A Personal Finance reader was blacklisted by his bank after accumulated charges sent a dormant account into the red.
Louen Kleinsmidt, of Cape Town, learnt that First National Bank (FNB) had listed his name at a credit bureau when he applied for a personal loan at another bank and was turned down.
"When I called FNB they said there were some dormant accounts listed in error. No apology was given to me over the telephone, and I subsequently faxed and emailed the branch concerned demanding written notification of my delisting with Information Trust Corporation (ITC)," Kleinsmidt says.
Bennet Mdebuka, the sales and service director for FNB in the Western Cape, apologised to Kleinsmidt for the "perceived lack of sympathy" that he received from the bank.
"The error was ours and we have removed the ITC listing. At the time of the ITC listing, Kleinsmidt's savings account had been dormant for some time and had gone into overdraft because of accumulated bank charges. The account was closed by the branch using an incorrect computer code, which then automatically listed the account with ITC," Mdebuka says.
He says that FNB has changed its computer systems to prevent dormant accounts from being overdrawn.
Kleinsmidt does not know by how much his account was in arrears and FNB would not reveal this information.
William Ramwell, a spokesperson for FNB, says it is difficult to say how many other account holders have been blacklisted because of bank charges that have eaten into their savings accounts.
In the case of dormant accounts, the bank's policy is that clients with these accounts should be notified in writing. The policy is also to notify the client if he or she is to be listed with a credit bureau.
Unfortunately, the bank's records of its clients' addresses are sometimes out of date - as was the case with Kleinsmidt - and the bank is unable to contact the client, he says. This is particularly a problem with dormant accounts.
Commenting on FNB's policy regarding blacklisting, Ramwell says any debt, large or small, written off by the bank can result in a client being listed with a credit bureau. In practice, this decision is at the discretion of the branch concerned.
The other major banks say they do not blacklist clients with overdrawn savings accounts if the overdraft is caused by bank charges.
Eugene Drotskie, the assistant general manager of retail credit at Nedcor, says that as far as savings accounts are concerned, the account holder is advised of the intention to take action (in other words, referral to a credit bureau) prior to Nedcor pursuing legal action, which may result in blacklisting. However, an actual referral to the credit bureau is only done once the default judgement has been issued by a court.
Notification
For lending products (for example, home loans, overdrafts and credit card facilities), the account holder is notified of the bank's intention to refer him or her to a credit bureau when the person is asked to pay up the loan and the account is handed over for legal action.
Erik Larsen, a spokesperson for Standard Bank, says it is not the bank's practice to blacklist clients with small debts. The minimum levels you are allowed to be in debt before you are listed with a credit bureau vary from R100 to R500 depending on the nature of the debt, he says.
Account holders who default on their loan commitments are notified in writing that their accounts are in arrears, and are requested to settle their debts.
Larsen says that when you open an account at Standard Bank, you give the bank the authority to ask a credit bureau to carry out background checks on you, and to send any information about your account to a credit bureau.
He says that Standard Bank's computer systems are considered adequate to ensure that unfair listings do not take place. However, if a person is unlisted unfairly, Standard would ensure that that person's name is removed from the blacklist.
There is also a provision at the credit bureaux that when a listing is disputed, that fact is noted on a person's record.
Deon Oosthuizen, a spokesperson at Absa, says every account is dealt with on an individual and sympathetic basis.
Dormant savings accounts at Absa cannot be overdrawn due to charges. Charges accrue but will not be added to the account if there are no funds available. The bank sends a letter to the account holder and if there is no response, the charges are written off and the account is closed.
No information is however passed on to credit bureaux on these matters, he says.
However, if savings accounts are overdrawn for other reasons, such as unpaid cheques or debit orders, the bank communicates with the account holder and as a last resort, if the money owing is written off, the account holder's details are then sent to a credit bureau.
Take note
Make sure that your bank and any other companies where you have accounts have your up-to-date address details. In this way, you should not miss out on crucial correspondence which could inform you that you are to be blacklisted.