Absa says it is justified in giving out confidential client information to brokers because the bank regards them as employees.
Absa is making the personal details of its accountholders available to independent brokers, in contravention of the Code of Banking Practice. The brokers, who sign up with Absa as contractors, use this information to contact Absa accountholders and try to sell them policies and investments.
The code, to which banks voluntarily subscribe and which has been in effect since October 1999, states that banks must treat your personal information as confidential, unless you state otherwise.
For years, banks have been making their accountholders' personal information available to their internal brokerages - something with which many clients are not comfortable. Now, Absa has gone a step further.
Absa Brokers, a subsidiary of the Absa Group, is recruiting independent brokers to do work on its behalf. The brokers are promised that they can remain independent and continue to sell the products of other companies. The brokers are not employed by Absa, but enter into a contract with Absa Brokers, in terms of which Absa will give the brokers "client information, leads and support services to procure business for the mutual benefit of the parties".
Commissions earned by the brokers - even from companies outside Absa - will be paid to them by Absa, which will take a cut of the commissions. In terms of agreements with outside companies, when the brokers sell their products, Absa will collect the commissions and pay out the brokers' portion to them.
Personal Finance has a copy of the contract that Absa has with the brokers, who are known as "Absa independent brokers". The contract clearly states that "the relationship between the Absa independent broker and Absa shall be an independent contractual relationship and not an employer-employee relationship".
The contract, and a sample of the type of information that Absa has promised to give independent brokers, was brought to the attention of Personal Finance by a financial adviser who is concerned that accountholders' rights are being violated.
The sample given to the adviser was intended to show him the kind of information he would be entitled to if he signed up with Absa. In the sample, the accountholder's name and account numbers were scratched out because the adviser has not signed a contract with Absa.
However, the sample information shows that the accountholder has two credit cards, two cheque accounts, two loan accounts, and a savings account. The balances for each account are given.
Absa initially defended divulging the information, saying that it only made the information available to brokers who are employees of the bank and only in instances where the customer has given permission for the bank to do so.
Steven Matthewson, a media spokesperson for Absa, told Personal Finance that Absa Brokers is a wholly-owned subsidiary of the Absa Group and all Absa brokers are full-time employees of the group. The main difference between Absa brokers and other staff is that a significant portion of the brokers' remuneration is performance-related.
However, Johan Reyneke, the managing director of Absa Brokers, later admitted that Absa was transgressing the Code of Banking Practice, but said it was unintentional.
Reyneke said Absa uses the same contract for all its brokers. The bank has to refer to "independent contractors" because, in terms of a Supreme Court ruling, anybody who earns most of his or her income from commissions is not considered an employee but a contractor.
Despite this, Absa regards contractors as employees, and there is a clause in the contract which states this intention.
But when Reyneke was asked to point out the relevant clause, he admitted that it must have been "unintentionally omitted".
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In statement yesterday afternoon, Johan Reyneke, the managing director of Absa Brokers, says that to resolve the situation he intends to take the following steps:
1. Review the wording of the entire employment contract for Absa brokers to ensure that it correctly reflects the nature of the contract between the bank and its staff - that is, full-time employment in the Absa Group. The review will also ensure that the contract properly accommodates the demands of labour legislation;
2. Contact all Absa brokers with whom the bank has already signed contracts (this involves 123 people) and, with their consent, amend their contracts; and
3. Immediately set up a meeting with the Banking Adjudicator, Neville Melville, to undertake a comprehensive review of all the marketing methods and policies of Absa Brokers in terms of the Code of Banking Practice.
"If our methods and policies do not live up to the adjudicator's scrutiny, we will revise them. We are confident, however, that our methods and policies are compliant with the code," Reyneke says.
What the Code of Banking Practice says about ...
Confidentiality
"We will treat all your personal information as private and confidential (even when you are no longer a customer). Nothing about your accounts nor your name and address will be disclosed to anyone, including other companies in our group, other than in four exceptional cases permitted by law. These are:
- Where we are legally compelled to do so;
- Where it is in the public interest to disclose;
- Where our interests require disclosure. (This will not be used as a reason for disclosing information about you or your accounts - including your name and address - to anyone else, including other companies in our group for marketing purposes);
- Where disclosure is made at your request or with your written consent."
Marketing services to you
"We may bring to your attention details of our other services and products, which may be of benefit to you. However, when you become a customer, we will give you the opportunity in writing to say that you do not wish to receive this information."
Giving your consent
"In order to enhance our existing relationships with you, we may give certain information about you to other subsidiaries within our group for marketing purposes. We may also tell you about another company's services or products and, if you respond positively, you may be contacted directly by that company."
Withholding your consent
"If you are a new customer, we will first obtain your consent to do this. In the case of existing clients, we will inform you that you may withhold your consent to our doing this, and how to exercise that choice. If you do not withhold your consent, we will presume that you have agreed to the practice. You will not be pressured for your consent in return for our services and products."
Tip
If you do not want your personal bank account information to be used by your bank to market products and investments to you, write to your bank and make your wishes known.
In terms of the Code of Banking Practice, your bank promises to keep your information confidential. If it does not, you can complain to the Banking Adjudicator, Neville Melville, at telephone 0860 800 900 or (011) 838 0035.