Latest news with #FinancialSectorRegulationAct
The Citizen
12-05-2025
- Business
- The Citizen
FSCA to investigate due to banks charging different amounts for the same product
The minister of finance answered some written questions in parliament about bank charges and nationalising the Reserve Bank. The Financial Sector Conduct Authority (FSCA) is investigating bank charges after observing several variations in the pricing approaches and structures between different banks. There is also concern about disclosure and how consumers understand these fees, says Finance Minister Enoch Godongwana. Godongwana, minister of finance, says in a written answer to Omphile Maotwe, an EFF MP, that In some cases there are significant disparities in fees between banks for the same or relatively similar products or services. Maotwe asked Godongwana, in a parliamentary question, if National Treasury is investigating exorbitant bank charges. Godongwana says the FSCA is responsible for overseeing the market conduct of banks, including whether the fees and charges banks impose are fair and transparent. ALSO READ: This is how to beat bank fees FSCA spotted several variations in bank charges at banks 'Through its ongoing supervisory activity, the FSCA observed several variations in the pricing approaches and structures of banks. Concerns were also identified about some of the banks' lack of adequate disclosure and customers' poor understanding of these fees. 'Therefore, the FSCA recently initiated a dedicated project to undertake a deeper assessment of transactional fee practices across registered banks in South Africa to determine whether further regulatory or policy interventions are needed.' Maotwe also wanted to know if Godongwana found that he and the governor of the South African Reserve Bank (Sarb) have the same policy approach on the role that the Sarb should play in terms of the transformation of the financial sector. Godongwana says in his answers that FSCA published the Conduct Standard for Banks 3 of 2020 which became effective in July 2021 as the responsible authority for supervising the market conduct of banks. The Conduct Standard was issued in terms of section 106 of the Financial Sector Regulation Act. ALSO READ: FSCA finds banks do not handle consumer complaints properly Conduct Standard for Banks requires transparency for bank charges 'The Conduct Standard introduced requirements for banks to conduct business in a manner that prioritises the fair treatment of financial customers. Section 5(1)(d) of the Conduct Standard stipulates that a bank that provides financial products or financial services must ensure that the terms, conditions and requirements in a contract between the bank and its retail financial customer, relating to a financial product or financial service, including fees and charges, are not unfair. 'Section 5(2) further stipulates that a term, condition or a requirement in a contract is unfair if it would result in an unfair outcome (financial or otherwise) to a financial customer if it was applied or relied on.' Godongwana says while the Conduct Standard does not prescribe or stipulate what would constitute an unfair or 'exorbitant' fee or charge, banks must be able to demonstrate that the basis for their fees and charges are reasonable and that these fees and charges do not result in unfair outcomes for financial customers. The FSCA will conduct the assessment of bank charges on this basis. ALSO READ: EFF-initiated Private Members Bill a set-up for ANC, says expert No plans to nationalise the Reserve Bank In another answer, to Nontando Nolutshungu, an EFF MP, Godongwana says government does not have any plans to nationalise the Sarb. 'While 100% ownership of the Sarb by the state would be in line with most countries and jurisdictions across the world, the benefit that would be derived from nationalising the Sarb must be balanced against the likely large fiscal cost that would accompany it. 'The costs would include compensation in terms of section 25 of the Constitution as well as existing bilateral investment treaties. However, the benefits of 100% ownership of the Sarb are minimal, as private shareholders are currently restricted to playing a governance role only and play no role in determining monetary, prudential, regulatory or any other policy, as policy issues are the sole responsibility of the governor and deputy governors of the Sarb who are appointed by the president.' Godongwana says it is more fundamental for the country that the Sarb ensures that it is allowed to independently pursue its constitutionally enshrined mandate of protecting the value of the currency in the interest of balanced and sustainable economic growth in the Republic and its additional objective of protecting and maintaining financial stability as envisaged in the Financial Sector Regulation Act.
