The New Consumer Protection Act: Has The Government Gone Too Far?

Apr 06, 11 The New Consumer Protection Act: Has The Government Gone Too Far?

The first of April 2011 sees the South African consumer Protection Act finally being rolled out. The Act now means South African consumers are in the fortunate position of being the most protected consumers in the world. Under the new Act the interests of the average South African consumer now enjoy greater protection than those of any other consumer in the world. This is a result of the ambit of the act being so wide, covering a large swathe of South African commercial activity and effectively making the Act a Bill of Rights for South African consumers.

The question is how far ahead has government thought about the potential impact the Act will have on the South African commercial environment? It will protect South African consumers like never before, but the main question one has to ask is, at what cost?

Beginning with some of the positive side effects, we can see how the Act has been designed with the common South African consumer in mind. The first is that the new act makes provision for an implied six month guarantee on all products purchased in South Africa, regardless of their purpose or price. In addition, the new mandatory guarantee still applies regardless of any existing guarantees the supplier already has in place.

The second (and my personal favourite) is the fact that should any citizen desire to avoid direct marketing they now have the power to do so. An example of direct marketing would be those phone calls that always arrive when you are busy eating dinner, asking you if you want to buy life insurance. The Act prevents this by now providing one with the option to place your personal details on an ‘exclusion register’, which effectively bans all direct marketing firms from targeting you. Therefore, if your name is on the list and an enthusiastic insurance salesman calls you up asking you if you would like to buy a new policy, that constitutes an offence under the Act and the company that they represent could end up facing prosecution. This also extends to emails or cell phone messages, effectively removing any form of communication that can target you as an individual, as a legitimate advertising medium.

However it does not end here, it goes even further than this. Not only are you able to remove yourself from the pool of potential customers that direct marketing firms are able to target, because now all South Africans must be offered a five day cooling off period after entering a sales agreement. This means if you were pressured into accepting the offer, or come to realise you simply cannot afford the product or service, you are able to safely back out of the agreement without facing any penalties whatsoever. I for one am already celebrating, and making sure my name ends up on the register as soon as possible.

But what about businesses? The new Act adds significant burdens to South African firms regardless of their size or the nature of their business, which will generate significant costs that will either have to be absorbed by the business itself or passed on to the consumer. The Act may also burden them in other non financial ways, by exposing them to time consuming administrative tasks, such as having to redraft all of their terms and conditions, sales agreements and so on into plain, easily understandable language.

And how about South Africa’s attractiveness to foreign direct investment? This is an area in which South Africa is already struggling, long before the arrival of an Act that may end up smothering potential investors in reams of red tape that they would be unlikely to face in even the most complicated markets. Has government thought about the burden they would be placing on foreign firms, when it proposed these broad measures. As a result we may see potential investors abandon South Africa as a viable investment destination and instead set up their operations in neighbouring countries which share many of our existing characteristics, such as Botswana.

Not to mention how many potential jobs this could mean when companies are forced to absorb the costs imposed by compliance with the new regulations. I fear most of all for the economic future of our country, our entrepreneurs and small businesses. How are they going to cope with the burden of the new Act?

Is the new Act therefore going to protect our consumers at the expense of our economic spirit and comparative advantage? We can hope this will not be the case and that for most businesses the transition will be smooth and uneventful as the Act has been in the public domain for quite some time now. At the moment however, most of the talk surrounding the act is speculative. Therefore what is needed is time to explore the implementation of the Act, and see how it will be interpreted by our courts once it comes down to enforcing it. I am sure legal precedent will become a keenly monitored subject once the first court cases begin to emerge.

South Africans can hope that this does not become another one of those pieces of legislation that, on paper at least, is some of the most advanced in the world, but in reality is nearly impossible to implement with the confines of our unique circumstances.

Image by Generic Brand Productions

  • xolani

    I would like to know how will this new act protect those who have life insurance because the act only applies to the transactions entered after the first of April.

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  • Mattews

    What about the FINE PRINTS on the agreement? It should be In BIG RED LETTERS becouse when they are giving you a final demand they write it in RED letters. And that is the most dangerous part of the agreement most people do not read it thanks to time presure.Remember people enter into an agreement not knowing that they are preparing a rope to hand themselves.

