Bank in naughty corner for raiding account

It’s a wonderful thing to hit ‘send’ on an e-mail telling someone that you managed to convince a company to refund them.

When it’s R51,000 that they had pretty much given up on getting out of their bank, eight months after the bank took the money, without warning, it’s an especially great feeling.

Pascual Maake of Bronkhorstspruit’s story began last New Year’s Eve when he received an SMS from his bank, FNB, alerting him to the fact that R51,000 had been withdrawn from his investment account.

All he managed to find out when he asked the bank about it was that it had been taken to settle a credit card debt he’d had with the bank about 10 years ago.

“I never received any call, or any statements; nothing! Please help,” he wrote in an e-mail.

The original outstanding debt was nowhere near that amount, he insisted.

Set-off has always been a controversial practice, now deemed unlawful, thanks to a ruling by the Johannesburg high court in late June.

Maake’s money grab – a far more accurate term than set-off, to my mind – pre-dated that high court ruling by about six months, but there’s another reason the bank shouldn’t have helped themselves to his money. That debt had long prescribed.

If, in the past three years, a “debtor” has not made a payment towards a debt, acknowledged in any way – such as promising to make payment at a future date – or been summonsed in respect of it, it has prescribed.

In other words, Maake was no longer legally obliged to pay it, and given the stealthy nature of set-off, he wasn’t even given the opportunity to raise prescription as a defence to paying it, all these years later.

“Subsequent to our internal investigation, we have made a decision to refund our customer,” said FNB Credit Card CEO Cilliers Kriel.

“We will be making contact with the customer to apologise for the delay in resolving the matter.”

Rightly so. Their customer had tried for months to get that result himself, being sent, as he put it, “from pillar to post” by various bank officials.

Maake was understandably delighted.

“It is with so much joy that I say thank you!

“As promised, the bank called me yesterday afternoon to say sorry for taking money out of your account, Mr Maake. We will refund it tomorrow.

“And late at night I got an SMS telling me my money was back in my investment account.”

With no interest, eight months later, mind you, but he’s decided not to pursue that.

Earlier this year, the National Credit Regulator brought a declaratory order against Standard Bank, seeking legal clarity on whether or not set-off was superseded the National Credit Act’s Section 124.

On June 27, the court ruled that that section excluded the applying of common law set-off in all credit agreements that are regulated by the NCA.

And that put an end to the money grabbing. Well, it should.

“The NCR welcomes this judgment as it protects consumers from financial difficulties caused by the arbitrary transfer of funds from their accounts by banks”, said the NCR’s CEO Nomsa Motshegare at the time.

“Banks should obtain permission from consumers before transferring funds from their accounts to pay amounts due under credit agreements.”

But the banks had always argued that the element of surprise was key in the successful application of set-off, which is why the Code of Banking Practice hadn’t required them to inform an account holder that they were about to whip money out of one of their accounts.

The banks always justified the money grabs, saying they were only done as a last resort, usually after repeated unsuccessful attempts by the bank to have the customer settle their arrears, but in many cases the client was left with too little money to honour their debit orders or buy food for the month.

Some years ago former Banking Services Ombudsman Clive Pillay lambasted “certain” banks for “applying set-off in what he termed a “morally repugnant manner”, causing severe hardship to their affected customers.

I’ve just taken up a case of setoff in the amount of about R60,000 – part of a pension payment – being applied exactly a week after that landmark high court set-off ruling.

So either someone didn’t get the memo, or old habits die hard. If I don’t get to send that man a “good news!” e-mail next week, I’m most curious to know why.

Set-off has always been controversial, now deemed unlawful