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05 May 2011

Cell Phone Contracts and The CPA

Cellphone Contracts, Consumer Protection Act (CPA), National Consumer Commission (NCC) 69 Comments

Adv Kate Thambiran @ Lucid Living

South African cellular service contracts may be the most restrictive contracts in existence. Trying to get out of the two-year contracts that bind local consumers to a particular provider is a difficult and expensive undertaking.

Cellular contracts in their current form have been designed to cause snowballing costs for consumers. You will inevitably end up paying more by the time you are halfway through your contract than if you opted for a “pre-paid” or “cash” option.

The new Consumer Protection Act (CPA) is set to end years of exploitation by companies in South Africa where retailers regularly refuse to refund consumers for faulty goods and in the case of cellular providers, offer poor service but have contracts that prevent consumers from cancelling.

With the CPA in place South African consumers will be among the best protected in the world. No more “sure, we’ll take back our junk but you have to choose something else in our store to replace it with” – and cellular service providers will have to let you out of your contract within 20 days and with far less in terms of requirements.

The new legislation requires that providers cancel contracts within 20 days of notice from consumers. They will also no longer be able to force payment for handsets provided, and will instead be required to take back mobile devices where payment is outstanding.

The only grey area that exists is the amount of money service providers will be able to claim for early cancellation. The CPA stipulates that the calculation of reasonable contract cancellation charges have to take ten points into consideration.

These include some sensible considerations, such as outstanding contract fees up to date of cancellation, the consumer’s average monthly spend, the value of handsets that will remain with the consumer after cancellation and those that will be returned to the service provider, the duration of the initial contract, losses suffered or benefits accrued by the consumer and the length of the cancellation notice.

However, they also contain some subjective and potentially vague matters, like the “reasonable potential” of the service provider to find an alternative consumer, general practice of the relevant industry and the nature of goods and services that were detailed in the contract.

This creates leeway for cellular service providers to lash consumers for cancellations.

The CPA doesn’t do much to curb contract periods. The usual 24 month contracts are still allowed, and the act even makes it possible to have 36 month contracts, so long as “demonstrable financial benefit to the consumer” is shown.

The stipulation of the CPA relating to demonstrable financial benefit to consumers is wish-washy and doesn’t do much to encourage more reasonable fees and cancellation charges. How does one demonstrate financial benefits? Will this calculation take the spending patterns, income and personal budgets of each cellular subscriber into consideration?

The new legislation will raise the churn rate of cellular providers in South Africa and potentially favour smaller operators like Cell C and Telkom’s 8ta in the short term. In the longer term, however, it will force better service from all operators and third-party providers.

Ultimately, however, it is the free market that does the best job of protecting consumers. In a highly competitive environment customer service and fairness towards consumers is a differentiator and something that service providers have to be better at than their competitors if they are to retain customers. Consumers will be more likely to switch when they aren’t happy with service levels or find a better deal elsewhere.

Service providers will also have to rethink the provisioning of handsets and modems as they will be loath to deal with an influx of useless, second-hand devices.

While consumers will have greater recourse, I’m afraid there won’t be much of a difference in terms of how easily one will wiggle out of contracts.

That said, the Consumer Protection Act is a vast improvement over what we had before. It allows for recourse where consumers feel they have been wronged. It also brings the national consumer commission (NCC) into being as a body that will enforce the CPA and NCA and protect consumers.

69 Responses to “Cell Phone Contracts and The CPA”

  1. ihatemyblackberry says:

    Hello,
    I am a student so money is always an issuse. I bought myself a Blackberry last year after working for it for a really long time. The contract is R800 a month. The phone never worked and I had to pay for Internet services and everything! My phone got stolen this year on Nelson Mandela day (irony) so the consumer act was already in place. This new phone also does not work and like before when I gave it in to be fixed it worked even WORSE than before.

    Can I cancel my contract and give my phone back? I dont mind paying for the R160 a month but the other things i have to pay for urk me! It almost works out at about R8000 for something that does not work and never has! I want my money back!

  2. Eugene says:

    Hi
    Ive upgraded to a talk 500 about 2 weeks ago and included in the deal is a blackberry 9900 bold. The phone have now got problems charging (after only 2 weeks) and they say they can send it in to get fixed. The problem i have is that I’m paying R980 per month for the contract and the phone will be in for repairs for at least 4 weeks, thus my first month I have to pay R980 and i dont even have my phone. Ive asked them for a cancellation fee, the quote is R8 571 (its a 24month contract). Do i have to pay this or can I give them my phone back and cancel the contract? Please advise me
    Regards

  3. Duncan says:

    Hi

    A number of years ago (ie: before 1st April 2011) I was contacted by a telemarketer who was selling Vodacom contracts. I “signed up” for a 24 month contract over the phone and recevied the phone via post.

