The Banking Division of the National Financial Ombud Scheme (NFO) saw a record 15 412 complaints in 2024, closing 11 535. But while the system offers recourse for banking customers, most formal case outcomes still favoured the banks – with 79% decided in their favour and only 21% for the complainants.
For the one in five consumers who succeeded, the outcomes mattered: the ombud helped to recover more than R29 million. The Ombudsman for Banking Services (OBS), now part of the NFO, played a key role in addressing these issues. Its latest annual report provides insight into how it resolved complaints – and where things went wrong.
A costly misunderstanding over loan interest
One consumer disputed the interest rate on a personal loan.
The complainant believed she had accepted a personal loan at an interest rate of 19.25%, only to discover later that the loan had been granted at 29.25%. She challenged the rate, arguing it wasn’t what she had agreed to and accused the bank of inflating the rate unfairly.
The bank stood by its position, saying the 29.25% rate was based on her credit profile, and she had accepted the terms.
But when the NFO reviewed the call recording of the agreement, it became clear the line quality was poor. The complainant repeatedly told the consultant she was struggling to hear. The NFO found it likely that she misunderstood the interest rate and concluded there was no clear meeting of the minds – a key requirement for a valid contract under South African law.
The bank ultimately agreed to amend the interest rate to 19.25% and refund the difference from the start of the loan.
Key takeaway: Lenders must go beyond merely stating terms – they must ensure consumers understand them. As the NFO pointed out, it’s not just good practice; it’s a legal obligation under the National Credit Act.
Wrong person, wrong payments – but debt still prescribed
Another complaint involved a 2015 personal loan the bank claimed had not prescribed because payments had been made as recently as May 2024.
However, the bank failed to prove that payments made by the complainant’s husband were enough to interrupt prescription on an old personal loan.
The complainant disputed liability for a 2015 loan, saying she had not been contacted for nearly a decade and had not made any payments. But the bank insisted the debt had not prescribed because payments were made as recently as May 2024.
Those payments, it turned out, had been made by the complainant’s husband – not her. The bank argued that because the couple was married in community of property, her husband’s payments counted as her acknowledgment of debt.
But the NFO found the facts did not support that claim. The bank could not produce evidence of a payment arrangement made with the complainant’s husband. More importantly, the husband had a loan of his own, and the account in question was mistakenly listed as his with the external debt collector. It was therefore possible he believed he was paying off his own loan – not his wife’s.
The NFO ruled there was no clear acknowledgment of the complainant’s debt and prescription had not been interrupted. The debt was therefore deemed prescribed, and the account should be closed.
Key takeaway: Under the Prescription Act, only a clear, provable acknowledgment of debt by the debtor – not a third party – can interrupt prescription. If a credit provider claims otherwise, it must be able to back it up with solid evidence.
Paid-up mortgage left open to fraud
In another case, a vulnerable consumer fell victim to fraudulent credit card transactions after funds were transferred from a paid-off mortgage account.
The fraud was only possible because funds were transferred from a paid-up mortgage loan account – one that should no longer have allowed access.
Although the complainant had settled his mortgage loan in full before the end of the term, the account remained open, and the linked access facility allowed for withdrawals. The bank claimed this was permitted under its product rules but could not produce those rules when asked by the NFO.
The NFO found that the contractual obligations had been met, and the mortgage loan agreement, including the access facility, had effectively ended. Since the account should have been inaccessible, the NFO recommended the bank refund the fraud losses. The bank complied, offering a full refund as a gesture of goodwill – an offer the complainant accepted.
Key takeaway: Consumers cannot be held liable for fraud losses that result from the bank’s failure to properly administer closed or inactive accounts. Once a contract is discharged, it should no longer pose a risk – particularly not one the customer never agreed to carry.
R10 000 house sale ruled unfair despite court order
A bank sold a repossessed home for only R10 000, whereas the property was independently valued at R590 000.
The complainant had fallen behind on their home loan repayments, and after legal action, the court granted judgment and declared the property executable. No reserve price was set, and the bank proceeded to auction the house for a fraction of its market value.
The sale left the complainant with a shortfall of R233 241.90, which the bank expected them to pay.
During its investigation, the NFO noted that the outstanding home loan balance was R234 541.06 and municipal rates and taxes of R335 575.12 were also owing. Still, given the property’s market value, the NFO found that a significantly higher sale price was achievable and should have been pursued.
Although the bank had complied with the court order – which set no reserve price – the NFO exercised its equity jurisdiction and found the sale neither fair nor reasonable.
“It could never be considered fair nor reasonable of a bank to sell someone’s home for R10 000 when it has a market value of R590 000,” the NFO said.
The bank accepted the recommendation and wrote off the full shortfall.
Key takeaway: Even if legally permissible, selling a home for a fraction of its value may breach the principles of fairness and reasonableness. Repossessions must be handled with care to avoid compounding a consumer’s financial hardship.
