The Code of Banking Practice : a good time and place to formally start recognizing consumer charge back rights in South Africa

Abstract

In South Africa, the robust banking sector may be overwhelming to its clients and may even leave them vulnerable to their business practice. Banks support card purchases but some are reticent about their role in chargebacks. The Consumer Protection Act 68 of 2008 provides for some very noble refund remedies but if these remedies are not enforced by banks, they prove ineffective. The banks own the credit transfer process but neither the Consumer Protection Act 68 of 2008 nor the National Credit Act 34 of 2005 compels them to chargeback credit card transactions and the consumer is therefore left without protection. This means that if a customer buys a service using his credit card and seeks a chargeback from his bank for a valid reason, there is no recourse for the customer in terms of the contract with the bank and the customer is left at the mercy of the bank and the rules and regulations of the credit card operator with whom the customer does not have a contract. Similarly debit card purchases and electronic fund transfers (EFT) also fall short of protection as the banks? reticence follows through to these as well. The bank is under no obligation to assist the client with disputed transactions and this can be appreciated from the wording in card agreements, some more notably than others. That been said, the Consumer Protection Act 68 of 2008 does contemplate payment for goods and services using a credit or a debit card but fails to call on the banks to assist the consumer. The code of banking practice does not come to the aid of the consumer either as the voluntary commitments are limited to some aspects of cheques, debit orders, foreign exchange, internet telephone and cell phone banking. The aforementioned payment services have chargeback references or provisions which protect the customer; however the code makes no mention of payment services linked to debit and credit card payments. In practice, a third party card operator attends to dispute resolution and chargebacks but accrues no contractual responsibility towards the client, nor are the card operators subject to South African law and jurisdiction. In this paper, the client bank relationship is also examined as the bank is in the precarious position of having to make or break a client. The mechanics behind the real time gross settlement system of South Africa in order to understand what can and cannot be done is also discussed. Coming back to the refund provisions in the Consumer Protection Act 68 of 2008 only two of them stipulate a timeline within which to effect the refund but the international card operator is not bound by these timelines. Also, there is no visibility as to the debit and credit mechanisms between the client?s bank and the merchant?s bank and if a dispute is resolved within 3 or 4 days there is nothing preventing the merchant?s bank or the client?s bank from taking 120 days to credit the client. The banks would then have the opportunity to create a healthy cash flow at the expense of the aggrieved customer. This dissertation also calls on the Competition Commission to test the code of banking practice against prohibited practices and it calls on the legislator to address consumer chargeback rights in appropriate legislation. Lastly a recommendation with regard to wording that must be introduced into the code of banking practice to enforce chargeback rights is made as well as a suggestion to the utilization of existing Ombudsman and registered paralegals.