Case Studies
 
 
Alleged Breach of Contract
Alleged Mal - Administration
Consumer Finance
Creditor Debit Cards
Foreign Exchange
Fraud
Mortgage Finance
Unfair treatment
 

Alleged Breach of Contract

 

Complainant was an employee of the Botswana Government, a Medical Practitioner and an expatriate on contract terms. When his contract ended he was paid his gratuity which was deposited into his account. He had a loan contract, which was not properly being serviced, and the bank decided to put hold on his account under advice to him as he had previously ignored the banks call to discuss various issues relating to his loan. The intention of the bank was to discuss with him how to settle the arrears and the loan as his contract had expired. Within the same period his contract was renewed for another term. During pay- day he could not access any funds from his account as his account was blocked and hence approached the Banking Adjudicator.

His claims were that the bank has breach his contract as follows:

The bank knew that he was on contract and failed to link his repayment period with his contract as is usually bank procedure.

The bank should not have granted him the loan at the first instance since the banks assessment of income to repayment ratio was above the 40% prescribed limit.

The Banking Adjudicator held that there was no breach on the part of the bank as this was purely a banks commercial decision and that banks procedures should not be made to be seen to be 'hard and fast rules' and in the process prejudice law abiding customers. The customer agreed with the terms and conditions of the loan and signed for the same without any cohesion or influence from anybody and this valid a valid contract.

The bank was advised to consider two options in assisting the complainant:

Since a new contact is now in place, they could consider allowing him to continue with the contract, having considered its credit risk assessment procedures, mandating the salary to the bank.

Settle the current loan with the gratuity and have the customer enter into a new contract, again based on the banks credit risk assessment procedures.

And remove hold on the account.

Alleged Mal - administration
 

A department of a local authority had deposited a cheque for P385000.00 with one of the banks and in the process the officer who went to deposit the cheque incorrectly missed one digit and instead of writing a digit 8 she/he wrote digit 9, in the deposit slip, however on close scrutiny the digit appears as 8. The teller at the bank was not able to realize this when processing the deposit as she/he could have seen the variance in the name of the account credited. The account the cheque was credited into had all its digits the same as of the complainant except for the digit incorrectly written.

The Officer of the Local Authority inadvertently, inserted the digit 9 which on close scrutiny appears so and not as 8. However, they argued that the bank could have reasonably realized the mistake as the name of the account should have been verified before the transaction was authorized in the system.

Such errors are common especially at peak times this does not however give the banks the leeway not to thoroughly check transactions after posting. The bank offered to refund the customer interest which the customer had lost and apologized for the error. The Local Authority suspecting maladministration on the part of the bank had requested the following information: whose account was initially credited, did they benefit from this transaction error in interest. For purposes of confidentiality this information was only confirmed to the Banking Adjudicator who confirmed to the customer that he is satisfied in the manner in which the matter was concluded without necessarily disclosing the details.
Consumer finance
 
Case 1

Complainant had acquired a loan under the Botswana Defence Force Scheme. Later during the contract period, he approached the bank to clear the balance in order to apply for a new loan of a higher amount. The balance furnished was much higher than what was expected by the customer. Took up this issue with his bankers, and for at least 2 years the matter still remained unresolved.

Complainant vehemently disputed the balance, because even taking into consideration interest rates fluctuations, still the loan balance did not add up. He even showed as evidence that at the time he acquired the loan a friend of his was also granted a loan on similar terms and conditions and prospects of default were non existent as the deduction were made at source.

Investigations revealed that the loan repayment amount was understated by P98.00, and therefore monthly payments for the period of the loan were underpaid by the same amount, and this amount attracted default interest.

Bank offered to refund the customer excess repayments, interest caused by underpayment, however, the customer had to pay the capital amount (without interest). The Banking Adjudicator further recommended an ex-gratia payment of P500.00 by the bank to the customer for having suffered distress and inconvenience within the two years as the matter could have been resolved within a shorter period.


