OPINION: Are the banks policies and contracts in line with public policy? Is a transformative or restorative justice approach not better than amongst others, judgements against customers, emoluments attachment orders and writs of executions? Some questions for our politicians as they ponder on how to help its indebted electorate, writes Zelna Jansen.
Financial institutions, better known as banks, are regarded as the engine that runs the modern capitalist system.
Capitalism in part, is an economic system in which private owners control property in accord with their interest.
This system is regarded as the lesser evil compared to others.
However, the price of property is so out of reach for many that it is regarded as a norm to obtain a mortgage bond and pay for at least 20 or 30 years.
Businesses promote products that people cannot afford through social media.
Grooming people to behave in a certain way. Get it now and pay later… But in hindsight, did anybody read the fine print?
If you had, would the banking institution change that standard agreement?
Covid-19 quickly burst that bubble.
Many are now heavily indebted. Houses have been foreclosed, vehicles repossessed, inundated calls from call centre agents looking to recover debt is now becoming the norm.
It will take some time for all these debts to be paid.
Of course, those that have, celebrate the capitalist system and guard what they have.
Whilst those that don’t have, will suffer the harsh consequences and trying to get out of it, is rigged with insurmountable hurdles.
Financial institutions do therefore play a pivotal role in enforcing the capitalist system in South Africa’s economy.
The legislation governing the banks is fragmented which means there are many laws governing different aspects of banking operations.
This makes it difficult for the educated or lay person to understand.
There is the South African Reserve Bank (SARB) which receives its mandate from the Constitution.
SARB is the central bank of South Africa, and it must protect the value of the currency in the interest of balanced and sustainable economic growth.
The Prudential Authority (PA) is responsible for ensuring compliance of banks with the Banks Act of 1994 and is the administrator of SARB.
The Financial Sector Conduct Authority (FSCA) regulates market conduct of the banks and aims to ensure market integrity and efficiency.
There is also the Banking Ombudsman for clients who feel aggrieved by their bank.
Thomas Jefferson, one of the founding fathers and author of the United States Declaration of Independence, called banks, “more dangerous than standing armies”.
Sekunjalo Investment Holdings would give ear to this.
Having been at the receiving end of having its accounts closed by several banks.
Is it constitutional for a bank to act in this manner?
Is there protection for the ordinary citizen should this happen to them?
South Africa has a brilliant Constitution that protects our rights and the dignity of its citizens.
However, South African law is based on the Roman-Dutch law.
Particularly, as it relates to security over property.
Banking law is therefore subject to this law and South African courts will interpret contractual, corporate, and commercial issues based on this law.
The banks have cited reputational concerns.
A company’s brand is intangible property and depending on the brand, it can be valued at a considerable amount.
It is the perception of its customers and potential customers.
It will be the deciding factor as to whether a customer stays or whether a potential customer uses the bank’s service.
The court will therefore give considerable weight towards the factor of reputation and brand.
Particularly, in a time where state capture, fraud and corruption are constantly highlighted and whether banks were complicit in this?
However, in a urgent application brought by Sekunjalo in the Western Cape High Court the court commented that: “It is fundamentally unfair and contrary to public policy for a bank to unilaterally decide to close an account, place the proceeds of any monies to the credit of the account holder in that bank’s suspense account, and the bank then retains the interest earned on those monies.”
The court further noted that even if such a clause existed, it would be contrary to public policy.
Questions to be asked is whether the banks when closing the accounts of Sekunjalo, considered how this could potentially damage its reputation or that of its employees?
If they closed the accounts, how would the employees of Sekunjalo be paid?
If banks believed there was wrongdoing, should they not have reported it to the relevant investigating authorities, rather than acting autonomously?
Should it not have waited for a more definitive outcome such as a prosecution?
It is therefore likely that the Constitutional Court will find that the banks acted arbitrarily, unfairly, and therefore unconstitutionally in unilaterally closing the accounts of Sekunjalo.
The high court made a rather interesting comment that transformative justice had a role to play in the banking sector.
Given South Africa’s history and context where it finds itself presently, I agree.
Perhaps the time has come to revisit what banks do and how they operate from a transformative justice aspect?
Are the banks policies and contracts in line with public policy?
Is a transformative or restorative justice approach not better than amongst others, judgements against customers, emoluments attachment orders and writs of executions?
Can our government and politicians take these financial institutions to task?
Some questions for our politicians as they ponder on how to help its indebted electorate.
* Zelna Jansen is a lawyer. She is CEO of Zelna Jansen Consultancy.
** The views expressed here are not necessarily those of IOL and Independent Media.
Insider