The South African consumer is set to become one of the most protected consumers in the world on October 24 2010 — if legislation does come into effect then.
There is, however, a question mark over this and Deneys Reitz attorney Patrick Bracher believes that there will be a delay until regulations guiding businesspeople are drafted. “There are no thresholds and no regulations and no one knows yet what all their obligations are going to be,” says Bracher, warning that if commencement is not postponed until April next year, there will be “chaos”.
The implementation of the Consumer Protection Act (CPA) is set to change life as we know it for the consumer. The good news is that the financial-services industry has embraced other regulations that protect our rights, too, like the Conflict of Interest amendments and the Treating Customers Fairly (TCF) set of guidelines.
“Product providers, including financial-services companies, will need to be transparent and open when dealing with clients,” says Christelle Fourie, managing director of MUA Insurance Acceptances.
She notes that clients have lost faith in the financial-services industry in recent years, largely due to the fact that some parts of the industry have developed a bad reputation.
There is now intense pressure on product providers to meet strict guidelines — insurers will need to make sure that no terms in a policy are unfair, unreasonable or unjust, for example. “A court will have the power to rule in favour of the insured against the insurer on the basis of ambiguous clauses,” Fourie explains.
The Consumer Protection Act (CPA) and plain language
How will the CPA affect the consumer? Anton Behr, MD of Writers Write, says one of the key tenets deals with plain language.
“The CPA is about protecting the consumer’s physical and financial well-being by making sure they understand the transactions they make,” he says.
“Plain language is defined in the CPA as a document or a visual representation in a language that a reasonable person with average literacy skills and minimal experience as a consumer will understand. The use of plain language in the CPA is to ensure the consumer understands what the manufacturer, distributor or retailer promises them to purchase their goods or service.”
This includes anything from guarantees, indemnities and warnings to sales agreements, franchise agreements, marketing and much more.
Legislation also says that exclusions limiting the liability of an insurer must also be pointed out to consumers, so they understand the implications.
Consumers need to understand the increased risk to insurers and how cost implications of flouting the regulations could, in fact, be passed on to them.
Further consumer protection
Fourie notes that the Conflict of Interest (COI) amendments to the FAIS Code of Conduct, which are being introduced by the Financial Services Board to address concerns regarding conflicts of interest between financial-services providers, brokers and clients, should also go a long way to further protect consumers.
“People often assume that others have already investigated the safety and integrity of financial-services suppliers and therefore rely heavily on their broker or the product provider to assist them to receive the best possible financial service to fit their needs,” she says.
While companies and brokers need to familiarise themselves with the new legislation, consumers also have to understand what their rights are, and what they can expect from their providers. So the consumer also has a responsibility, and knowledge and self-empowerment will be critical.
A further initiative, inspired by similar actions by the Financial Services Association (FSA) in the United Kingdom, is the Treating Customer Fairly (TCF) set of guidelines, ensuring that customers are treated properly and their interests are safeguarded.
“All the recent developments and regulations point to the fact that as financial services providers, we must conduct our business with integrity and professionalism by putting the interest of the customer first,” says Fourie.
This is more good news for consumers — provided we remain activists and know not only our rights but also our responsibilities.
Your rights and the Consumer Protection Act
Behr says consumers will enjoy:
Consumer resource will be comprehensive, too — the National Consumer Commission has been established to oversee this. A complaint can be lodged by an individual or by a consumer group representing the consumer.
There is an implied provision that the manufacturer, distributor and retailer warrant that the good or service is suitable for the purpose they are intended for. This gives the consumer recourse to all parties involved in the supply chain.
Finally, the South African consumer no longer has to put up with the take-it-or-leave-it attitude so deeply entrenched in large companies. This, coupled with the new Companies Act, will hopefully make executives more conscious of good business practice, says Behr.
Will the Consumer Protection Act be delayed?
There are still sections within the Act awaiting detailed regulations when it comes to how to interpret and implement it.
“The implementation of the Act was deliberately phased in to give people adequate time to prepare themselves. As it happens, no time at all has been given in relation to critical issues,” cautions Bracher.
“There is the threat therefore that suppliers of goods and services will have 20 business days within which to get themselves geared up, less any time that it will still take for the regulations and thresholds to be published before the implementation date. That is an unhappy state of affairs,” he says.