Bill outlaws unfair deals
Law firm Deneys Reitz has warned retail banks and other credit providers of immense cost implications the Consumer Protection Bill will have if it is enacted in its current form.
The bill, which is in its third draft, might be tabled in parliament in July.
With the new National Credit Act (NCA) coming into effect on July 1, Deneys Reitz says retail banks and other credit providers must start assessing their state of readiness and make preliminary assessments of the impact the bill might have on their business and their bottom line.
It is suggested that the banks collectively make submissions to the Department of Trade and Industry (DTI) to have all agreements and activities regulated by the NCA exempted from the bill.
One of the bill's controversial provisions is that it imposes strict liability on the supplier or retailer of goods. Under common law, consumers only had limited rights for defective or harmful goods and services.
The bill outlaws numerous unfair marketing practices because they are deceptive and misleading to consumers.
Any dealing a bank or a retailer has with consumers will be regulated by the bill.
Deneys Reitz said when the first draft of the bill was released last year, it contained an exclusion which expressly stated that credit agreements, as defined under the NCA, would not be subject to its provisions.
But, it seems NCA compliance might not be sufficient, as the DTI in March deleted the clause excluding credit agreements from the ambit of the bill.
They will only be exempt if an appropriate directive is made by the Trade and Industry Minister.
Consumer credit agreements and business processes which have just been reworked will, according to Deneys Reitz, have to be re-visited, no doubt at significant expense. This applies in particular to instalment sale agreements, and to vehicles or other assets financed by banks and credit providers.
Amendments will be needed to bring these in line with the bill.
There is a new list of unlawful provisions to be deleted from consumer agreements.
These include clauses where the consumer consents to pre-determined costs for enforcement of the agreement or signs enforcement agreements in advance and those clauses in which the consumer undertakes to give his or her identity document, credit or ATM card to a supplier, or to provide a PIN number to access an account.
Savings accounts, current accounts without overdraft facilities, insurance policies, funeral policies and "non-credit" items, while escaping the NCA, will fall within the provisions of the bill .
"The bill is an all-encompassing piece of consumer legislation that will have far-reaching consequences for business, and will bolster consumers' bargaining powers and rights across all industries," Deneys Reitz said.
Deceptive marketing practices that have been outlawed include falsely offering prizes, not disclosing conditions related to prizes and bait advertising, where the goods or services offered are not actually available, but the idea is to lure the consumer to the supplier's premises.