The Consumer Protection Act (CPA) came into effect on 1 April 2011, setting out the minimum requirements to ensure adequate consumer protection.
Key points include the following:
- Product/service information must be in a language appropriate for the target market, and understandable to someone with average literacy skills.
- Any agreement that seems excessively one-sided against the customer can be ruled to be unreasonable and therefore not applicable. The CPA also applies to franchise and lease agreements.
- Fixed-term agreements cannot be automatically renewed at the end of the term, except on a month-to-month basis. During this time the consumer cancel by giving 20 business days' notice.
- Consumers who buy something that is marketed directly to them have a five-day 'cooling off' period in which to return the item.
- Consumers have up to six months to return faulty or unsafe goods, regardless of the warranty that the seller might provide.
- Repair work that falls outside warranty must be quoted for in writing. Suppliers cannot charge for quoting, or charge more than what is quoted.
- If a consumer claims damages as a result of an unsafe, faulty or hazardous product, it is up to the supplier to prove they are not at fault.
- Cancellation fees must be 'reasonable', based on how early the cancellation is made and how easy it is for the supplier to rebook it.
- Consumers can pre-emptively block direct marketing attempts. Marketers must first obtain permission before they can market to someone directly.
- SMS or MMS-based competitions are allowed, but entries can only be charged at standard SMS rates.
- Prepaid certificates, credits and vouchers only 'expire' once they are redeemed by the bearer, or after three years from the date of issue.
- Any business name that is used for trading, in any way or form, must be registered.
PLEASE NOTE: To download a full copy of the Act, visit www.info.gov.za/view/DownloadFileAction?id=99961
Aims of the act
South Africans are now among the most protected consumers in the world, following the Consumer Protection Act (CPA) that was brought into effect on 1 April 2011.
The CPA strives to protect consumers against unfair business practices, giving them greater recourse against companies that supply them with products or services. It sets out the minimum requirements to ensure adequate consumer protection, and provides an overarching framework for all other laws that provide for consumer protection.
It collates a number of previous disparate pieces of consumer legislation into a single document, effectively ensuring that suppliers now carry the risk and expense of goods or services that are not up to an acceptable standard.
While the provisions of the Act imply more risk, more admin and more hard work for many businesses, those that provide quality products and excellent service based on sound business principles, have little to fear.
In fact, the CPA is an opportunity for companies to promote their own compliance to customers as proof of how much they value and respect their business.
The consequences of not complying, however, can be serious, and there is no room for complacency: every business that transacts with consumers needs to take a long hard look at their products, services, business methods and terms of trade.
Who is affected?
The CPA covers both products and services, which means it applies to anyone who manufactures or sells something. Interestingly, however, the Act defines a 'consumer' as including a juristic (legal) person (such as companies, trusts, partnerships and similar) if that person's asset value or annual turnover is less than R2 million a year.
In other words, small businesses and sole proprietors who fall within this turnover, now enjoy the same protection from their suppliers as the individual consumer does.
Another important aspect of this definition is that, in terms of the CPA, a consumer is not only the person to whom goods or services are promoted or sold, but also the actual user thereof. This means that anyone who uses an item has recourse for complaint even if he or she is not the one who actually purchased it.
To which areas of business does the CPA apply?
The provisions of the CPA are broad reaching and affect not only what you offer your customers, but also how you offer it. The regulations can be roughly grouped into the following ten areas:
- Language (discussed in this article)
- Agreements (discussed in this article)
- Contract terms and renewals
- Cooling-off period
- Refunds, repairs and warranties
- Over-bookings, reservations and cancellations
- Safety monitoring and recall
- Your trading name
- Disclosures and intermediary services.
The Act does not specify that particular official languages have to be used when providing consumers with information about your product or service. However, it does stipulate that the language has to be appropriate for the class of person at which your product or service is aimed. It also has to be understandable to someone with average literacy skills and experience.
How this affects you: You might have to relook at the 'fine print' in any written material to ensure that important facts are not hidden away, but are clearly and obviously stated. You might also have to review any technical documentation, particularly financial or legal wording, to ensure that any complex concepts or jargon is reworded into simpler and more easily understandable phrases.
Agreements have to be fair. In terms of the CPA, any agreement that seems excessively one-sided in favour of anyone other than the customer can be ruled to be unreasonable and unjust. Once this happens, the customer is no longer bound by that agreement.
If an agreement is set out in writing, it must include details of the customer's financial obligations, and you have to give him or her a free printed copy or access to an electronic copy.
If it is not in writing, then you are obliged to keep some other form of record of the transactions that you have entered into with that particular customer. This could include, for example, audio recordings of any agreements you make over the phone.
Part B of the Consumer Protection Action also covers franchise agreements, stipulating a number of special requirements. These include detailing the services that you offer as a franchisor, as well as a clause about the general principles of honest and equity that guide the franchise agreement. While the requirements are extensive and may seem onerous to a franchisor, they provide a valuable 'tick list' of best practices for this sector.
Also note that lessees are regarded as consumers, and therefore any lease agreement has to comply with the CPA (see point 3). If it does not, the court can order you to redraft it as well as any other consumer-related agreements or terms of business.
How this affects you: You need review all written agreements that you currently have with your customers to identify any areas that could be interpreted as unfair to the customer (whether that customer is an individual or another small business) or one-sided in your favour.
If you are a franchisor, you have six months from 31 March 2011 to amend your existing franchise agreements accordingly.
Plese note: The following article is a general summary and should not be construed as legal advice or as an exhaustive overview. To download a full copy of the Act, visit www.info.gov.za/view/DownloadFileAction?id=99961