    About 7 months into the contract, I started having severe financial problems and got into arrears with my contract. When my account was 60 days in arrears, I paid one month’s instalment (the oldest one) to keep me from going into 90 days (when my number would be deleted). I was then told that the amount I paid was taken for the latest instalment and that my account was still 60 days in arrears!

    During my conversation with them, I asked that they do not debit my account any more as there were no funds available. They then debited my account with three amounts (total divided by 3) instead of one amount (presumably to try get at least some?), so I was charged R130 per transaction (R390) by my bank. Furious, I contacted Vodacom to dispute this sneaky tactic AFTER I told them not to and was informed that I need to lodge a dispute – which I did. About a week later, I was contacted by a lady at Vodacom who told me that she was about to delete my number, but thought she would double check that I hadn’t paid. I then told her what had happened and that I actually thought she was going to resolve the dispute. She told me that she did not believe my “story” (ie: I was lying) and promptly deleted my number. she did not even give me an opportunity to pay my account, she just said I was lying and deleted my number! This took place on a Friday evening. Now, Vodacom has me listed with the credit bureaux and they claim I owe them R10 900, +/- R7000 of which is the remainder of the contract.

    My question is this:

    Is a telephonic contract (where they contacted me via direct marketing) enforceable even though I did not sign anything, nor did I have the opportunity to read the “fine print”? If it is enforceable, how is that fair when I get nothing in return? Vodacom has not lost anything of value, therefore they have not suffered a loss, yet now thay can get all their money (in case of a breach) WITHOUT providing a service!! If the law is this one-sided, it MUST be illegal. Immoral – for sure, unethical – you bet, illegal – I hope so! In fact, I switched to a Vodacom pay as you go sim card, so they have actually been making money from me anyway.

    You have said many times on this forum, that contracts prior to April 2011 are not subject to the NCA, but if it can be determined that the contract terms were non-compliant (and the fact they they have now changed strongly implies this) why can they still enforce these terms?

    Sorry for such a long entry, but the fact that corporations in general (banks are the WORST) get away with so much just makes me angry.

  4. Stephen says:

    Good Day

    I have question regarding a networks failure to live up to a contract.
    I took out a contract will Cell C Direct with the explicit request to keep my existing number (on cell C prepaid) on the 1st of November. Everything was done telephonically and no documentation was sent through. I received the handset and new simcard (which was required for new contracts) on 3rd November and discovered Cell C had activated the wrong number. I lodged various queries over the next two weeks trying to rectify this problem but to no avail and therefore frustrated beyond belief I requested to cancel my contract stating Cell C failed to meet the Contract requirements.

    I must note that not a single call or sms was made off the contract number as I was using my prepaid number and thus no charges have incurred other than Cell C’s activation debit and first months contract debit. The handset is still in its original packaging albeit opened up to inspect as this was goods ordered online.

    Can I cancel my contract and request Cell C refund all debits to my account to date? I believe that they did not meet the original contract conditions and I have gone through reasonable lengths to correct the error but it was not done on there part. How does the CPA view this matter?

  5. Jet says:

    Good day,

    please advise, I have taken a Vodacom top up contract 2 months ago for a tablet, however at my residence I receive very poor internet signal making it nearly impossible to use the tablet for anything internet related. I have contacted Vodacom numerous times. They admit there is a problem with the tower close to me but no action has been taken in 2 months. so I am basically paying for a service I cannot use. What can I do?

  6. Shamiel says:

    Hello

    I had a cellc contract and lost my work in February 2010. I was unable to find a new job and fell behind with my payments as I had no income. Cellc cancelled my number at the end of June 2010 and I couldn’t make or receive any calls, so i got myself a prepaid sim.
    I only found a job in march 2011 and went under debt review to pay off all my debt. I am expecting some extra money in december and want to pay off my cellc account so I contacted them and was told that my arrears was R1400 but my total due was R4400 and i asked them why? I was told that I upgraded in july 2010 and my contract only expires in july 2012, which is not true as I had no contact with them.
    Can you please offer me some advice as I don’t know if what they are doing is fair or not.

