Eva Smith (Attorney) @ Lucid Living
The Consumer Protection Act (CPA), which came into effect on Thursday last week, significantly strengthens your rights as a consumer. The CPA has been long awaited as legislation that effectively gives you, the consumer, the advantage when you deal with suppliers.
Transactions covered by the CPA include any purchases you make or instances where you pay for a service.
The issues dealt with by the Act include direct marketing, the use of simple language in contracts, and the prohibition of unfair terms and conditions.
While many of the financial services that you use will continue to be regulated by earlier legislation, contracts that have financial implications – such as transactions that involve estate agents, cellphone contracts and property syndications – will now be covered under the CPA.
The Act also introduces consumer courts in each province where you will not require legal counsel and your complaint will be heard for free. However, only four provinces have operational consumer courts.
Other aspects include:
Direct marketing. Direct marketing is defined as any approach to offer you goods or services for sale. Direct marketing can take place in person or by mail or electronically (phone, fax, email or SMS). An example would be an SMS from a finance company that invites you to apply for a loan, or a flyer from an estate agent about properties for sale in your area.
The regulations state that the phrase “no adverts” on your post box or post office box or on any other container for mail is sufficient to indicate that you do not wish to receive any material related to direct marketing.
A national registry where you will be able to record that you do not wish to receive any direct marketing offers will be established. Direct marketers will be required to check the register before they contact you.
Fixed-term contracts. The maximum duration of fixed-term contracts, such as cellphone contracts, is stipulated as 24 months from the date of signature, unless you expressly agree to a longer period and the cellphone company or service provider can show that a longer contract will be of financial benefit to you.
Promotional competitions. The cost of submitting an electronic entry (such as an SMS) is restricted to R1.50 per entry.
Alternative work schemes. Advertisements that state that you can earn huge amounts of money by working from home are required to contain a statement that cautions that the offer is not a promise or a guarantee.
Fraudulent schemes. The CPA outlaws fraudulent schemes, such as pyramid schemes. It also outlaws multiplication schemes, which the Act defines as any scheme where you are offered, promised or guaranteed an effective annual interest rate that is at least 20 percent above the repo rate at the date of your investment.
Auctions. The regulations cover the advertising of auctions, auction rules, prohibited behaviour for auctioneers, bidders’ records, bidding, mock auctions, internet or electronic auctions, motor vehicle auctions and auction records.
Terms and conditions. The regulations contain a list of contract terms that are presumed not to be fair and reasonable.
There are a number of aspects of the CPA which still require clarification:
Insurers. It is not clear whether insurance contracts will now fall under the CPA, with opposing views between the DTI and the industry.
“There are, however, instances where insurers may indirectly fall under the ambit of the CPA. For example, if your geyser bursts and your insurer agrees to send a plumber out to repair the geyser, the plumber and the geyser repair service will fall under the CPA. Under these circumstances, the insurer will form part of the supply chain and will fall under the CPA,” says Brian Martin, the Ombudsman for Short-term Insurance.
The long-term and the short-term insurance industries believe that they have been granted a temporary exemption from the CPA until October 2012, by which time the Long Term and the Short Term Insurance Acts are expected to have been amended to bring them into line with the CPA.
According to the Department of Trade and Industry (DTI), if the two insurance Acts have not been amended by October 2012, then both the insurance legislation and the CPA will apply to the financial services industry concurrently and the CPA will take precedence wherever the CPA offers consumers more protection.
However, the DTI has said that in the interim insurers should change their processes so that they comply with the CPA from its effective date.
Financial advice is excluded from the CPA, because it is already covered by the Financial Advisory and Intermediary Services Act.
Property lease agreements. There is substantial disagreement among the legal fraternity over whether or not property lease or rental agreements fall under the CPA.
Estate agents. Ebrahim Mahomed, the deputy commissioner at the NCC, confirmed only this week that estate agents do not fall under the section of the CPA that regulates intermediaries, because estate agents are governed by the Estate Agency Affairs Act.
However, estate agents will have to satisfy other requirements of the CPA. For example, they will have to use plain language in their sales agreements and ensure that you understand the terms and conditions.