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Consumer journalist Wendy Knowler recently met with a group of financial services ombuds from around the world (US, New Zealand, Taiwan, Singapore, India, Finland, Switzerland, Armenia, Mauritius and other countries).

The group assembled at a game reserve in Pilanesberg for an annual conference.

All of them operate with Swiss-like neutrality, in assessing the complaints lodged by disgruntled clients against their insurers, banks and investment companies.

Wendy Knowler, consumer journalist

Unsurprisingly, says Knowler, they all deal with similar issues:

  • Failure to use simple language in their Ts and Cs.

  • Failure to reimburse victims of fraud.

  • Consumers not bothering to read “horribly small, legalese Ts and Cs".

Several interesting suggestions came from a brainstorming session about disclosure and transparency Knowler attended:

1. Replicate the US’ “Card Act”. On every credit card statement, banks are compelled by law to disclose in full what the interest implications are, should the client wish to pay her or his debt in full that month as opposed to over longer periods.

I think it’s a wonderful idea, especially given the very low levels of financial literacy in this country. As I sat there listening to them, I kept thinking of South Africa’s car finance contracts that don’t draw the customer’s attention to the fact that it’s a balloon deal. That last big final payment is not put in big bold print, and the customer is not required to sign next to it. I can understand how some people get towards the end of their contracts and only then realise that they signed a balloon deal.

Wendy Knowler, consumer journalist

(Also, read: “How to buy a new car even if you don’t really have enough money for it”)

The layout and design of contracts play into the hands of unscrupulous dealership staff who don’t properly explain how a balloon deal works, alleges Knowler.

There’s no proof of what was said face-to-face. There is just the contract. That needs to change.

Wendy Knowler, consumer journalist

The message, loud and clear, from those ombuds to financial institutions:

Don’t hide all the important aspects of a contract with financial implications in the small print!

2. Credit providers should give a “sample sheet” to consumers. This should clearly indicate the monthly cost of a loan (including all additional fees) and how adjusting the amount a client pays back – and the term - will affect the total cost of the loan.

What a brilliant idea! I can’t see how credit providers could justify not doing that…

Wendy Knowler, consumer journalist

3. Banks and insurance companies should highlight five things from insurance and home loan contracts that frequently catch consumers unaware in a way they can’t miss or misunderstand.

For example:

  • The cost of settling a loan early.

  • Rejection of claims for stolen cars without tracking devices.

  • The cost of defaulting on a loan or credit when you get “handed over”.

  • Rejection of claims should a consumer replace a SIM in a phone insured by the cellphone company.

…the rest of the Ts and Cs are important… but there is huge justification in very proactively drawing consumers' attention to the most important ones…

Wendy Knowler, consumer journalist

The Money Show’s Bruce Whitfield interviewed Knowler.

Listen to the interview in the audio below.

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This article first appeared on 702 : Banks and insurers can – if they wanted to – serve us better. Here’s how…

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