The World Bank Group has released a new report focusing on consumer transactional accounts and fixed deposits offered by retail banks in South Africa.
The report also has a focus on advertising and sales material from the financial sector – and how it influences customers.
“For many consumers, decisions about which financial products to purchase are significantly influenced by information conveyed in advertising and marketing material. Consumers who rely on misleading or incomplete advertisements can be more likely to select an unsuitable product,” the World Bank said.
“Even if they ultimately do not select a product as a result of such marketing (for example, because they receive clarification in a branch), they may nevertheless suffer inconvenience and lost opportunities by having been attracted to approach a particular bank based on an incorrect understanding.”
It added that consumers with little experience – including youth and previously unserved individuals – are particularly vulnerable.
According to the report, the Advertising Standards Authority of South Africa (ASA) has upheld more than 60 complaints of misleading, dishonest, or false advertising made against banks since 2001.
However, an analysis of the ASA complaints database reveals more than 100 complaints against banks for misleading, dishonest, or false advertising from 2001-2017. Approximately 58% of these complaints were upheld against the bank or resulted in voluntary action by the bank.
The complaints cover a range of products and services, including those related to transaction and fixed deposit accounts (which make up approximately 20% of the total). Over 80% of complaints were made by consumers, with the remainder submitted by competitors or other industry stakeholders.
“Of the ASA complaints relevant to transaction and/or fixed deposit accounts, most relate to misleading claims about product features, pricing, and availability,” the World Bank said.
“In one instance, the ASA upheld a 2010 consumer complaint concerning a bank’s marketing statement that ATM cash deposits were free, although in reality many of the bank’s ATMs charged 0.65% of the deposited funds at the time.
“The ASA also upheld a 2011 consumer complaint that a bank had omitted references to the customer’s liability for a ‘lost-card administration fee’ in its marketing (which instead suggested that such fees were covered in the monthly fee).
“In another instance, the ASA upheld a 2012 consumer complaint that the marketing for a fixed deposit account had been misleading in stating that a customer can withdraw up to 30% of the invested amount at one time; in reality, the limit was 15%.”
|Bank||Total complaints (2001 – 2017)||Complaints resulting in voluntary action||Complaints upheld against the bank (fully or partially)||Complaints dismissed in favour of bank||% upheld/actioned|
The report also identified a number of current advertisements currently being used by South African banks which could be considered misleading.
According to the report, several banks describe certain accounts or product features as ‘unlimited’ without clearly specifying that per-transaction charges can be incurred.
“A review of bank marketing materials for transaction and fixed deposit accounts reveals that some banks use the words unlimited and free to describe features that would in fact incur per-transaction charges,” it said.
“One bank has marketed an ‘Unlimited Pricing Option’ on several of its accounts, even though many product features of these accounts (for example, other bank’s ATM withdrawals) come with per-transaction charges.
“The marketing notes several features that are ‘qualifying transactions’ for the ‘unlimited’ account option, but the overall description of the account option as ‘unlimited pricing’ is potentially misleading.
According to the report, another bank describes an account as allowing ‘free unlimited transactions, including purchases, debit orders, electronic account payments and electronic inter-account transfers’ – despite the fact that debit orders, electronic account payments, and inter-account transfers incur charges (at R16, R5.50, and R4 per transaction, respectively) under the ‘pay as you transact bundle.’
“The statement is given greater prominence on the relevant website page than information that refers to a pay-as-you-transact variation, requiring the customer to be alert to the variation,” it said.
The report also took issue with the fact that several banks use the word ‘free’ to describe features that are paid for via a monthly management fee under a bundle package.
For example, under one ‘Big Four’ banks’ bundles, consumers are offered:
- 2 free ATM deposits,
- 2 free withdrawals from its own ATMs
- 2 free funds transfer transactions.
However, the monthly fee for the account is R59.
“Under another Big Four bank’s account, which has an R100 monthly fee, customers are offered four free withdrawals per month from its own ATMs and free SMS banking,” the report said.