The Ombud for banking services in South Africa says banks do not have to reverse transactions despite requests from a client.
In its 2022 annual report, the Ombud looked at a recent case brought before it regarding a transaction reversal dispute.
In this case, the complainant booked with a travel company and paid via an immediate transfer.
However, the travel company was liquidated three weeks before the date of travel.
The bank said it could not reverse the payment as the travel company was liquidated, informing the complainant to contact the liquidator.
The Ombud said that the evidence showed that the complainant entered into a valid contractual agreement with the travel company, meaning that the payment was not made erroneously.
It concluded that ordering a reversal request on the travel company would serve no purpose.
Moreover, the liquidator would be prohibited from allowing the refund as it cannot prefer one creditor over another.
This meant that the bank cannot refund the complainant as creditors in a similar situation were not reimbursed, with it impossible for the insolvent company to refund all its creditors as its liabilities exceeded its assets.
The Ombud also stressed that the complaint would still not be eligible for a reversal if they paid via a card transaction, as the liquidator would still have to deal with the matter.
Thus, the Ombud did not find in the complaint’s favour.
In terms of principle, the Ombud concluded that banks are unable to take responsibility for reversing a transaction from a customer who entered into a valid contractual relationship with a merchant – even if the merchant is later liquidated.