The Consumer Protection Act (CPA) came into effect on 1 April 2011 and received much publicity in the months leading up to its inception, sparking fear into the hearts of suppliers and joy as well as eager anticipation into those of consumers.
In this month’s article we will have an introductory look at the new act, why it was put into place and what it is meant to achieve.
Why do we have a new Act?
It has been said that CPA will do for consumers what the Labour Relations Act did for employees. In short, it is designed to benefit consumers although one may argue there will be many positive spin offs for suppliers as well. This would probably in the same way that one would look at the positive side of the recession, i.e. improve your business so that you are recession proof, which can only be good for you. In the same way if your business is Consumer Protection Act proof then it means that you have taken the necessary steps to get your business ready and have improved your products, services, communications and terms, which only makes you stronger.
The laws that were in place before the new act were out dated and fragmented and did not provide consumers and consumer organisations with a comprehensive and specific set of laws that empowered them to be in a position to take action when their consumers rights had been abused.
The new act is designed to create a situation whereby consumers can have access to goods and services in a market place that is fair to them and will promote responsible behaviour on their part. I think that the responsible behaviour could be compared with the effects of the National Credit Act whereby individuals seeking credit should not be granted credit if they are not credit worthy and then suffer the consequences of falling deeper and deeper into debt. The responsibility has been passed on the credit providers. Similarly the CPA will seek to protect consumers from getting themselves into trouble because of either bad judgement or being misled by suppliers.
The act takes special notice of historically disadvantaged individuals and anyone who is in a position of less means (whether related to finances or awareness of rights) in order to ensure that they are not exploited or taken advantage of as it is so often the case that the more vulnerable in society are the ones that are preyed upon.
In South Africa the gap between those who are advantaged and those who are not is particularly wide and hence the need for protection.
What is the National Consumer Commission?
The National Consumer Commission (NCC) was brought into effect to help enforce the CPA and to promote consumer welfare. It is their job to investigate and prosecute complaints and assist consumers with resolution of their complaints.
The whole idea behind having the NCC is so that we do not simply end up with a nice set of new consumer protection laws that are powerless (in and of themselves) as they are weakened by an inability to be enforced.
The commitment from the national consumer commissioner is that complaints raised by consumers would be addressed within 6 weeks and resolved within 6 months.
Within its first four days of operation the NCC received over 400 calls from consumers. The bulk of these calls related to one particular city council’s massive billing errors and complaints against cellular operators (for various reasons) and a particular fixed line telephone service provider.
What areas does the Act focus on?
The act touches on many areas of business trading including things like what name you put on your business (including on stationary, invoices etc), new terms for gift vouchers, new terms for fixed term contracts, rules for electronic communication with your clients, warrantees and refunds, information to be provided to clients when they purchases products and services, terms and conditions of purchases, terms for running specials, booking cancelation policies and so on.
Consumer Protection Regulations
In order to apply the new CPA a set of regulations was drafted that provided supplementary information to the CPA to help interpret and apply the act. The regulations are subject to change more frequently than the act.
One example of an important difference between the draft regulations and the final set of regulations was the fact that originally the draft had capped cancellation fees for contracts like gyms and cell phones at 10% of the remaining balance. This seems like a major swing in favour of the suppliers whereas before consumers would have been queuing up to cancel their contracts. Now the supplier is able to determine what they believe is a “reasonable” cancellation fee but we do not have specifics on what is reasonable.
What constitutes a consumer?
Generally speaking a consumer is the man on the street who purchases products and services.
However, it also applies to businesses that have an annual turnover or Asset base less than R2000 000. Therefore if your salon has an annual turnover less than R2000 000 then you qualify for protection when purchasing goods or services for a supplier.
Originally the threshold had been set at R3000 000 per year but was recently changed to R2000 000.
Note that an individual who earns over R2000 000 per year does qualify for consumer protection, so don’t fall into the trap of ripping off your super rich clients thinking they fall outside of the scope of the CPA’s protection.
Therefore, you the reader are protected by the act as an individual or small business (annual turnover less than R2000 000) when you purchase goods and services. However, it also means that you as the salon owner have clients who are consumers and are protected by the same act.
When is the Act effective from?
The act came into effect on 1 April 2011. This means that transactions conducted prior to this date are not subject to the act. Therefore if you entered into an agreement or purchased a product before this date then you will not be able to apply the benefits of the new act to this transaction, even if the transaction took place on the 30th of March 2011.
When I started paying attention to the publicity surrounding the new act I remember thinking to myself that this would be the end of business as we know it, that consumers will be licking their lips at the prospect of being able take their suppliers to the cleaners. That they would be queuing up with all sorts of complaints to lodge, products to return and contracts to cancel and that many business would suffer severely as a result.
There was speculation about extreme situations like what would happen when consumers would buy a car and after a few months decide to return it because of the smallest inconsequential fault and there were the stories of rental tenants being able to cancel their rental agreements whenever they wanted and I could not help feeling a small sense of panic.
But upon closer inspection it appears that the act promotes “reasonable” interaction between consumers and their suppliers and consumers will not simply end up being able to exploit suppliers as long as they have acted with due diligence and in a reasonable and fair manner.
Also the act is new and applying law is not always as black and white as it seems and only time will tell just how much protection the act provides for consumers. It will not make sense to send our economy into turmoil because overly protective consumer laws, else their will not be anything left to consume.
To sum it up you should be conducting business with the right intentions (don’t go out to exploit anyone). Do an audit of your processes and ensure that you comply with the act as far as possible. Its worth consulting a lawyer who specialises in this information to “audit” your operation and advise you if you are exposed in any way. The cost of a few hours consultation will most likely pay for itself quite easily in time.
A side effect of this exercise will be an improvement in the quality of your products and your service and a consumer that is more confident to spend their money with you as a result of them feeling they are not going to be ripped off without recourse.
Next month we will take a closer look at some of the implications the act has on salons.