    Thank you

  7. refilwe says:

    mrning. I would like to understand why is it when one cancells a contract, the sevice provider charges you for the remaining months, but they do not credit you you minutes or airtime for the months that you are paying for in the cancellation fee? You are almost settling an account but you cant get the goods…how do they justify the money you paying when the consumer is not geting any service or benefit. Im concerned. This is roberry. New laws need to be put in place.

  8. RandolphLucid says:

    Good day

    If the problem is related to the signal coverage and not the hardware you purchased, requesting the service provider to replace the hardware with an alternative is probably not going to resolve your problem – although that is an option.

    In the circumstances, you could terminate the contract, based on the fact that the hardware is not fit for purpose. In this instance you can claim a full refund.

  9. RandolphLucid says:

    Good day

    What the service provider should be billing you for – if your terminate a fixed term agreement, earlier than the anticipated date – is a penalty fee.

    According to the NCC that penalty fee should be approximately 10% of the aggregate remaining payments under the contract.

    It is a penalty fee – because you are breaching the agreement.

  10. RandolphLucid says:

    Good day

    Please see our previous comments to similar issues like yours.

    You do have rights and we can assist you to enforce them.

    Contact us on 010 590 5617.

  11. RandolphLucid says:

    Good day

    The short answer is YES you can cancel the contract.
    What is less clear is the value of the penalty / cancellation fee that they will charge you.

    You do have rights and we can assist you to enforce them.

    Contact us on 010 590 5617.

  12. Mase says:

    I bought a Blackberry 8520 on contract september 25th. A week later I saw the exact same deal from the same network provider at the same price but for a Blackberry9300(3G model). Is there any way for my contracted phone to be upgraded? I have on a number of occasions tried to contact the call center but its always too busy.

  13. Timothy Anderson says:

    Hi There,

    Quick question, my granddad (83) was contacted by a telemarketer for 8ta, he entered into a contract ( not knowingly) recieved a phone that he does not want. He has now been told that he cannot cancell it. he unfortunately missed the 2 week deadline to exit the contract.

    Surely there is a way for him to get out of this contract? a pensioner now paying R135 per month for something he does not need or use. It has only been one month since he entered the contract (telephonically)

    Any advice?

  14. hillion says:

    hello

    I upgraded on 16th nov 2011 but the contract took effect from the 30th nov 2011. I took nokia n9 and used it roughly more than 30days. However im not happy with the phone entirely. It looses network constantly and cannot download any applications because of its software is new and not surported like symbian s60 is. Nevertheless id like to cancel the contract for this phone and take another phone. I called the voda contact center and the guy told me it wouldnt be possible. Do you think i can?

  15. lerato says:

    Good day

    I bought a 9300 Black Berry Decemnber 07 2011 from Cell C.From the start I had a problem with internet always cuts off while you busy or do not log in at all.no help from Cell C.I call them they call me nothing is improving,I. Am tired of Cell C.I need and want to cancell my contract.

  16. D Weare says:

    How do I cancel my autopage contract which still has 21 months to run. My last upgrade was June 2011.

  17. Donia says:

    Hi, my sister has a contract with cell c. The cotract is in her name but the phone was for me cause its debting from my bank account. Anyhow, I was robbed but I do have insurance as well. Went to report it at the cell c store, but the consultants working there said my insurance is not going to cover my loss cause they can’t pick up the sim card. So was I paying insurance for a sim card thinking it was for the actaul phone?!? Cause if I knew its for a sim, I would never have told my sister to sign the contract! Also the consultant didn’t inform me nor my sister about how the insurance works. So I have no phone now and I’m still paying cell c every month! What can I do or should I do about my situation,please? Its not fair.

  18. De Wet says:

    Good day. I upgraded on Friday 20 January 2011, thus today is day 5 of the cool off period stipulated in the CPA.
    Upon upgrading I chose a Samsung Galaxy S2 above a iPhone 4S purely by comparing them on paper at http://www.gsmarena.com. On the first day of having the phone i tried to change some basic settings and found it to be a nightmare to navigate around the various menus. I phoned Vodacom and asked if I could return the phone and swop it for an iPhone, which i am familiar with…they told me yes and to go to Cellucity where I did the upgrade. At Cellucity they could not help me and I had to call their management which wasn’t very helpful either. Can I still return the phone and swop it???

  19. De Wet says:

    Just a correction…I did the upgrade on Friday 20 January 2012…sorry!

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