Case 2

Complaint had a personal loan of P20,000.00 sanctioned and payable over a period of 36 months, unfortunately at an understated installment. The Customer realized that there was something amiss on her loan account, when the bank continued deducting repayments long after the expiry date as per the loan contract.

The bank realized that it had incorrectly calculated a low installment for the loan and therefore a portion of the capital amount remained unpaid with default interest charges.

The customer was advised that she will only be liable for the capital shortfall on the loan repayment, free of interest. The bank refunded the excess repayments and unduly charged interest. Customer was advised to accept the bank's outcome as reasonable.


Case 3

The claimant is the mother to the deceased, who was an accountholder with one of the commercial banks. When she called on the bank enquiring of the status of her deceased son's accounts, she was advised by the bank that her son had a loan balance which she was required to clear to avoid further interest charges, whilst awaiting a claim from the insurance on a credit life policy. She accordingly settled the loan as advised at P3522.40 plus accumulated interest to date.

After some months she approached the bank enquiring on the status of the claim, and was advised that the insurers did not pay and no reasons were advanced.

Investigations revealed that, no claim had ever been lodged with the insurance company and the time to lodge a claim was prescribed.

There was no evidence to show that a claim has been lodged with the insurance company and that such a claim has been refused. The bank offered to pay the customer the sum of P3522.40 (interest at the time of settlement) inclusive of interest from the date the loan was settled.


Case 4

Complainant is the wife of a deceased former staff member of a bank and a heir to the deceased estate. Initially, the question the Banking Adjudicator was faced with was to consider whether, we have jurisdiction over this matter, that is, whether as a staff matter and in that case "Staff Conditions of Service "prevail. And if not the Banker's Code of Conduct prevail. If the deceased accounts were converted to commercial rates, then the wife becomes a customer of the bank and not staff. The matter was pursued on discretionary basis by the Banking Adjudicator.

In the process of winding the deceased estate, she got to learn that credit life insurance had not been perfected on the deceased car which was relatively new and therefore the bank required her to settle the lease loan, and she utilised proceeds from the pension of the deceased estate to settle the loan.

It was revealed by the bank that there was an initial requirement by the bank even though not compulsory to have all staff loans covered through credit life. This was held in abeyance because negotiations were still ongoing with the Staff Union as most staff were reluctant to take cover. It was established that the deceased completed and lodged the application forms, with the exception of one which required applicants to confirm that they are "active at work" with the department responsible for processing cover in the bank. It was also discovered that persistent reminders were sent to the deceased to lodge the forms, but later verbally informed officials that he had decided to cancel the cover.

Complainant produced a copy of the 'active at work' from the deceased records from home, maintaining that her husband has never told her that he had since decided to cancel the insurance. The bank insisted that the deceased never submitted the form and that "the submission of the insurance documents is not necessarily conclusive evidence that the insurance cover would be approved, by the insurance company even if they were properly completed". The Banking Adjudicator concluded that he can not assess conflicting evidence or conduct cross examination, and therefore no recommendation may be made on any complaint in which a material fact can not be established, and therefore, this was a dispute of fact case .


Case 5

Complainant was granted a loan of P75000.00 approved at one of the banks branches. The customer had another loan facility, a mortgage loan at the banks head office, and since the complainant had failed to service the mortgage loan the bank had obtained a warrant of execution against him on the property. When the personal loan was granted the Loans Officer at the branch who was processing the loan was not aware of this, neither had the information been relayed to the credit bureau according to the bank's credit procedures.

Investigations revealed that the complainant was granted the loan which was credited into his account and had started drawing on the facility. An officer at head office of the bank who was responsible for monitoring the account realized a huge deposit in the customer's account and on enquiry with the branch was advised that the customer had been granted the loan. Immediately the officer reversed the credit and requested the branch to cancel the loan forthwith, without reference or notice to the customer. The complainant only got to know about it when he was trying to make a withdrawal at one of the bank branches.

