Consumer Protection Bill, 2008

Presentation to the Select Committee on Economic and Foreign Affairs

30 July 2008

Mr Ebrahim Mohamed – Chief Director, CCRD

Mr Sipho Tleane – Director, CCRD

Mr Narain Kuljeeth – Chief Director, CCRD

Scope

Scope

To provide an overview of the submissions and responses on the Consumer Protection Bill (CPB) ; and

To request the Select Committee of the NCOP to consider the Bill for approval.

Policy Context

Policy Objectives:

Promote a fair, efficient and transparent market place for consumers and business;

Provide a consistent, predictable and effective regulatory framework that fosters consumer confidence, but also recognizes the developmental imperatives of the South African economy;

Provide access to effective consumer redress for economic citizens;

Promote better customer service in the public and private sector;

Harmonize our consumer protection framework with international best practice.

 

Analysis of Submissions

Analysis of submissions

• All 9 Provinces submitted their negotiating mandates;

• All provinces supported the Bill in principle;

• Key concerns raised in the submissions are summarised in the presentation.

 

Gauteng

Redress for consumers in insurance matters

• Insurance issues are excluded in the Bill as part of the

agreement with Treasury;

• Currently consumers can access redress through the various Ombuds offices operating in the short and long term Insurance sector as well as the FAIS Ombud;

• National Treasury has agreed to review in two years in line with the Bill.

Gauteng

Consumer Rights (Section 82)

Consumer Rights should be displayed in all retail and wholesale outlets.

• Sectors will be encouraged to form industry associations and their accredited codes of conduct may be displayed in member stores.

Consumer Education (Section 96)

The Commission should be tasked with the responsibility of empowering consumers on the contents of the Bill.

• Cabinet also made the same call. The dti has already begun with a massive public awareness campaign to educate consumers on their rights as contained in this Bill. The Bill provides for this mandate in section 96 of the Bill.

Gauteng

Section 22, 48 to 52 Contracts between consumers and retailers should be simplified

and standardized.• Section 22 – plain language requirement• Section 48 – 52 – unfair contract terms• Section 50 provides that the Minister will prescribe categories of contracts

that have to be in writing and the Commission will endeavour to standardise and simplify the contracts in the identified categories.

Capacity and Resources of NCC ( Sections 88 and 55) More inspectors should be appointed to look into the quality of

perishable goods and unfair treatment.• Inspectors will be appointed to carry out various responsibilities in terms

of section 88. • Section 55 also provides consumers with the right to quality and safety.

Gauteng

Written Consumer Agreements ( Section 50) Contracts between consumers and retailers should be in the

preferred language on the consumer.• The Bill provides that contracts should be in a simple language and we

feel this is sufficient protection and not a regulatory burden on business, especially small business.

Redress (Section 74) Reimbursement of consumers who have suffered financial loss.• Section 74 provides for consent orders, this may include reimbursements

or any other amicably resolved outcome. • The Bill provides in most instances for consumers to be refunded or for

defective products to be replaced. • The Tribunal can also make orders that consumers be refunded with

interest.

Gauteng

Enforcement Functions of the Commission (Chapter 3 Part C)

More powers to investigate Consumer complaints against banks and insurance companies.

• The Commission will have sufficient powers to investigate any contravention of this legislation.

• The Commission has jurisdiction over Banks and will therefore have sufficient powers to investigate.

• The FSB (Financial Services Board) regulates insurance companies and their powers are quite extensive and as part of the review agreed to by Cabinet these powers can be enhanced if necessary.

Gauteng

Redress (Section 53 to 59 )

The Bill should provide speedy resolution regarding faulty products from the suppliers

• Section 53 to 59 deals with issues around speedy resolution of complaints relating to faulty products.

• The sections provide for consumer’s rights to demand quality service, rights to safety and quality goods, implied warranty on new and repaired goods, warning on risks and the safety around disposal of goods.

Gauteng

Right to Choice (Chapter 2 Part C Section 24)

Detailed labeling of Genetically Modified Organisms food and other foods to enable consumers to make informed decisions

• In principle the department has no objection to the reinstatement of this clause for purposes of giving the consumers the right to choose;

• As a department we do not have the technical capacity to pronounce on the safety or non safety of GMO’s;

• We would without pronouncing on whether GMO’s are safe or not support the right of the consumer to know and choose what they want to consume.

Gauteng

Exemptions (Section 5 (2)

Foodstuffs are already dealt with by the Foodstuffs, Cosmetics and Disinfectant Act and related Regulations and that this should be

exempted. • The Minister will only exempt upon a proper application by a competent

regulatory authority;

• The onus is on the NCC to look for duplications and how well consumers are protected before exemptions are granted;

• The Act referred to does not go far enough in terms of providing redress for consumers.

Gauteng

Threshold Determination (Section 6)

Threshold should be based on the supplier’s annual asset or turnover value.

Consumer Protection in terms of the Bill is applicable to all consumers irrespective of the size of the turnover of the respondent;

• By using annual turnover a number of big businesses will be excluded with unintended consequences;

• The Bill adequately makes provision for threshold determination based on the value of the transaction.

