr F would be “un­justly en­riched”.

Old Mu­tual said it had of­fered Mr F an amount of R10 000, which South African Rev­enue Ser­vice (SARS) has re­fused our re­quests to can­cel the tax di­rec­tive that was is­sued, as the er­ror was not on their side. How­ever, our team will re-en­gage SARS to re­verse the trans­ac­tion in or­der to pro­vide Mr F with his full an­nu­ity.

“We re­gret that we have not yet found a way of re­solv­ing the mat­ter and are mind­ful of the dis­com­fort this may be caus­ing the cus­tomer.

“This mat­ter is re­ceiv­ing our ur­gent at­ten­tion for res­o­lu­tion.” he had re­jected. Old Mu­tual ended off by ask­ing the om­bud’s of­fice for guid­ance in the mat­ter.

CODE OF CON­DUCT

In mak­ing her de­ter­mi­na­tion, Bam said there was no dis­pute that Old Mu­tual, in wrongly ad­vis­ing Mr F, had con­tra­vened the pro­vi­sions of the code of con­duct for fi­nan­cial ser­vices providers. Old Mu­tual had also con­ceded that it had mis­rep­re­sented the law when ad­vis­ing Mr F.

Bam ar­gued that a rea­son­able per­son would not of his or her own ac­cord ap­pre­ci­ate the com­pli­cated re­la­tion­ship be­tween tax and re­tire­ment sav­ings, and the “at­ten­dant del­i­cate de­tail”. It was there­fore rea­son­able for Mr F to have acted on the ad­vice given to him.

The om­bud also took um­brage with Old Mu­tual’s re­sponse that it was un­able to re­verse the trans­ac­tion as a re­sult of SARS, and that the com­pany had sought her coun­sel on how best to re­solve the mat­ter, say­ing this re­quest was “disin­gen­u­ous”.

She said Old Mu­tual had shown no in­ter­est in re­solv­ing the com­plaint, hav­ing pro­vided no records to demon­strate the steps it had taken, and that its con­duct made “a mock­ery of the Fi­nan­cial Ad­vi­sory and In­ter­me­di­ary Ser­vices Act and the Treat­ing Cus­tomers Fairly prin­ci­ples”.

Bam noted that the In­come Tax Act caters for bona fide mis­takes, in which case a tax di­rec­tive to SARS could be re­versed.

Re­gard­ing Old Mu­tual’s claim that Mr F would be un­jus­ti­fi­ably en­riched by be­ing paid out the full amount, the om­bud held that this was not sup­ported by any fact or law, and that Mr F sought only that which be­longed to him.

Bam up­held the com­plaint and or­dered Old Mu­tual to take the steps nec­es­sary to re­verse the trans­ac­tion, re­cal­cu­late the tax and pay Mr F what was due to him, less the per­mis­si­ble de­duc­tions.

martin.hesse@inl.co.za

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