Editorial | Banks can do better
The banker-customer relationship in Jamaica appears broken in many parts, judging from the mounting complaints in media made by dissatisfied customers.
Customers’ experiences are instructive whether they relate to in-branch service or online access and these complaints ought to attract the attention of the Bank of Jamaica, the Bankers Association of Jamaica and the Consumer Affairs Commission, and other interested parties.
What exists between banks and their customers is a contractual relationship which imposes certain responsibilities on both parties. In many instances, banks are failing to live up to their contractual obligations, leaving customers frustrated. Customers, too, can be difficult in following the letter of the law. All in all, a complex relationship.
The Banking Services Act is meant to provide a valuable first step in strengthening consumer protection for those who have dealings with banks and other deposit-taking institutions.
Applicable to commercial banks and building societies, there is an enforceable code that establishes minimum standards of business conduct aimed at strengthening consumer protection for those who deal with financial institutions. Specifically, the code requires that deposit-taking institutions provide customers with reasonable notice of fees and charges and terms and conditions, access to their account information at a reasonable cost, interest rates expressed as effective annual rates calculated in a standard manner across the banking sector, simple and clear language in contracts, and effective mechanisms to address complaints.
The Bank of Jamaica, as part of its regulatory role reviews compliance with the code and incorporates violations into its risk assessment of banks and financial institutions. Where they fail to follow the directions they are considered to have committed an offence and are subject to penalties.
Bank customers are mostly motivated by accuracy, timeliness and general efficiency in the handling of their affairs. Banks have fallen short in many of these expectations. The database of the Consumer Affairs Commission indicates that customers are dissatisfied with the profusion of fees demanded of them: for the use of automated teller machines, overdrafts, penalties and dormant accounts, as well as interest charges on outstanding balances, credit cards and loan accounts. They also complained about payments being posted to incorrect accounts or in incorrect amounts, as well as out-of-service ATMs and unauthorised deductions from their accounts via debit and credit cards.
Take the concept of dormant customers. As we understand it, all financial institutions operate on the KYC basis – which simply means, know your customer. If a customer has more than one account with the same bank, and one account is about to fall into dormancy, how difficulty would it be to ask the customer to reactivate such an account? But the banks must choose the more difficult path by requiring that the account-holder presents a birth certificate and other documentation to reconnect him with his money. A fee is also extracted for the privilege of reactivating one’s account.
It is the introduction of some of these fees which compelled St Catherine Member of Parliament Fitz Jackson to introduce his Banking Services Bill in the House of Representatives in 2019. His bill failed, but he has now taken his case to the Supreme Court.
Electronic-banking which refers to the automated delivery of banking services directly to the customers through electronic and interactive communication channels has expanded rapidly. Customers are now able to transact business using electronic devices, such as phone, computers, debit and credit card payments and automated teller machines. The entire dynamics of the banker-customer relationship has shifted in the face of these choices.
There is no doubt that the introduction of e-banking services is intended to achieve efficiency. Question is how have the banks ensured that customers are in step with the use of this technology. For example, do they hold informal sessions to issue basic instructions so that those who are not tech savvy can still utilise the capabilities of e-banking?
We believe the Consumer Affairs Commission would be doing a service to the banking public if it were to cause the setting up of a commission of enquiry into current banking services.
Banks can do better and they should do better.