Consumer interests, as defined by the Code of Banking Practice, will always be curtailed by the banks' profit motive, the National Consumer Forum (NCF) says.
In its submission to the Banking Council, the NCF questioned the code's voluntary nature and the extent to which it can ensure fairness for consumers.
The submission was made in response to a call by the Banking Council for suggestions and comments on the Code of Banking Practice, which is reviewed on a regular basis. The code aims to address the interests of bank customers.
The NCF was established in 1994 as a non-profit, independent organisation dedicated to the protection and promotion of the rights of South African consumers.
Some of the concerns the NCF raised about the code include the following:
*plain language deadline
Banks have failed to meet their deadline for rewriting their documents in plain language.
"The continued use of terse legal jargon disadvantages lower- and a substantial category of middle-income earners who contribute much of the banks' profits," the NCF says.
In addition, to the plain language requirement, the NCF would like to see key bank contracts made available in all 11 official languages so that consumers can properly understand their rights and responsibilities.
*Access to banking for rural and township communities
Banking services are unevenly distributed. Low-income rural and urban dwellers have to travel long distances to do their banking. To overcome this problem, the NCF suggests that banks establish joint centres - as opposed to separate branches, which are expensive - in under-serviced areas.
The manner in which branches and outlets are closed is also of concern to the NCF. The banking code offers limited help to the consumer: It commits banks to giving "reasonable prior notice" of a bank's intention to close any of its branches or automatic teller machine (ATM) centres. In Britain, banks are obliged in terms of their own code to communicate with clients and the public for eight weeks before closing a branch.
The NCF is calling for the South African code to specify the period in which a bank must inform you of its intention to close a branch, outlet or ATM. In addition, the NCF says, the bank should disclose the profit or loss record and net income of that branch, outlet or ATM.
* Liability of banks
The code provides a limited scope for consumer redress in cases of fraud and other losses.
The NCF says the code exonerates banks from compensating customers where the banks act negligently - for example, in the case of lost cheques.
The NCF says it has difficulty in supporting a clause which gives the banks blanket indemnity against any loss or damage caused where cheques are lost in the banking system. It says each case must be reviewed on its merits.
Banks must make available information about their liability to customers and take responsibility for lost cheques and funds lost to fraudulent scams which the banks themselves could have avoided, the NCF says.
* Access to credit
Access to credit is vitally important for South African consumers, especially Africans and women, the NCF says.
Banks have responded poorly to this need, choosing, instead, to pursue rigorous commercial principles, without considering apart-heid's legacy of excluding black people from participation in the economy.
The NCF proposes that consumers state the reason they are seeking a loan and that the banks' credit assessment take into account these reasons.
* Basic bank accounts
Millions of people are without bank accounts and, as South Africa moves into the information age, a bank account is becoming a need rather than a want if people are to function meaningfully in society, the NCF says.
Current banking practices which prevent people from having a bank account include the practice, by some banks, of checking your credit profile, even if you want to open a savings account; the requirement that you be employed before you can get a bank account; and minimum opening deposits.
The NCF suggests that the revised code prohibit credit checks for the opening of savings accounts, because these accounts pose fewer risks for banks. Also, savings accounts do not have overdraft facilities and so the customer can only draw money that is actually in the account.
The NCF also wants banks to drop the criteria of employment and minimum opening deposits.
A basic bank account should be made available to people who do not usually qualify for banking. These accounts could have low transaction fees, no mandatory minimum balances, and a certain number of free withdrawals and balance inquiries in a month.
The NCF says the unbanked represent a potentially profitable class of customers for financial institutions. Bringing more people into the banking system will also encourage a culture of saving.
* Financial difficulties
Scores of consumers complain that they have been blacklisted by credit bureaus, even after informing banks of their financial difficulties and agreeing on remedial steps.
The NCF proposes the inclusion of a paragraph in the code in terms of which banks will develop a plan, in conjunction with consumers, for dealing with financial difficulties. Banks must inform clients in writing what has been agreed.
Adri Grobler, the senior manager for consumer affairs at the Banking Council, says the council is working through all the submissions it has received.
It hopes that a reworked code will be ready for ratification by the board of the Banking Council by the end of the year. The redrafted code will probably only be implemented next year.