Passing the buck, bank and DSA style

Mehrotra’s story finds an echo across the financial sector with customers complaining of verbal promises made by DSAs that are not honoured by the banks. Then begins the ping pong of the buck tossing between the DSAs and banks. At the end, the customer is left holding the ticket, losing money, time and patience.

WHO ARE DSAs?
Direct Sales Agents, or Direct Sales Associates as some companies call them, are outside agents hired on a commission basis to sell products on behalf of a company. Most people come across DSAs for financial products like credit cards, home and car loans. However, they also sell products like mobile phone subscriptions and computers. DSAs are different from salespersons of the company, who are employees. While most companies take the responsibility of the actions of their employees, promises made by DSAs belong to nobody in India.

ONUS FOR FALSE PROMISES
What happens if a DSA makes a promise that is not backed by the company? The answer changes depending on which side one stands. While banks like Kotak Mahindra who stand by their DSAs are in a minority, the banking industry norm is to fling the buck into the DSAs office (see box), others like ICICI Bank say they are responsible but the ground reality, say upset customers, is different. Says Neel Chatterjee, Senior Vice President Standard Chartered Bank, “If any DSA or even an employee has made an erroneous offer, the bank is not responsible to fulfil it legally”. Agrees Sujan Sinha, Vice President, UTI Bank, “Any losses arising out of that (false promises) have to be borne by the DSA”.

The buck is flung back by the DSAs. apnaloan.com, an internet portal which sells loans and credit cards, says the bank must employ enough checks and balances to ensure no distributor crosses the line. “It’s very easy for the bank to lay conditions on the DSAs but the fact is that more than 70 per cent of the problems occur due to delays in bank processes,” says Mahesh Balasubramanian, Director and Business Head, apnaloan.com. “Responsibility should lie with the bank,” he says, adding, “If you find worms in your chocolate, you will not sue your Kirana shop right? Ultimately the manufacturer is responsible”.

The Chief Umpire in this fling-the-buck game, the Reserve Bank of India (RBI), does have rules for the DSAs but it seems nobody is listening. Says a RBI spokesperson: “The bank appoints the DSA and therefore the responsibility, if the DSA does not deliver, is that of the bank”. Consumer activists like Kirit Somaiya, Chairman Investor Grievances Forum are sure that the banks are responsible. “If the bank has out contracted the work to an outside agency, then the bank can be held responsible for any misleading promises (made by DSAs),” he says. While customer activists can wish, the reality is that the legal position of the liability of the agent or the bank remains fuzzy until the contracts between the banks and the agents are read (none of the banks we approached were willing to show us these contracts). And then comes the issue of braving the Indian legal system to get back the 3,000 bucks paid as processing fee. Customers like Mehrotra find it easy to write it off as a bad debt and move on.

WHAT YOU CAN DO
Says S Ramakrishnan, Head Retail Assets, HDFC Bank, “If the DSA does not honour his promise, the customer should first get in touch with the bank. If he is not satisfied with the solution offered by the bank, he can take up the matter with the Banking Ombudsman, or consumer forums”. Easy to say but difficult to execute as bank call centres are known for their standard replies and going to the Ombudsman needs time, something that most customers are not willing to spend. The cosy relationship between banks and their DSAs and the cumbersome legal option leave the customer with little room to take action. Apart from asking for identification from the DSA, you must get them to write down all the terms and conditions that you have agreed upon (see box). Call up the bank and check to see if these are going to be honoured by them. If you get fuzzy answers, change the DSA or the bank or both.

The RBI, consumer activists and the DSAs themselves all point to the bank as the party that should pick up the responsibility. Most banks simply turn their backs to all this finger pointing and look for the next customer. Till the Reserve Bank of India takes up the baton to police the retail banking sector and beats virtues of transparency, disclosure and accountability into them, the onus is on you, the customer, who needs to buy your own armour.