    • Andrew Glendinning

      Hi Mattews

      You are correct about the problem of fine print.

      This is why the Consumer Protection Act contains specific provisions to ensure that all agreements are now to be written in plain language.

      Section 22 of the Act covers this in detail. Therefore according to Section 22:

      “For the purposes of the Act, a notice,document or visual representation is in plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the notice , document or visual representation is intended, with average literacy skills and minimal experience as a consumer of the relevant goods or services, could be expected to understand the content significance and import of the notice, document or visual representation without undue effort having regard to:

      a) The context, comprehensiveness and consistency of the notice, document or visual representation
      b) The organisation, form and style of the notice, document or visual representation
      c) The vocabulary, usage and sentence structure of the notice, document or visual representation
      d) The use of any illustrations, examples, headings or any other aids to reading and understanding”.

      This therefore means under the Consumer Protection Act, the fine print needs to be made both evident and understandable to all consumers.

  • champs singh-padayachee

    Our Company has 45 Contract with Vodacom/Nashua Mobile, we need to exercise this whereby they do not get unncessary marketing material on their phone, How do we stop this service. Who do I contact?
    My number is 033 346 1444

    • Andrew Glendinning

      Hi Champs

      I would unfortunately tend to think that because your agreements with the service provider was signed prior to the Act entering into force, your particular situation will not be remedied by the act. However, have you contacted the service provider directly and asked them if there is anyway to remove you from their marketing database?

      However under section 11 of the Consumer Protection Act you are now afforded what is broadly referred to as the right not to be approached by direct marketers. However in order to exercise this ‘right’ you will need to place your details on the national register that will prevent direct marketers from contacting you. However the National Consumer Commission has to establish the register first, and only once the Minister who is responsible for the Act declares the date from which the register shall be established. Therefore I recommend that you keep an eye on local news sources because I am sure as soon as the register has been created there will be significant news coverage of the event, and you will be able to submit your details. Until then I believe your best bet would be to speak to the service providers directly.

  • Andrew Glendinning

    Hi Xolani

    The problem with the case of an insurance policy is that it falls under the National Credit Act, meaning it is exempt from the provisions of the Consumer Protection Act, especially if it was taken out prior to the act entering into force.

    Therefore any financial service would be regulated by existing acts, and would not provide you any of the benefits that the Consumer Protection Act contains.

    This said, I am no legal expert, so I would recommend you seek professional legal advice if you have a specific problem.

  • Andrew Glendinning

    Dear All

    One last thing. If you require further information on he Consumer Protection Act, either as a fellow consumer, or as a business and service provider, I would like to recommend a book I recently bought which deals with this very subject.

    The book is entitled, “The Consumer Protection Act Made Easy”, and is authored by Advocate N J Melville. It is published by: Book of Life publications, Pretoria, 2010. You can purchase a copy online from http://www.crink.co.za, or alternately call 086 166 8368.

    The book covers the Act in detail and is proving to be highly useful guide to all of the intricacies of the new Act.

    However, please remember that if you require specific advice, your best bet is always to contact a qualified legal professional. The book and my piece are no substitute for professional legal council.

  • Shawn

    Hi Andrew,

    How does the new CPA influence second hand purchases? If I purchase something on Gumtree for example from a private buyer and discover after a few days later that I was mislead or that the item is faulty, do I have the same rights as if I purchased from a store?

    How would someone who is cheated through a second hand purchase invoke the CPA?

    • M Bosman

      Hi Shawn
      I’m also intrerested in the answer here. Did you find any information on this?

  • Marica

    How does the act influence direct personal selling? And with people now removing them self from the database – how will it affect market research? That is the main function of many companies.

  • Nick Darlington

    Can anyone provide me with a link to download the act? I’m googling it and can’t seem to find the latest version.

  • Makhawukani

    Hi Andrew

    I bought a dress at a certain store and the following day I decided to return it but i was told they dont do cash refunds and I had to pick something something else of the same price. When I asked them what happens if there is nothing in the store I was told they can only extend my exchange dates and thats all they can do or I’m stuck with the dress. I told them about the new consumer act and they sia there is a sub-clause that allows them to do such, how true is that?

  • Meneer

    Hi

    What is the case with a second hand car ?

    Regards

    Richard