Banks face fines for unethical behaviour

South African banks could face hefty fines or risk losing their licences if they behave unethically or treat clients unreasonably.

The Financial Sector Conduct Authority (FSCA) this week released a uniform code of conduct for banks, and they will be compelled to comply with six basic requirements.

These include that banking products must be developed that are suited to the needs of specific clients, banking services must perform in the way communicated to clients and clients must be continually provided with information before, during and after banking products are sold to them.

During the release of the code this week, Sindiswa Makhubalo of the FSCA said that clients could now hold their banks accountable for the manner in which they are treated.

If banks act irregularly, the FSCA can fine the offender, order it to compensate the client or suspend its licence.

As an example, Makhubalo said it was unreasonable for a bank to charge a consumer banking fees to overturn an irregular debit order if the client had not authorised that debit order in the first place.

Another recent example of banks failing to act in good faith was when banks failed to properly inform consumers that payment holidays in respect of home loans and vehicle finance would eventually lead to higher payments.

Makhubalo said that infringements of the code would be adjudicated on a case-by-case basis and that there were no prescribed fines.

“Banks have to move away from a profit-driven business model to a strategy where clients are put first,” she indicated.

Adri Grobler, manager for market conduct at the Banking Association of SA, said it was unfair to state that banks put profits above clients.

“The principles put in place by the code of conduct are part of banks’ business approach and business models, but banks also have a responsibility to be profitable to stakeholders and shareholders,” said Grobler.

Makhubalo noted that the FSCA’s code of conduct did not replace the guidelines and sanctions of the banking ombud.

One of the questions that came up during the release of the FSCA’s code of conduct was whether the new norms would conflict with the work of the banking ombud.

Although there is already an ombud that dissatisfied clients can complain to, this body has no regulatory power over banks, nor over the services and products they offer.

The ombud has the power to process and decide on specific complaints from clients. Makhubalo emphasises that dissatisfied clients should still complain to the ombud. If they are dissatisfied with the ombud’s ruling, they can then approach the FSCA. -CityPress