Gauteng

Strict Liability (Section 61(5))

Small businesses will not have access to the defences available in relation to strict liability.

• Small to medium companies cannot be excused for introducing dangerous goods into the market;

• Retailers must ensure that their manufacturers, importers etc supply them with safe and good quality goods;

• Retailers will not need to test products themselves but to secure guarantees from the manufacturers;

• This is not unreasonable to ensure the safety of consumers.

Gauteng

Expiry and Renewal of fixed term Agreements

Franchise Agreements be excluded from the 20 day cancellation period

• Franchise agreements are already excluded as the definition of “consumer agreement” specifically excludes franchise agreements. Section 14(1) refers to a “consumer Agreement” which is defined.

Financial Implications on Provinces

• National Government sets norms and standards;

• Consumer Protection is an area of concurrent jurisdiction;

• Responsibility for executing mandate of consumer protection for provinces lies with provincial treasuries.

Northern Cape

Section 40: Unconscionable Conduct

Shop owners keep consumer’s bank cards and ID documents• This practice is prohibited in terms of the provisions of Section 40; • Clearly an unconscionable conduct;• It is also outlawed in the National Credit Act .

Bait Marketing (Section 30) Goods advertised to include taxes

• This issue is already dealt with by the introduction of the VAT system of tax. No supplier is entitled to advertise goods that exclude tax;

• Section 30 provides that advertised goods should not result in consumers being misled/ deceived on availability at the advertised price

.

Northern Cape

Discriminatory Marketing (Section 3, 8 and 9) 1. Prices of a company or store must remain the same no matter in what town the company or store is situated. 2. Electricity increases must differ according the size of the town or

area • This is dealt with in terms of the provisions of Section 8 which prohibits

discrimination against anybody on the grounds listed therein; including Constitutional grounds; goods and services

• The Bill aims to reduce any disadvantages experienced by low income groups an rural communities in accessing g

Interest Charged Interest charged on items bought or sold must be reasonable• Interest is regulated by the National Credit Act and the National Credit

Regulator.

Northern Cape

Section 48: Unfair, Unreasonable or Unjust Contract Terms

Give suppliers a right to exclude indirect consequential losses

• Section 48(1)(c) has to be retained as the standard practice by suppliers has been to force consumers to contract out of their rights;

• They can still contract out but the contracting out may not be on terms

that are unfair, unreasonable or unjust.

Limpopo

Consumer Protection Groups (Section 77)

Co-operate with Consumer Protection groups especially in rural Provinces

• The Commission may co-operate with and support education activities and other consumer protection activities carried out by consumer protection groups;

• The Commission should be tasked with the responsibility of empowering consumers on the contents of the Bill.

NB -The other issue raised related to financial implications on Provinces and this has already been dealt with under Gauteng

Free State

Registration of Business Names (Section 80)

Businesses constantly close shop and move to other areas resulting in losses for consumers.

• The requirement for the registration of business names will solve this problem; authorities will know where this business is located.

Unsolicited Goods (Inertia selling) (Section 21) airtime is transferred into a consumer’s cell phone without his or her

consent. • Section 21 will apply and it is broad enough to capture this concern;• The Bill further states that the consumer will not be liable to any charge if

the goods were unsolicited and also not liable for the charge of the delivery of such goods.

• NB – The final issue raised related to the withholding of ID’s and Bank cards dealt with under Northern Cape.

Kwazulu-Natal

Cost to Business

Implementation costs will be passed to consumers

• It is anticipated that the Bill will result in some cost to the consumer,

• The benefits of implementing the Bill far outweighs the costs

Section 1: Definitions

Prospective Consumer – prospective vs. potential customer” are used (as well as “individual”) and there is no clarity as to when a consumer would be considered to be either of these.

• It is conceded that this is indeed problematic and submits that the Committee may agree to affect the necessary amendments in consultation with the State Law Advisors

Kwazulu-Natal

Forum Shopping (Section 69, 70 and 116) Institutional Structure allows for forum shopping• Consumers will have various forums to approach for assistance;• All these forums are recognised and all dependent on each other

for the resolution of the complaint at various stages; • It is only when a complaint has not been amicably resolved at one

level that it can be referred to the other;• All the forums compliment each other.

Local Gov involvement Consumer Protection bodies should be established at

municipalities to enable easy access. • The Department does not have jurisdiction to impose on

municipalities.• It is a constitutional issue.

Kwazulu-Natal

Direct Marketing (Section 16)

Definition of direct marketing too wide

• The definition is intended to be wide so that it covers as many situations in this area as possible.

Right to cancel advance bookings (Section 17 (5))

Section to include circumstances beyond the control of the consumer

• The section only talks about refunds in the circumstances stated i.e. death or hospitalisation for any other reason the supplier is entitled to charge a portion in cancellation fees, we think this is reasonable.

Kwazulu-Natal

Implied warranty of quality (Section 56)

Section 56 provides for a 6 months warranty on new goods, whereas section 57 provides for a 3 month warranty on new parts fitted as repairs. This appears to be an anomaly.

• There is obviously a difference between new goods and repaired goods; there are no anomalies in the section.