Daily Maverick
22-04-2025
- Business
- Daily Maverick
African Bank fined R700,000 over misleading loan advert
According to the Financial Sector Conduct Authority, the advertisement misrepresented the nature of the loan product by implying it was an investment rather than a credit facility. African Bank — rescued from collapse in 2014 and now rebranded as a diversified retail lender — has been fined R700,000 by the Financial Sector Conduct Authority (FSCA) for a misleading advertising campaign that promoted personal loans as 'investments', in contravention of South Africa's banking conduct standards. The December 2023 campaign was marketed under the hashtag #KeFestive, using the tagline: 'It's not a skoloto chomi! Ke investment' (It's not a debt! It's an investment). The advert was circulated widely on African Bank's social media platforms during the festive season. According to the FSCA, the advertisement misrepresented the nature of the loan product by implying it was an investment rather than a credit facility. This amounted to a violation of the standards for banks' conduct of business under the Financial Sector Regulation Act. Specifically, the FSCA cited breaches of the Act, which requires that advertising of financial products must: Be clear, fair, and not misleading; and Be factually accurate and not include any statements, promises or forecasts that are untrue or misleading. Why the fine print matters As financial institutions lean into viral marketing, they must ensure that slick copy doesn't outpace compliance. The difference between 'investment' and 'loan' is not just semantic, it's regulatory, and African Bank flew a little too close to the marketing. For consumers, the consequences are subtle but real: stronger advertising rules mean fewer financial traps dressed in festive wrapping. 'By positioning the product as an investment rather than a credit product, financial customers were misled about, among other things, the longer-term risks and potential costs associated with taking up the product,' said the FSCA on Tuesday. The regulator's scrutiny extended beyond the ad itself, focusing on governance failures, including the lack of proper internal approval processes for marketing material, which requires advertisements to be signed off by suitably senior and qualified individuals. This suggests a broader compliance gap, not just a one-off messaging failure. On Tuesday, the #KeFestive campaign page on the African Bank website had been removed and returned a 404 error, without notice and with no media releases issued on the website's press portal. Renewed assertiveness This is the latest in a growing series of enforcement actions by South Africa's financial regulators targeting misleading practices, poor governance and non-compliance across the sector. Over the past six months alone: Sasfin Bank was fined R209.6-million for historical failures in anti-money laundering compliance in its forex operations. Old Mutual Life Assurance paid R15.9-million for customer due diligence failures. Ashburton Fund Managers incurred a R16-million penalty for failing to develop adequate risk compliance systems. Prime CIS Managers and Wealth Managers (Pty) Ltd were fined a combined R1.8-million over risk management and compliance programme (RMCP) failures. Mika Finansiele Dienste and individuals Ashley Mphaka and Kabelo Mogale were penalised and debarred for offering financial services without authorisation. The FSCA's renewed assertiveness follows South Africa's greylisting by the Financial Action Task Force (FATF) in early 2023. Since then, regulatory authorities have accelerated enforcement actions to demonstrate alignment with global anti-money laundering and consumer protection standards. The FATF specifically flagged insufficient enforcement as a systemic weakness — and recent penalties show a strong intent to rectify that. 'Misleading advertisements can lead customers to choose unsuitable products, resulting in financial losses or other negative outcomes,' said the FSCA. 'Fair customer treatment is integral to maintaining public trust and confidence in the integrity of the financial system.' Cooperation and consequences African Bank cooperated fully with the investigation and has already paid R500,000 of the fine. The remaining R200,000 has been suspended for two years, contingent on the bank's compliance with the conduct standard. While the penalty is modest compared to past sanctions imposed on larger institutions, the reputational hit is significant. African Bank's marketing strategy, particularly on social media, forms part of its brand rebuild after its 2014 collapse and subsequent recapitalisation led by the South African Reserve Bank. That rebuild includes the integration of Grindrod Bank, the acquisition of Eskom's home loan book and a long-anticipated JSE listing now planned for 2028. But this incident raises questions about the maturity of African Bank's compliance function, especially as it prepares to court public investors. A culture of sharp enforcement forces banks to prioritise clarity over conversion, reducing the risk of customers being sold credit products disguised as something safer. Better governance, in this case, isn't abstract — it's protective. DM
