ombudsman warns nedbank on stop orders 
21 December 2007

Nedbank yesterday invited sharp rebuke and a threat of unspecified action from the ombudsman for banking services after SA’s third-largest retail bank unilaterally altered stop-order contracts for many of its personal loans customers.

“The bank is not allowed to ignore the contract that exists between itself and its client. The bank cannot unilaterally disregard the client’s mandate. We have told Nedbank unequivocally their actions are illegal and constitute a breach of the agreement. We have instructed them to remedy the situation immediately, failing which we will be obliged to take action against them,” Pillay said yesterday.

Doug Hardie, Nedbank’s executive general manager for client services, admitted the bank had erred, and said it was taking steps to remedy the situation.

“We have received a number of complaints from clients where implementation of the system has led to unintended consequences, hardship or embarrassment. This is sincerely regretted, and we apologise for the inconvenience caused. “Wherever requested by a client in good standing, we have reversed the early debit, reverted to the original date of the debit order, and have reversed all fees generated as a result of the process.

“Nedbank is committed to the welfare of its clients, and is in the process of further refining its collection systems to avoid a recurrence of such incidents in the future,” Hardie said. Following complaints from stakeholders and regulatory authorities, Nedbank would review its “practices and procedures with the view to taking steps to improve and clarify our collection systems and client agreements”, the bank said.

“Nedbank Personal Loans are serious about their obligations to clients, and equally serious about their compliance with applicable legislation such as the National Credit Act and the National Payment Systems Act. We made the deductions in good faith and based upon the belief that we were acting within the letter and spirit of both the applicable loan agreements and legislation.

“We wish to stress that all payments collected by Nedbank were due to the bank and it did not benefit over and above the instalment due for the month of December. What Nedbank did was to synchronise collection debits with salary payments, which we understand is not an uncommon practice in the retail credit industry,” Hardie said.

“By collecting payments a little earlier over the festive season when consumer spending levels are typically at their highest, Nedbank’s intention was to process the instalments at a stage when there were still sufficient funds in clients’ accounts to meet these. This was done in good faith for perceived overall benefit for both the bank and client.

“In other words, Nedbank would be paid when the client received his or her salary and the possibility of a default by the client, should collection take place later in the month, would be reduced. It is also not in clients’ interests to go into arrears on their loan accounts,” he said.

Regis Nyamakanga, www.businessday.co.za