OUR, JPS and Guaranteed Standards for the Banking Sector

The Lord bless and keep Auditor General Pamela Monroe Ellis and her team as her office seems to do not just their own work but the work that every other GoJ executive is paid to do.

It was a pleasure to have read earlier this year that the Office of Utilities Regulation (OUR) had taken seriously the findings of the 2013 performance audit carried out by the Auditor General into its operations. Of particular interest to me were the findings concerning the effectiveness of the Guaranteed Standards scheme.

The OUR is charged with managing an initiative known as the Guaranteed Standards scheme, under which telecommunication, water and electricity providers have been ‘gently forced’ to commit to offering at least a minimum level of service deemed to be reasonable and acceptable and further to compensate the consumer where they breach the agreed standards.

Breaches such as wrongful disconnection currently attract automatic compensation i.e. the fee for the breach is automatically credited to the customer’s account but the majority of breaches (9 of 13) require the consumer to make a written claim to the utility company involved. The Auditor General found that while 100% of the J$45 mil for automatic compensation was paid up for the 2008 to 2012 period only J$60 mil of a potential J$709 mil in potential claimable compensation had been claimed and paid out for said period.

According to the January 2015 media release, the OUR has made changes to the claimable compensation aspects of the scheme which will see, by June 2016, automatic compensation for all breaches.

This is certainly good news for consumers. The turnaround time may seem a tad lengthy considering the AG’s report is dated November 2013 and one would have expected the OUR would have identified the weaknesses before and started some planning prior to the report but even with that said, it may be fair to expect that the utility providers will need to make technical adjustments to facilitate the changes.

Come 2016 consumers can expect better service from the mentioned utility providers or at least automatic compensation for any distress that is governed by the standards.

Guaranteed Standards for Banking Sector?

The sharpening of the OUR’s Guaranteed Standards and the nice sums of money accumulated from the breaches brought back thoughts about some of the untidy, sluggish and miserable experiences I have had dealing with financial institutions.

What are the service standards for the banking sector?

The  Jamaica Bankers Association has a voluntary Banking Code of Practice which has as its first objective “foster a fair and reliable approach in undertaking customer relationships and provide minimum standards for customer care”. There are many service areas that are not covered in the document and it is as generic as the ‘customer service charters’ ‘service commitments’ and other variations used by the individual institutions.

According the the JBA’s  code of practice, two weeks is fair time within which to acknowledge a complaint. It is 2015 how many of those complaints would be handwritten? And, if the policy of a bank is to only accept handwritten complaints or complaints in hardcopy, then there is a problem there!

There are other shortcomings, for instance, the code of practice does not touch on service issues such as service delivery timelines for common banking services. In much the same way that fees are to be posted for the sight of consumers, should it not also be known what the processing time for different types of applications will be?

Let us not forget, for just about every service that the banks and credit unions offer, there is a service fee and other fees and charges for the slightest of default. They use these fees not just to make more money but to hold consumers to their obligations! Shouldn’t they also be held to service delivery standards?

While it is known that the Bank of Jamaica (BoJ) has ultimate regulatory oversight for deposit taking institutions (DTIs) (credit unions not included) that oversight is strictly down the line of ensuring the institutions are capitalized, minimum cash reserves are maintained, a solid management structure is in place and so on, all things relating to financial stability, industry risks and country risks, not client service standards.

Consider this real life and very recent case involving a financial institution regulated by the Department of Co-operative and Friendly Societies.  An application was made mid March for an unsecured loan for just under J$1 mil for the disclosed purpose of consolidating existing loans; all documents provided, applicable service/processing fee being about 5% of the amount being borrowed. A query was made with respect to turnaround time, 2-3 weeks was the verbal response.  After several ‘false alarm’ calls from the institution (administrative mishaps) and even more ‘false alarm’ trips to the branch, it was not until the first week of May that the loan was paid out.

With the availability of credit reports in the Jamaican market, a response concerning a loan application, whether an approval or rejection, should not go beyond a week!  Perhaps there is scope to stagger that according to different  loan types, type of collateral if any and the amount being borrowed, but 2 months, no.