Findings revealed that the banks systems and processes were not "online real time" and therefore could not adequately inform or make other parties in the branches aware of various activities performed on various accounts simultaneously which, was a cause for this error. The Banking Adjudicator submitted that the bank knew or ought to have known of the dangers such a deficient system without interface can cause and the delay in sharing information within the bank and the credit bureaus.

The bank sought to rely on some provisions of the loan agreement on set-off and default, which unfortunately are not applicable to the new contact. The new contract should be upheld and therefore considered valid. The bank was given two options to consider:

Reinstatement of the loan

Compensate the customer for the charges incurred in the processing of the loan and offer an amount for substantial distress and damages.

Amount determined to be discussed and agreed with the customer and if a dispute arises reference to be made to the Banking Adjudicator, whose determination would be binding on the parties.

 

Credit / Debit Cards
 

Case 1

Complainant had been maintaining a credit card account for the past 7-10 years. Monthly repayments to the account were being made through a debit order from another bank. The complainant account was blocked as repayments seemed not to credit the customer's account, her account details were black listed with credit bureaus and her account referred to debt collectors.

Investigations revealed that monthly payments were being debited from the other bank and what was not clear was which account was being credited. The bank maintained that the credit card account number had been misquoted and therefore funds were retained in an internal account as there were problems in allocating the payments. This had been going on for a year and the customer was in the dark as to what was happening despite repeated enquiries with the bank. She even decided to terminate the debit order and pay by hand at the bank every month.

The bank has not taken any initiative in checking why the customer was defaulting. No prove was produced that the customer was pre warning of the banks pending action. When the customer came to complain the bank should have traced the debit order to the originating bank and could have managed to resolve the customer's complain immediately.

On realizing this problem the bank assured the customer that, the account would be re-actived, a new card made, repayments updated, black listing and debt collector's information accordingly withdrawn.

Foreign Exchange
 

Complainant approached the bank to open a Euro denominated account, with the aim of remitting/transferring an amount of GBP78,000.00 into the account. The bank processed the remittance of GBP 78,000.00 and credited the customer's account. According to the bank's procedure the funds are initially converted to Botswana Pula (BWP) and subsequently to Euros. The customer had expected a straight conversion to Euro from Pounds and that the bank had to use the middle rate in its conversion. He therefore maintained that by having two conversions the bank had profited twice from a single transaction.

The bank response was quick in this matter as it offered the customer an adjustment using the market (inter-bank) rate, which rate is only applied by banks when transacting foreign exchange between themselves and not with customers. The bank's action did not constitute acceptance of liability but a gesture of goodwill and good customer relationship. The Banking Adjudicator advised the customer to accept the Banks offer.

Fraud
 

Case 1

The complainant reported to the bank that he had lost her A.T.M. Card and there were various unauthorized transactions in her account. The bank had recently credited her account with proceeds of a loan amounting to P18,000.00 which had also been withdrawn. She alleged that the card was reported stolen to the bank's call centre before and it was confirmed to her that the card was blocked.

The investigations were concluded and the following issues were discovered:

That there was no prove that she had contacted the bank to block her card. Either through confirming the name of the bank officer who assisted her and the time. The bank could not locate her message in their telephone system.

The customer maintained that she only realized after a month when she was making a cheque encashment inside the bank that there were unauthorised withdrawals.

The bank realized through a video clip, which was run in the presence of the customer that the culprit identified was the customer's former boyfriend.

The bank maintained that the customer had breach its contract by giving PIN card access to a third party not covered in the contract. The customer disputed having given the culprit access. The Banking adjudicator advised the customer to report the matter to the Police as this was a case of fraud and that if she still strongly feel that the bank was negligent she could still approach the courts for redress.

Case 2

Complainant maintained that whilst she was outside the country, the sum of P38,000.00 was withdrawn from her business account and two personal accounts through an inter -account transfer into his husband's personal account.

