Banking Practices

Are our banks still, ethically the worst in the world?

2020 was perhaps not the best year to file a class action against the major banks in South Africa for alleged unethical practices. Co- V delayed things as did the implications of the new digitisation for filing cases: Caselines.  However, the case has been long in coming.

When I was first briefed by clients telling me that our banks were selling people’s houses worth millions for R1000 even R100, I frankly, did not believe it.  However, as more and more people told me their stories I realised it was really true.  I realised also that despite the Constitutional Court’s decision in Jaftha that houses must only be sold as a last resort, the banks, despite their protestations, were still far away from that.  My PhD thesis revealed our banks were not typical, in terms of global standards, far from it.

Friends and colleagues told me the equivalent of “you can’t beat city hall”: the banks were big and powerful. Sometimes doing whatever was necessary to ensure their system remained.  I chose to believe in South African justice. I was right. 

Our system of justice still works, at least most of the time. Laws passed told banks that a minimum price must be set by the court before a defaulter’s house is sold. While some banks are still inclined to ask for low minimums (often as low as 50% of value), this at least has eliminated improper practices.  We no longer see the R1000 and R5000 cases that we saw before.

But what about the roughly 100,000 people who have been wronged in the past after the constitution came in?  Our class action is to make the Banks compensate the people who have worked all their life and built up a little money in their house, only to see everything they had worked for, swept away by waves of bank negligence and incompetence We now consider selling without a reserve price wrong, but what about the banks’ victims from the past?

Sometimes no alternative exists, but to sell properties in execution on defaults, but sell it for close to market value and ensure that properties aren’t sold when there is an offer to purchase pending. Don’t sell when the outstanding amount due is small.  Surely refinancing at a lower monthly amount is the only ethical option? Why are banks’ selling properties when clients are under debt review? This is clearly illegal. Why are properties still sold when there are no arrears but based on past arrears?  Why are these constitutional principles in housing not being applied to motor vehicles and in sales in insolvency situations?  South African banks and our laws still have a long way to go.

Better ways, are to look to banks of other countries who have developed superior ways over the last 40 years while our banks have been “sleeping” (at least ethically, if not technologically).  Most of the world, developed and developing, no longer use the archaic methods of our banks and laws and have a softer, less aggressive approach. They are still solvent, credit systems still work and there is far less crying than in our beloved country.