By the time the above loan was processed and even after the loan cheques were paid to the institutions that were the subject of the consolidation, the client was facing an additional J$90,000+ in interest and charges accumulated during the waiting period.

So much for satisfying the intention of a consolidation.

Scenario two, a letter is requested from a leading commercial bank to confirm for another bank that information about a second credit card which was present on the client’s credit report, was an error on their part, as the card was replaced and the balance transferred to the existing/ current card. Note, institutions that use the credit report take it at face value that whatever debt appears is current and will use that information in their assessment unless the customer is able to present documents to prove otherwise.  The bank responds by preparing a letter which simply confirms the amount due on the existing credit card but makes no mention of the card that is the subject of the request.

Information from the head of the relevant department through his officers was that the bank only uses a standard letter to communicate to other banks on matters concerning debt balances; that they could not amend the letter to make mention of the inaccuracy of information concerning the second card (though verbally the error was acknowledged to the client). Utter nonsense!

While it is understood that matters concerning inaccurate information on credit reports are to be routed to the credit bureau, an investigative process which should yield results within two weeks, the particular request was not for the information to be corrected immediately at the bureau level, but for communication to be made to a third party in a letter that was already being prepared for said third party. For emphasis, this was the experience of a client trying to address bad debt with that bank.

A bank that charges almost J$150 for cashing out a cheque, over J$2000 for late credit card payments, earns from over limit fees, and minimum balance fees, charges about 50% interest on credit cards and makes J$3bil in profits in three months cannot provide that basic level of service? One would think bankers understand the time value of money and that time is money but apparently not.

So shouldn’t there be guaranteed service delivery standards for the banking sector?

An October 21, 2013 article by Balford Henry  a senior staff writer of the Jamaica Observer, titled “Enforceable’ code of conduct for banks coming’, gave some insight into the support of the BoJ Governor Brian Wynter for an enforceable code of conduct. At the time of the article the Governor indicated that the proposals put forward by the BoJ were to be tabled by Parliament “in a few months”.

I would want to think that the provisions mentioned by Governor Wynter in that article are those for which a consultation paper dated March 2015 was released for comment by “…deposit taking institutions (DTIs) as defined under the BSA, the Consumer Affairs Commission (CAC) and other relevant stakeholders, including industry associations, to facilitate industry discussion and consultation…”. This code of conduct is perhaps the last puzzle piece that is missing to put the 2014 passed Banking Services Act into effect.

I suppose the CAC would have represented consumers but I am also curious to know if any of the private citizen action groups contributed.

A review of the ‘proposed code of conduct’ consultation paper shows very noble intentions on the part of the BoJ, especially as it concerns terms and conditions, publication of fees and charges, treatment of dormant accounts and minimum disclosure requirements.

The problem with the code of conduct however, is that it speaks more-so to matters which are important to consumers as a group; things which must be addressed for the general ‘group’ of consumers and where it does speak to matters at the single man level, there is no redress for the individual.

Take the complaints process for example, there is no redress for the consumer but a fine or imprisonment could apply to the institution if they fail to comply with the rules of the Supervisor; a fine and or imprisonment of up to three years if my non-lawyer assisted interpretation of the Act is correct.

Banks, being commercial banks and building societies like utility companies benefit from a large share of consumers’ disposable income whether it be from their investment, saving or debt products. I strongly believe whatever code of conduct that is to be implemented for the sector should be modeled after the OUR’s Guaranteed Standards scheme; person level service standards are to be set, a process determined to report breaches and compensation paid over to consumers where they are the victims of service breaches.

As the BoJ goes through its process of reviewing matters concerning credit unions, similar standards should be established for this group also.

My unsolicited comments on the BoJ’s consultation paper have been linked hereto http://goo.gl/DWCR4u despite the passing of the deadline, it is my hope that there are other consumers with similar expectations and that similar matters have been raised by one or more of the groups representing consumers.

C.E. Clarke |

(c) 2015

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2 thoughts on “OUR, JPS and Guaranteed Standards for the Banking Sector

  1. Pingback: Who Died & Made Banking Risk-less Business? – Help Mi Consulting

  2. Pingback: A Few Micro-level Concerns Heading into 2016 | Help Mi Consulting

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