When the transfer was executed the complainants husband was the one who presented the inter account transfer forms and probably set up the person who answered the bank's call seeking to confirm the transaction. Transfer documents had "identical /similar' signatures of the account holder in terms of the customer's mandate.

Investigations revealed that proper documents to effect an account transfer were presented with positive identification indicating the complainant's husband as the one who enchased the money and skipped the country.

The Banking Adjudicator would want to acknowledge that this matter was complicated and took a long time to be concluded as initially the bank needed to establish the implications of releasing the forensic report it had undertaken on the matter. A resolution by the Banker's Association of Botswana as to whether this was privileged information or not and whether the Banking Adjudicator could not have access to was a break through on the matter.

From the onset the complainant had been advised to report the matter to the police to avoid prescription seeing that investigations might take long. No award was made in favour of the complainant on these basis as the bank was not found to be negligent. The complainant was advised to follow up the reported matter with the Police.

Mortgage finance
 

Complainant had a top-up loan facility granted by the bank. He was allowed to draw on the facility, awaiting the registration of a bond on the amount sanctioned. The customer was allowed to draw on the funds and in the process an overdraft facility was created and condoned by the bank for several months.

Unfortunately, the decision to grant the customer a top-up facility was never made in writing to the customer and therefore never formalized. Following the registration of the bond, and when the contract was being formalized, it was realized that the customer in fact did not qualify for the top up in terms of the banks assessment procedures, that is, income to repayment ratio.

It was found that the error squarely lied with the bank and therefore it was recommended that the customer's overdraft and home loan be amalgamated and repayments scheduled. Furthermore, the bank had to ensure that this does not place financial hardships on the customer.

Unfair treatment
 
Case 1

The deceased had maintained a current account with one of the banks. During preparations for the funeral one of his uncle was appointed by parents temporarily to request for funeral expenses from the employers of the deceased. After the funeral the said uncle refused to have his mandate withdrawn as he maintained he also had a say in the way his brother's assets had to be apportioned.

On enquiry with the deceased former employer there was no will, nor any document available to confirm the heir to the deceased estate. The bank on the advise of its attorneys could neither allow the uncle whose mandate was cancelled by the deceased parents' resolution confirmed by the District commissioner nor allow the rightful heir, a son who also had papers confirmed and attested to by the local authorities and District Commissioners' office, to close the account and draw the money.

The Banking Adjudicator recommended to the bank to facilitate payment, and that the cheque be drawn in favour of the "Legal Representative of the late XYZ'. This way the bank would have done its part, as it would be making payment to the legal representative of the deceased in good faith, and the duty of care on the part of the bank would have been discharged. The bank only paid after receiving another letter similar to the previous one made out by the District Commissioner but made in Gaborone . By the time this matter was concluded the beneficiaries to the deceased estate had incurred increased legal expenses as they had to borrow money to defend an action of rental default for the house the deceased stayed in.


Case 2

Complainant submitted the relevant forms for opening a business account. On enquiring after some days as to how far the account opening was, he was advised that he has not submitted the Memorandum and Articles of Association documents. He tried to explain to the bank that he has indeed submitted all the required documentation and even referred the officer to the checklist they were using to cross check all the documents before submission. After 5-10 days he was called by the bank and advised that his documents have been found.

The bank confirmed that indeed the documents were submitted, and that the office who assisted the customer had misplaced them in the office. The account was opened and the customer requested that the bank apologize for their mistake and further wanted to know what action was taken against the concerned bank official. The bank did not respond until after two years.

After investigations were completed on the matter, the Banking Adjudicator recommended that the customer be paid an amount of a P1000.00 for distress and inconvenience. The bank maintained that it was not in a position to pay the recommended amount since the customer did not incur any financial loss. Finally the Banking Adjudicator settled for P500.00 as a determination.

 
 
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