South Africa has a new financial regulatory model called "Twin Peaks" based on Australia's. Financial services will be regulated by two regulators - the Prudential Authority responsible for prudential regulation and Financial Sector Control Authority for market conduct and consumer protection.
In the article Twin Peaks: the good, bad and ugly (Business Times) Roxanne Henderson writes:
“In the Twin Peaks model, financial services will be
regulated by ... the Financial Sector Control Body (FSCA) to strengthen the
country’s approach to consumer protection and market conduct.”
She quotes University of Western Australia financial
regulation expert Andy Schmulow who said “the implementation is going to be absolutely
crucial”; UNISA law professor Michelle Kelly-Louw: “Australia’s model [on which
South Africa’s is based] had encouraged deeper consumer participation in the
financial services sector, which South Africa needed”, and Odette de Beer: “the
renewed focus on consumer protection would give companies a competitive
advantage over their peers”.
Greater consumer protection and participation? Absolute poppycock!
The FSCA came into operation on April 1 and already has failed
that first and vital test. And through no fault of theirs, Andy, Michelle and
whoever else who advocated it in good faith because that’s their understanding
of its mandate may be embarrassed and mistaken as a result.
On the advice of Schmulow whom I communicated with via his The Conversation article on the subject, I submitted a complaint to the FSCA
online on May 1. It concerned my credit card company Standard Bank
that since January 1 unilaterally imposed a monthly fee for “value-added
services” they never asked me/customers about that I don’t want or need. The
Consumer Protection Act explicitly bans this practice which it calls “bundling”
saying consumers are not obliged to buy them.
It’s similar to infamous Cash Paymaster Services levying social grant
beneficiaries with “unauthorised, fraudulent deductions”.
I’m not upset by the small monthly fee (I pay R10, but it’s between R10 and
R212 depending on the type of card), but that they’ve taken from me my right to
exercise my economic and financial decision-making and imposed “services” I
don’t want. This scheme benefits
them and their business partners and it remains
to be seen if customers can get better deals on their own if they so desire.
In March after I complained, they briefly repeated the status quo and did not bother to explain the inconsistencies with the CPA.
When there was no further response, on April 1 I wrote to the National Consumer Commission (NCC). On April 30 they replied they have
no jurisdiction because the “Financial
Services Laws General Amendment Act 45 of 2013 exempts the banking industry
from the CPA”. They suggested the Banking Ombudsman. (I copied the complaint to
Standard Bank. Only then did they
respond more fully, but still refused to delist me from the scheme saying there’s
no “opt-out”.)
The
Banking Ombudsman is a private, bank-funded organisation, not a regulator or statutory body. That’s like taking your criminal
charge to the perpetrator to investigate. (I referred my complaints to the ombudsman and NCR. The
former acknowledged it but the NCR didn’t although I believe they’re already investigating.)
That’s
where it lay when Andy suggested the FSCA, which he described thus: “As of 1 April the Financial
Sector Conduct Authority will have authority over ever regulated entity which
is every entity that provides a product or service as defined by the Financial
Sector Regulation Act, except in respect of credit, which is still the ambit of
the National Credit Regulator”.
The FSCA automatically acknowledged my complaint, but on May
9 this is what their Itumeleng Kganane wrote:
“Kindly be advised that your complaint does not fall within
our jurisdiction. The National Consumer Commission’s response was
correct when stating that the best forum to deal with this matter is
office of Banking Ombudman.”
The NCC has no jurisdiction because of a specific act but
Kganane didn’t say what legislation or regulation prevents them from doing
so. (Her email didn’t identify her job
title but a LinkedIn page identifies one “Itumeleng Kganane” as “senior
analyst” at the FSB, FSCA’s forerunner.)
I replied stating that, otherwise they must investigate. There was
no further response.
In the absence of an explanation and based on what Schmulow and other
experts say, my complaint does fall within FSCA’s jurisdiction. But it’s
apparent they’re making up reasons not
to investigate, a strange, illegal attitude by a regulator. I didn’t complain
about a minor customer-bank dispute, but Standard Bank’s deliberate violation
of the CPA and my economic rights and national credit act. “Attorney Stephen Logan said the fee has nothing to do with the provision
of credit, and a bank can't add additional services that aren't optional" (ibid).
I don’t know how many credit card clients they have but if,
say, a million don’t want the service and thus the bank incurs no related expense,
and they’re forced to pay R20 a month each, Standard Bank’s earns over R200
million a year for doing absolutely
nothing.
But the regulator, allegedly the champion of consumer rights
and protection, is fine with letting them get away with it!
To Schmulow’s follow-up article I related what the FSCA’s Kganane
told me. He replied, “This is disappointing to hear”. That’s an understatement. Unfortunately the FSCA’s conduct or confusion
about their mandate undermines good-intentioned people and
experts who believe the Twin Peaks model offers the kind of financial regulator
the country needs and deserves.
This week I spoke to a senior consultant/financial planner of
a major asset management company about another matter during which I mentioned my
experience. I asked what she knew of
FSCA’s role. Regarding my complaint about its apparent lack of oversight of
banks she opined, do “banks operate in their own bubble?”
That’s exactly what I told Schmulow: the ANC government,
despite its promise of “better life for all” including some economic prosperity,
gave banks the extraordinary privilege of “regulating themselves”, as former
finance minister Pravin Gordhan cravenly allowed in 2009/2010 about excessive
bank charges (at the time of his involvement, the Competitions Commission
abandoned their investigation), a situation that saw fees immediately and
significantly increase.
Ten years ago the same bank changed my savings account without informing me. I lost some interest and incurred higher charges as a result. According to the bank consultant I spoke to they probably contravened the Financial Intelligence Centre Act (FICA). After they promised to investigate but then became uncooperative, not knowing who had jurisdiction, I wrote to the South African Reserve Bank. In an unsigned letter SARB told me they don't "mediate customer-bank" disputes. The bank broke a law and that was what they thought it was - a minor dispute?
But if a client violates financial laws or regulations, as the Guptas found out to their cost, they face severe sanctions and penalties including having their accounts closed. But the government has given banks carte blanche.
It appears the FSCA is another in a long line of ineffectual,
incompetent and compromised regulators and statutory bodies – NPA, public
protector, etc – that’s failing the public. I’m not surprised.
Schmulow offered to look into the matter for
me (his The Conversation profile states, “He currently serves on an
independent expert advisory panel convened by the South African National
Treasury advising on the Conduct of Financial Institutions Bill”). But I said I shall not hold him to it. Already they’re going the way of sister
organisations – inept, hopeless and waste of time. Those invested or indirectly associated,
e.g., advisors, etc, with it should not identify too closely out of
reputational risk.
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