High Court outlaws banks’ controversial money grabbing

High Court outlaws banks’ controversial money grabbing

For years, South Africa’s banks have taken it upon themselves - without warning - to grab money from their clients’ current accounts to settle their credit card debt, often leaving them with too little money to honour their debit orders or buy food for the month.

Business woman hand using smartphone with digital marketing via multi-channel communication network on mobile application technology.
iStock: Maxxa_Satori

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It’s called a set-off. It could only happen if a person had a credit card and a current account with the same bank. And if they owed on the credit card and they weren’t paying or they weren’t paying well enough, the bank would literally transfer funds from the current account and put it into the credit card account.

But no more, thanks to a ruling by the Johannesburg High Court this week outlawing set-off.

The National Credit Regulator had brought what’s known as a declaratory order against Standard Bank, seeking legal clarity on whether or not set-off had superseded the National Credit Act’s Section 124.

The court ruled that that section excludes the operation of the common law set-off in all credit agreements that are regulated by the NCA.

“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.

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

But the banks have historically argued that the element of surprise is key in the successful application of set-off, which is why the Code of Banking Practice has not required banks to inform an account holder that they’re about to whip money out of one of their accounts.

A Standard Bank spokesman, responding to one such complaint some years ago, stressed that the bank used set-off to recover money “as a last resort only”.

But now, thanks to this court ruling, they can’t use it at all.

Telkom directory pretenders found guilty of improper conduct

Hundreds of small businesses around the country which fell prey to a phone directory listings scam, and have endured relentless threats of legal action and “blacklisting” if they fail to pay for a long-term online listing, will no doubt be interested to learn that those threats are bogus too.

The Council for Debt Collectors recently found two Durban-based debt collecting “companies” guilty of improper conduct and fined them R100,000 each, with R90,000 of that being suspended for three years on condition they don’t commit further “transgressions” in that time.

In effect, they must both pay a fine of R10,000 by the end of June.

"White Business Pages Pty Ltd” or “White Pages Business Listings” - and other variations of that, phone businesses listed in bold print in Telkom’s phone directories for areas both big and small across the country,  then ask the person who answers the phone for an email address in order to send them a form confirming the accuracy of that listing.

But the tiny, barely legible print, which most recipients don’t read, states: “I am aware that this is a twelve-month contract - R8340” and that the online directory in question has nothing to do with Telkom.

“Delayed payments will incur penalty fees after 30 days and will be handed over for collection”

Once “handed over”, the fees get added on at an alarming rate and the “pay up” harassment intensifies.

The Council recently held disciplinary hearings against NCR Legal Debt Collectors and Debt Review Administrators for various forms of improper conduct.

The former is owned by Sanjith Surajpal (29) and the latter by Ishwarlall (Ashwin) Dwarika (36) - and there were 20 complaints against them in total.

The charges ranged from not being registered, to not identifying themselves properly in their correspondence, attempting to recover interest, charging legal fees and document fees, and failing to include their company or cc number in correspondence.

Surajpal was accused of creating the false impression that the company is a firm of attorneys when in reality there was “only one director”, and Dwarika of making fraudulent, misleading representations by talking about “my client” when it is one and the same company, something I’ve been saying for years.

In other words, the companies trick business owners - mostly small business owners - into committing to a 12 or 24-month contract for a listing with some obscure online directory that they never have sight of, and then contacts them relentlessly as a debt collecting company, demanding that they pay up.

Many did so out of fear, some without telling their bosses, fearing for their jobs.

Last year a “Jurie” of East London said shortly after the fell victim to the scam, what he called the worst mistake he made in a workplace, he was retrenched.

“Although my retrenchment letter doesn’t refer to this issue,” he told me, “I know that it provoked the actions taken by my employer. The "fake" account has not been paid, but they are persistent and a real irritation.”

He was one of those 20 people who lodged a complaint with the Council for Debt Collectors.

Sadly, but not unsurprisingly, it seems that the guilty verdict hasn’t stopped them.

Yesterday, I heard from Susan Marshall, a medical practice manager in Bloemfontein, who fell for the scam recently and is being harassed to pay up.

“The company kept on phoning me to pay the invoice and yesterday someone phoned our rooms and said it was some kind of debt collecting department and they will give me 20% discount if I pay immediately,” she said.

As always, what this saga illustrates more than anything else, is the danger of not reading the small print. Seek it out - always!

The smaller the print, the more vital it is that you read it.

Trust me on this!

*If you have received such demands from such a “debt collector”, lodge a formal complaint with the Council for Debt Collectors. Go to www.cfdc.org.za for details.

All debt collectors have to be registered with the Council in order to operate legally. Always ask a collector for their registration number and then check if it is valid.

 Also check out: Scam Tenders - a cautionary tale

To contact Wendy, go to her Facebook page and click on the send email tab.

In case you missed any of the past Consumerwatch shows, find them below:

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