Victory for consumers as court rules banks can’t hide behind exclusion clauses

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An Observer celebrates a ruling by the Court of Appeal which has struck a blow in favour of the rights of consumers in their dealings with banks.

I felt over the moon when I read the Court of Appeal has ruled that an exclusion of liability clause cannot shield a bank from being sued for negligence.

It has become quite rampant and customary for banks to hide behind exclusion clauses for losses suffered by consumers caused by the negligence or lack of care by bank staff in day-to-day banking transaction. Missed payments, instructions not carried out, addresses not updated, applications not processed – the litany of sins can run into Tolstoy-esque volumes.

As Malaysia does not have an Unfair Trade Practices Act (although common law and various inserts in various acts require the exclusion clause to be in good faith and not in breach of any governing law), banks especially have been hiding behind such exclusion clauses for far too long.

When their mistakes are highlighted, banks will withdraw into their turtle shells and claim no liability due to an exclusion clause. This is similar to a school bully who will run and hide behind the mother’s kain once confronted about his/her action.

For this, bravo to our learned judges at Court of Appeal who have struck a blow for consumer rights which Bank Negara Malaysia has either been slow or reluctant to enforce. Hip, hip, hooray to our Court of Appeal.

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The morally correct and best practice for banks is to rectify any mistake caused by them even if their highly paid lawyers advise them not to admit liability. We don’t care if the banks admit liability or not; we just want to be compensated for our losses. Losses caused by bank staff negligence or lack of care are allegedly numerous.

Anyone who has bought a house which has an existing loan and a charge to a bank will testify to the prolonged agony to get the existing charge lifted and title deed returned so that a fresh loan and charge can be enforced by the new owner and his or her lending bank. Sometimes, this routine process could take more than two months – a process which can be completed in seven working days.

The lack of specific rules by Bank Negara or the Association of Banks allows banks to drag their feet, probably due to documents sitting on the table of some clerk who doesn’t see the need for any urgency.

In the last five years, I have been involved in six property transactions, and almost all of them share a similar story: prolonged agony and a lot of chasing and sarcastic caustic communications before the discharge is completed. At times, requesting even asimple redemption figures will take more than two weeks. Goodness gracious me!

The end result: if the period passes the three months’ timeline for completion, the buyer has to pay a penalty to the vendor – out of no fault of the buyer. Will the bank compensate? Of course not.

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In another matter, my company changed its cheque signatories from dual to single. While waiting for the banking mandate to be updated, my company enquired with the bank whether we should issue cheques signed by two signatories or one.

The bank advised us to carry one with the dual signatory as long as the new mandate was not effected, and even when it is effected  (as the single signatory is one of the original dual signatories, the cheques would be honoured and cleared).

Lo and behold, the cheque was rejected by the bank clearing centre, and the bank disclaimed any liability or responsibility even though it had given an assurance that the cheques would be honoured.

I have been ‘fighting’ this case since 2014 without any success as the bank refuses to acknowledge its mistake and liability. It even claimed that it called a few days after the original advice and told one of our company staff (although I am the nominated authorised person allowed to speak to the bank) that the cheque would not be honoured.

Complaints to Bank Negara Malaysia have brought no joy as there has been no reply or decision forthcoming. Complaints to the Financial Mediation Bureau were rejected as this is a credit/banking matter outside the bureau’s jurisdiction. The only option left is through the courts, but imagine the cost of pursuing such a matter.

Other banks have been terminating low balance and low transaction accounts, hiding behind exclusion clauses although banking precedents says you cannot terminate any account in bad faith. The funny part is banks are charging fees for certain type of accounts below a minimum balance and even then they see fit to terminate aaccounts with low balances.

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All big companies start as small companies initially and most companies becomes larger with the full support of their bankers and other advisors. If everyone pulls the rug from under the feet of small companies, there won’t be any small company left to grow bigger. Where will the small companies go for their banking needs?

Some banking bigwigs have predicted a banking sector slowdown in Malaysia. Of course, there will be a slowdown if banks keep terminating accounts with low balances or few transactions to boost their own profits.

An Observer is the pseudonym of a casual follower of the non-stop shenanigans played out in the public sphere and at times can’t stop the urge to write and join in the merriment.

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