Compliance Notices (Section 100)

There appears to be no provision permitting a supplier to respond to allegations before a compliance notice is issued.

• The supplier would have been given the opportunity to respond to the

allegations before the matter is even considered for compliance Notice.

Western Cape

Business Names

The Bill does not deal with issues of business licensing as dealt with previously by the Business Act.

• The Bill only deals with consumer protection issues, licensing issues will have to be resolved elsewhere.

Continued operation of repealed laws (Schedule 2 item 7)

• The Bill provides that the Commission may continue to investigate contravention of repealed laws up to three years after the promulgation of this Bill

• Some of these issues need further discussions with Provinces for more clarity

Western Cape

Reinstatement of Labeling for GM Foods Clause 29 (1) (A)

There is a call for the reinstatement of GMO labelling.

• In principle the department has no objection to the reinstatement of this clause for purposes of giving the consumers the right to choose.

• As a department we do not have the technical capacity to pronounce on the safety or non safety of GMO’s;

• We would without pronouncing on whether GMO’s are safe or not support the right of the consumer to know and choose what they want to consume.

Western Cape

Exemptions

Casinos to be excluded from the application of the Bill

• The Minister will only exempt upon a proper application by a competent regulatory authority;

• The onus is on the NCC to look for duplications and how well consumers are protected before exemptions are granted;

• The Act referred to does not go far enough in terms of providing redress for consumers.

Cooling Off periods (Section 7 (2))

Cooling off periods in relation to Franchise agreements unacceptable

• Cooling off periods as prescribed by Section 7 (2) is valid and is also a measure that finds international application.

Mpumalanga

Right to information in plain and understandable language (Section 22)

Supplier to use language understood by consumers • The issue is covered in section 22 which provides for the right to

information in plain and understandable language. Right to safe, good quality goods (Section 55(2)) The government must ensure that all foreign products are subjected

to the SABS norms and standards.• Section 55 (2) (d) provides for goods to comply with any applicable

standard under the Standards Act or any other public regulation. Right to return goods (Implied warranty) (Section 20 and 56) Cooling off period to be extended beyond 10 days to return goods of

poor quality.• Consumers are allowed to return goods within 6 months after delivery to

return goods of poor quality.

Mpumalanga

Other issues raised Access to information • All institutions are subject to the Access to Information Act

Inspectors ability to commence work immediately• Inspectors will be appointed to carry out various responsibilities in terms

of section 88. Local authorities to exercise powers of the NCC• The Department does not have jurisdiction to impose on municipalities • It is a constitutional issue,

Regional office to be closer to the people particularly rural communities

• It is agreed

Eastern Cape

Exemption (Section 5) Public entities and their representatives not to be exempted• Exemptions are within the discretion of the Minister and permitted in

terms of the Bill;• Regulatory authorities may apply for exemptions from provisions that

overlap with that of the regulatory scheme. Exemptions to be subject to public hearings• Where possible public hearings should be considered and applications for

exemption to be published in the gazette Right to equality in consumer markets (Section 8) Public entities to be prohibited from refusing/ failing to provide

services• Section 8 stipulates that a category of persons cannot be unfairly

excluded from accessing any services on grounds of unfair discrimination as contained in the Constitution and Promotion of Equality and Prevention of Unfair Discrimination Act.

Eastern Cape

Right to privacy ( Section 11) Regulation on dates and times when debt collectors contact consumers• Section 11 of the Bill only deals with the right to restrict unwanted direct

marketing;• Debt collectors are not direct marketers and are regulated by the Debt

Collectors Act

Unsolicited Goods (Inertia selling) (Section 21) The right not to pay for preloaded advertising material on airtime

bundles

• Section 21 will apply and it is broad enough to capture this concern;• The Bill further states that the consumer will not be liable to any charge if

the goods were unsolicited and also not liable for the charge of the delivery of such goods.

Eastern Cape

Pyramid and related schemes (Section 43)

Bill to exclude legitimate schemes Stockvels etc

• Legitimate schemes will always be recognised as legitimate hence there is no need to exclude such schemes.

Auctions (Section 45)

Reserve price to cover full settlement of outstanding debt/ bondholders to be excluded from securing below market value bids

• The Minister may consider this issue when regulations are to be prescribed.

Other Issues

Prepaid Certificates, Credits and Vouchers

The proposed five year validity period for certificates, cards, credits and vouchers as stated in section 63(2) (b) is too long, impractical

• Recommend reduction in period to three years.

Section 77: “Consumer Education and cooperation”

The Commission should be tasked with the responsibility of empowering consumers on the contents of the Bill.

• Cabinet issued a directive to the dti to embark on a public awareness campaign. The dti has already begun with the planning for a massive public awareness campaign to educate consumers on the Bill.

 

Other Issues

Section 83: Co-operative exercise of Concurrent jurisdiction

Recommendation to centralise all provincial functions under the office of the NCC, making the NCC accountable for services and standards throughout the country.

• The Constitution provides for shared legislative competency between national and provincial government.

• This Bill sets the general norms and standards for the country in line with the constitution.

• It is important to recognise the important role of provinces in the implementation of this legislation.

 

THANK YOU