SA banks are closing accounts without warning, complaints data suggests
- South African banks have taken to closing client accounts without notice, data released by the Ombudsman for Banking Services suggests.
- In previous years, internet banking was the biggest source of serious complaints that office receives.
- But in 2020, current accounts – previously relatively trouble free – saw a spike in complaints.
- Fraud, fees, and charges were big reasons for those complaints, says the ombud.
- And so was accounts being closed.
- For more stories, go to www.BusinessInsider.co.za.
Banks in South Africa are closing client accounts without – according to the clients, fair warning – at a significant rate, data released by the banking regulator suggests.
Complaints about current accounts shot to the top of the list in 2020, said the Ombudsman for Banking Services in an annual report released on Wednesday.
In previous years, South Africans were more likely to lodge complaints about internet banking, credit cards, ATMs, and personal loans. But in 2020, 19% of all complaints the ombud received were about current accounts, compared to 13% dealing with internet banking, and around a tenth each for credit cards and personal loans.
That may be, in part, because internet banking is growing less troublesome. "Internet banking has steadily decreased as the largest category of complaints that we received over the last two years," said the ombud.
The vast majority of complaints about current accounts were around fraud, fees, and charges, said the ombud – as well as banks not giving notice of account closure. Those were "a major cause of complaints", said the ombud in a statement.
That does not mean banks were actually acting unfairly, when they closed accounts. As in 2019, the ombud settled 72% of 2020 cases in favour of banks. In ATM complaints closed, only 16% had a finding in favour of the complainant. For current account complaints, the ratio was less favourable for the banks, but even so, only 35% of the 1,338 complaints were found to be valid.
Account closures by banks usually go unnoticed, with banks citing client confidentiality in such dealings and account holders often not willing to talk in public about the reasons they were fired as clients.
But high-profile cases have turned up in the courts, most notably banks in South Africa closed the accounts of businesses linked to the state-capture-accused Gupta brothers. The SA Reserve Bank later said banks would have risked being locked out of international payment systems had they not done so.
In March a chance remark made in Parliament by its chairperson revealed that the JSE-listed Ayo had seen some of its bank accounts closed several months earlier.
That led investigative journalists to court filings in which the company had sought to interdict Absa from kicking it out. Absa said it had the right to refuse to do business with anyone if it thought the association could harm its reputation.
In mid-April Ayo announced to shareholders that First National Bank was also seeking to close its accounts, then failed to convince it should be heard in an urgent application to stop FNB from going ahead, and ultimately said it had found third-party solutions to keep its business operating.
(Compiled by Phillip de Wet)
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