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The Citizen
22-04-2025
- Business
- The Citizen
FSCA fines African Bank R700 000 for misleading advertising [VIDEO]
By telling customers that a personal loan was an investment—not debt—African Bank prompted an investigation by the FSCA. The Financial Sector Conduct Authority (FSCA) has imposed a R700 000 administrative penalty on African Bank for a social media advert that urged consumers to take out a personal loan as an 'investment'. According to the FSCA, it found that African Bank contravened Conduct Standard 3 of 2020 for banks. The Conduct Standard is a regulatory framework that enables the FSCA to critically and urgently supervise the market conduct of banks according to its mandate as outlined in the Financial Sector Regulation Act. The Conduct Standard establishes high-level requirements that banks must adhere to, aimed at ensuring they treat their financial customers fairly when offering financial products and services. The FSCA imposed the penalty after investigating African Bank's #KeFestive social media campaign from December 2023 and finding that it contained factually incorrect and misleading statements. The advertisement featured a well-known public figure and encouraged consumers to take out personal loans with the phrase 'It's not a skoloto chomi! Ke investment'. This is the advert that was flighted on TikTok: ALSO READ: Most South Africans not happy with financial institutions' handling of complaints FSCA found African Bank advert misrepresented nature of loan product During the investigation, the FSCA found that this statement was factually incorrect and misleading as it misrepresented the nature of the loan product offered, implying that it was an investment rather than a credit facility. The FSCA says that by misleading financial customers and failing to provide clear and accurate information about the nature of the product, African Bank contravened sections 6(1), 6(3)(a) and 6(3)(b) of the Conduct Standard. Section 6(1) requires that banks must ensure that its financial products and financial services are advertised to financial customers in a way that is clear, fair and not misleading, while section 6(3)(a) requires that bank's advertising must be factually correct and not contain any statement, promise, or forecast which is fraudulent, untrue, or misleading. In addition, the FSCA found deficiencies in African Bank's governance and oversight processes regarding the review and approval of the advertisement. This was a contravention of section 6(9) of the Conduct Standard, which requires that banks must have processes and procedures in place for the approval of advertisements and advertising methods. A senior person with expertise within the bank must approve advertisements, and this must form part of its governance arrangements. ALSO READ: FSCA fines 3 financial services providers R1.2 million for Fica non-compliance African Bank cooperated and already paid the FSCA fine The FSCA points out that African Bank cooperated during the investigation and took prompt remedial action to comply with the Conduct Standard. Considering the nature of the contravention, as well as the remedial steps African Bank implemented, the FSCA suspended R200 000 of the R700 000 for two years, subject to the bank remaining fully compliant with the Conduct Standard. African Bank has already paid the remaining fine of R500 000. The FSCA urges all financial institutions to take note of this sanction and reminds them of the importance of providing clear and accurate information to financial customers regarding the nature of the products and services they offer. 'For many financial customers, advertising and marketing material significantly influence their decisions about which financial products to buy. Financial customers who rely on misleading adverts or false impressions are more likely to select unsuitable products, which could result in financial losses or other prejudicial outcomes,' the FSCA says. ALSO READ: FSCA finds banks do not handle consumer complaints properly Banks must be careful not to position credit as investments In this case, positioning the product as an investment rather than a credit product, financial customers were misled about the longer-term risks and potential costs associated with taking up the product. 'Financial institutions must have robust internal governance and approval processes to ensure compliance with all requirements of the Conduct Standard, including the development and publication of marketing material and other key information disclosed to customers.' The FSCA states that it will continue to take firm regulatory action against financial institutions that do not prioritise the fair treatment of customers across their governance arrangements, business processes, and procedures. 'The administrative penalty imposed in this case serves as a reminder that misleading advertising will not be tolerated, particularly as financial customers increasingly find themselves under pressure to make important decisions regarding their future financial resilience and well-being. 'Fair customer treatment is integral to maintaining public trust and confidence in the integrity of the financial system,' the FSCA says.
