Clients can be prejudiced when banks rush to curb fraud

“There are real criminals out there; not us.”

So said the man who sold his car privately, and hours later had this account blocked by his bank, Capitec, the transaction having “met the strict requirements to classify as fraudulent”. 

Clearly banks are expected to protect their customers’ accounts from being raided by fraudsters, but in doing so they run the risk of prejudicing a client who is not guilty of any wrongdoing, as in this case.

The incident happened on the Wednesday before the Easter weekend, Capitec client Prakash (who asked to be identified only by his first name) having sold his car to a fellow Capitec client, Joash Moodley after placing an advert on Facebook Marketplace.

Moodley, of Phoenix, Durban, collected the vehicle from Prakash’s Verulam home on April 5 and both being Capitec clients, his R130,000 payment reflected in Prakash’s account almost immediately.

A few minutes after he’d driven off in his newly acquired car, Moodley got a call from a woman who identified herself as being from Capitec, asking him to confirm that he had made the payment to Prakash. 

“I told her it was me,” he said.

But when Prakash attempted to pay for fuel a short while later, he suffered the embarrassment of having the transaction repeatedly declined.

He soon discovered that a stop had been put on his account, meaning he couldn’t access either the R130,000 or about R20,000 which was his balance before the car payment.

Capitec also put a stop on Moodley’s account. 

The bank told them that the only way to resolve the matter was for both of them to visit a bank branch in person, claiming that the bank had been unable to confirm the transaction via phone with Moodley.

They obliged the same day and were forced to stand in bank queues at the Capitec branch in Phoenix Plaza for three hours. 

“I showed them the call log on my phone, proving that I had taken a call from a bank official shortly after paying the money,” Moodley told me.

“I asked them to get the call recording but I don’t think they did.”

And when the two men left the bank after that long wait, their accounts were still blocked, and remained so for another week.

“Please accept my sincere apology for your negative service experience and for the inconvenience caused,” a Capitec “complaint management officer”, told Prakash on April 12, the day the stop was finally removed from his account.

Unsurprisingly, Prakash was not placated, arguing that the stop on the two accounts should have been removed a week earlier, when it was established that no fraud had taken place.

“I was embarrassed by having a transaction declined, and had to cancel my Easter weekend travel plans as I had not a cent to spend,” he wrote in an email to the bank.

“Plus I have lost income due the hold on my account.

“I want Capitec to compensate me. I will not just accept an apology.”

The bank’s response was a hard no, delivered in classic corporate-speak: “Please note in this instance we are unfortunately unable to accept your request for compensation. I trust the above is received in order.”

And that’s when Prakash brought the case to my attention.

Here’s the Q&A exchange I had with Capitec on taking up the case:

Q: What about this transaction had the bank’s fraud division flagging it as possible fraud?

A: “It met the strict requirements to classify as fraudulent.”  

Q: What should these two men have done, if anything, before that payment was made, to avoid the stopping of their accounts?

A: “Apart from making sure they are contactable; clients won’t be able to forewarn us about transactions that might trigger a fraud alert.”

Q: Why did the stop remain in place for seven days? That’s a very long time to be unjustifiably denied access to your own money.

A: “After an in-depth investigation, we found the stop remaining on the account was a process error. We take this extremely seriously, and we’ve taken every action to address it, to ensure all our clients have the best possible service experience.”

Q: Prakash has not attempted to quantify his losses, but generally speaking, does Capitec feel that an apology was sufficient in this case? Banks have the benefit of all sorts of mechanisms (penalties, interest, “blacklisting”) to penalise customers who err, but it appears that the only thing on offer from banks when the shoe is on the other foot is an apology.

A: “Our complaints team has contacted the client with a letter of apology and a monetary gesture of goodwill, which the client declined, stating his loss was greater. The client was then asked to provide proof of the loss of income, so the complaints team could relook the amount offered. We are waiting on the client to provide this.”

Prakash has since told me he rejected the bank’s initial offer of R500 compensation, but accepted its second offer of R5,000.

Ombudsman for Banking Services (OBS) Reana Steyn said not every case that comes to her office was about a financial loss.

“In many cases we find that bank customers were victims of maladministration on the part of their banks, which is when we look at an amount to cover what we term “distress and inconvenience”.

But consequential damages were not considered, Steyn said.

By the end of April this year, bank customers had collectively asked for R4.7m via the OBS as compensation for the distress and inconvenience which their banks caused them.

After the OBS’s involvement, the banks opted to offer a total of R43,700 in distress payments, and another R216,000 was paid to clients by their banks on the OBS’s recommendation.

That brings the total amount the banks have paid to compensate their clients for their poor treatment of them — so far this year — to R260,220.

And I daresay that’s just the tip of the maladministration iceberg.

CONTACT WENDY:Email: consumer@knowler.co.za

Twitter: @wendyknowler

Facebook: wendyknowlerconsumer