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08 Apr 2011 00:00
Municipalities not exempt from the provisions of the new Consumer Protection Act (CPA) face legal challenges if they do not deliver proper goods and services to their customers, according to legal experts.
Rob Davies, the trade and industry minister, effectively exempted the low and medium-capacity municipalities from the provisions of the Act, which took effect last Thursday, by deferring the application of the new law to them until further notice.
But the high-capacity municipalities, including large metros such as Johannesburg and Cape Town, will have to comply with the legislation.
The law has given extensive protection to consumers and has established the National Consumer Commission, a body tasked with investigating consumers’ complaints.
Trudie Broekmann, a consumer law expert at Webber Wentzel, said she was not surprised that Davies had exempted low- and medium-capacity municipalities, but she was concerned that he had done so for an indeterminate period.
The purpose of the Act was to protect vulnerable consumers and people living in the bounds of low-capacity municipalities were likely to be among the most vulnerable, she said. But there was “substantial legal risk” for richer municipalities and metros, which had been classified high-capacity municipalities, Broekmann said, given that the Act specifically defines the provision of water, electricity and gas as goods.
Although there are extensive remedies available to consumers when it comes to the supply of goods, including the right to demand a refund, the Act also covers services. These could include, for instance, refuse removal, which might be classed as a service provided to residents in an area.
According to Broekmann if these services are not provided to a generally acceptable standard, or are delayed without timeous notice, consumers are entitled to recourse under the Act. This includes the right to request that the services be repeated to remedy any defect, to request a refund for the services or to withhold payment pro rata to the extent of the failure by the service provider.
Suppliers and consumers
The Act inserts “an implied warranty that has never existed before into agreements between suppliers and consumers”, says Broekmann. “This gives consumers the right to demand services that are of a generally acceptable standard, as well as to the timeous completion of services,” she said.
Where consumers’ rights have been infringed it is not just an individual consumer who has the right to take the matter to court, the commission or the National Consumer Tribunal—the Act allows for class action suits on behalf of a group of consumers, as well as associations acting in the interests of their members, such as a ratepayers’ association.
Johannesburg has been beset by complaints about its billing systems. Ratepayers have been incorrectly billed for services and in some instances have had their services cut off as a result. So it comes as no surprise that the first complaint to be received by the commission was reportedly a complaint about the City of Johannesburg.
The department of trade and industry (DTI) said the extension of the provisions of the Act to the smaller municipalities would only be deferred until such time as it is adequately prepared and has implemented administrative systems to ensure that it can meet its obligations in terms of the Act efficiently and effectively.
“DTI will work closely with the department of cooperative governance and traditional affairs in assessing the level of readiness of each municipality,” Sidwell Medupe, the department spokesperson, said.
Broekmann also warned that the implementation of the Act, particularly in relation to some types of services, could be difficult. She said its impact on some sectors, such as the financial services sector, remain to be seen.
She gave the example of shares in a company. The definitions in the Act were not clear about, whether they were goods to which the Act applied or not. This left stockbrokers, companies issuing shares and share traders uncertain about whether they needed to comply with the obligations set out in the Act.
Broekmann said it was also unclear whether stockbrokers and other intermediaries, such as estate agents, travel agents and transactional arrangers, were suppliers of the goods that were the subject of the deals they brokered. If so, they faced major legal risks if the goods were defective or hazardous. The Act has also introduced uncertainty into the commercial and residential rental property market.
According to Michelle Dickens, managing director of TPN Credit Bureau, a consumer is defined as a person transacting with a supplier in the ordinary course of the supplier’s business, and this applies to tenants who transact with landlords in the property market. But, she said, many landlords are individuals with other professions, who own property which they rent out, even though this is not in the ordinary course of their business.
“The tenant should not be afforded less protection because [the rental transaction] does not fall under the ‘ordinary course’ of the landlord’s business,” she said. Dickens said this issue would have to be tested by cases brought before the courts or by a decision handed down by the tribunal. But Marlon Shevelew, a senior partner at Marlon Shevelew and Associates, said tenants already had sufficient protection under many other pieces of legislation and regulations, such as the Rental Housing Act.
He said that with the promulgation of the regulations for the Consumer Protection Act normal safeguards included in standard rental lease agreements could be deemed unfair to the consumer or tenant. Among such clauses are those that indemnify landlords should tenants be harmed or hurt on a landlord’s premises. But to take out these types of clauses from a contract, “for fear of not meeting the requirements of the CPA”, would be hugely problematic, he said. The Act favours the consumer and strips suppliers of protection—it should be titled the “supplier non-protection act”, he said.
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