It's now easier for SA customers to take legal action against banks

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Some of SA's biggest banks have agreed to remove clauses that precluded their conveyancing firms from representing said banks' clients in legal action brought against them, the Competition Commission said on Friday.

Additionally, steps have been taken to remove restrictive clauses that could potentially have excluded smaller firms from the market.

Standard Bank, Investec, FNB and Nedbank have all agreed to amend their standard agreements with conveyancing firms after two years of engagements, the antitrust body said. This was in response to concerns the Commission raised over the relationship between banks and conveyancers, which surfaced after a customer named Michael Monthe filed a complaint against Standard Bank in 2018.

Monthe had stated in his complaint that he had approached several law firms in a bid to institute action against Standard Bank, but alleged that the law firms he approached had been unable to take his case on the basis that they were on the bank's panel of conveyancers and representing him have been in conflict with their Service Level Agreements (contracts) with the bank.

The Commission said it found that similar, restrictive service contracts existed at other banks.

"Following the engagements between the Commission, Standard Bank, Investec, FNB and Nedbank, it was agreed that contractual clauses that prevented law firms appointed to provide conveyancing services from acting against the banks on any matter should be removed," it said.

The Commission addressed three key issues, the first being conflict of interest provisions in the contracts between banks and conveyancers.

"The problem with such clauses is that consumers would have limited choices of law firms in matters involving banks, especially if they are broad and not only limited to conveyancing matters," it said.

Standard Bank, FNB, Investec and Nedbank have all amended the conflict of interest clauses in their service level agreements, according to the Commission.

The second issue related to the duration of the contracts between banks and conveyancers, which has been reviewed; and the third was the fact that some banks required minimum investment amounts as criteria in the attorneys' performance scorecards.

"The investment criteria can be a barrier to entry for small conveyancing firms seeking to enter this market, particularly if they do not have the requisite trading history or financial capital," the Commission said.

All four banks have committed to either removing the investment criteria for small firms or entirely exempt members of the Black Conveyancers Association (BCA) from their investment requirement.

Nedbank said it had been engaging with the Commission for some time.

"Nedbank welcomes the positive reaction of its stakeholders on the transformative work it has undertaken in conveyancing, as recently reported by the Commission in the media," it said. 

"Nedbank has held several engagements with the Commission since July 2018 as part of the Commission’s review of practices by banks in relation to their conveyancing attorneys. During the course of the engagements it was observed by the Commission that Nedbank had for a number of years already implemented practices that sought to eliminate barriers to entry, especially for black conveyancing attorneys," it added.

"The Commission further observed that Nedbank’s proactive decision, taken some years back, to automatically exempt conveyancers who belong to the Black Conveyancers Association from the investment criteria requirement in its scorecard for conveyancing attorneys was a progressive way to create meaningful economic participation opportunities for black conveyancers."

It also said the Commission's statement was "incomplete insofar as it only dealt with the ongoing commitment and not the measures Nedbank had already implemented".  

Compiled by Marelise van der Merwe. This article was updated on Monday 20 July to include input from Nedbank.

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