Business & Economy

Tuesday, 17 July 2018 08:37

Banks flout TCF and credit life regulations as consumers switch to more affordable and transparent offerings

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With July touted as savings month, consumers face a barrage of marketing messages from financial services providers on how to save and cut back on unnecessary spending.  However, it would seem that the marketing campaigns are paid mere lip service by SA’s credit providers, with consumers treated shoddily when their actions to cut back have a direct impact on the bottom line of SA’s big banks.

“Treating Customers Fairly (TCF) and the new credit life insurance regulations that came into play in August 2017 are being blatantly flouted by some loan providers when consumers opt to switch their overpriced credit life insurance policies for ones that better suit their needs and pocket. It’s early days at Yalu since launching our first credit life insurance offering which covers personal loans for now, but even so our customers have experienced unwarranted resistance from the banks when they receive the cancellation request which we automate on behalf of our customers. The resistance ranges from banks not responding to the cancellation request for weeks at a time, to asking for an unreasonable amount of extra documentation from the customer that is not required at all by regulations, to outright refusals to allow them to switch. We have even come across cases where the incumbent bank asks customers to go into the branch to cancel,” explains Nkazi Sokhulu, CEO and co-founder of Yalu, a new digital insurance provider.

Credit life insurance provides the security that should a policyholder be unable to repay their loan due to death, disability or retrenchment, the credit life policy will take care of their debt to the bank. 

“Up until as recently as August 2017 when the new credit life insurance regulations came into play, consumers were getting a very raw deal on credit life policies sold to them by their loan providers.  In an environment with little credit life-focused regulations, many loan providers saw credit life insurance as a cash-cow and took to selling their own offerings as a condition of the loan, charging outrageous premiums that were in no way reflective of the underlying risk of a client experiencing death, disability or retrenchment in the relatively short term of the loan period.  The result was that the industry experienced very low, single digit claims ratios, and an excessive if not obscene amount of profiteering at the expense of customers,” explains Nkazi.

After years of consumer financial inexperience being exploited by financial service providers, the regulators stepped in and introduced new Credit Life Insurance Regulations in August 2017, with two key changes introduced to protect consumers.  First was the capping of the Rand per thousand premium that insurers could charge to R4,50 per R1000 borrowed – previous premiums were more than double this in most instances, sometimes even upwards of R15 per R1000 loaned.  Secondly the new regulations mandated the standardisation of benefit definitions and exclusions across all credit life insurance policies. The latter is significant in that it means that current credit providers can no longer refuse to accept alternative credit life policies on the basis of the benefits and definitions being different to their own.  Most critically to note, is that the new regulations and capping of fees only apply to new loans post August 2017 and not retrospectively.

“The new regulations along with new entrants to the standalone credit life insurance sector such as ourselves can put a huge dent in the multi-billion Rand earnings of loan providers, so we absolutely expect there to be resistance from loan providers, at the expense of consumers.  Given that the Financial Sector Conduct Authority (FSCA), newly endowed with powers of resolution, has trained its sights on credit life insurance and the conduct of credit life providers, we hope to see these providers being taken to task. ” he adds.

“We founded Yalu because we absolutely believe that the current value proposition of legacy credit life providers to the consumer remains very poor.  The industry is now becoming more susceptible to disruption from new business models that provide better value to more informed consumers, and Yalu intends to be the provider that drives this change towards fairness, transparency and value for money for the millions of consumers who have credit life insurance.  Most South Africans will have a need for a personal loan at some stage of their lives, but that does not mean they have to settle for an overpriced credit life insurance product from their loan provider as a pre-requisite for the loan. They have the freedom of choice.  Right now, that freedom of choice is being infringed upon by loan providers making every excuse in the book to frustrate the switching process in the hope that the policyholder will abandon the process.  So much for treating customers fairly. Thankfully, our early adopter customers know their rights and are asserting them in spite of the resistance of the banks,” concludes Nkazi. 

How to log a complaint with the FSCA

As of 1 May 2017, the TCF regulatory framework was introduced set to improve market conduct in financial services by governing the way a Financial Service Provider (FSP) conducts daily dealings with its customers, ensuring that all customers are treated fairly. The TCF outcomes defined for FSP’s are numerous, but a key point that stands out is that customers must not face unreasonable post-sale barriers when they want to change a product, switch providers, submit a claim or make a complaint.

If you believe you have been treated unfairly by your loan provider in your request to switch your credit life cover to another provider, log your complaint with the FSCA and ensure that your service providers are held accountable for their actions.

Our name “Yalu” is short for the Zulu term isiyalu - the source of a river.  Yalu was born out of a passion to nourish and bring life to the world of credit life insurance. Our goal of delivering true value for money is evident in the transparency of our products, the simplicity of our process and the fairness of our pricing.  Simply put, we believe in doing right by our customers. By making credit life insurance easy to understand, ensuring that you pay what is fair and rewarding you when you settle your loan, we are changing the face of credit life insurance for your benefit.

For more information go to

Issued by: Teresa Settas Communications
011 894 2767 or This email address is being protected from spambots. You need JavaScript enabled to view it.

On behalf of: Yalu Financial Services
Tlalane Ntuli

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