The problem with a ground-breaking piece of legislation is that there’s a delay between it being passed into law and it becoming effective.
With the Consumer Protection Act, we’re in that “gap period” now. The problem is that in writing about the act and how it will apply to consumers from when it becomes effective, is that many get the impression that it’s already in force and can help them.
But even when the Consumer Protection Act finally becomes effective on April 1, it won’t apply to any contract entered into before that date. So, if you’re thinking of signing any contract, wait until April if you can.
Consumer Watch reader Sue Currell wrote to me recently in response to a column I wrote about the act putting an end to “lock-in” contracts. It allows consumers to cancel a fixed-term agreement – such as one with a fitness club or cellphone company – at any time by giving 20 business days’ notice in writing.
According to the act’s regulations, on receipt of an early cancellation notification, a company can impose a cancellation penalty of not more than 10 percent of the amount that would have been payable by the contract holder in subscriptions for the remainder of the fixed term, excluding interest, if applicable.
“Based on what you said, I contacted both my and my daughter’s cellphone service providers to verify what I’d read, and ask how and when to go about terminating our contracts,” she wrote.
“Only one replied to say: ‘We are unable to provide you with any information regarding your query at this stage. Please contact us after the Consumer Protection Act has been launched so we may best assist you. Surely someone in these companies is gearing up to deal with customers who want to make a change under the new conditions from April 1?” Currell argued.
“Why do I have to wait until April 1 for an answer?”
Currell’s experience throws up two issues. One – the answer she should have received, immediately, from her service provider, is that the act does not apply to any contract signed before April 1.
So Currell can’t cancel her contracts with 20 days’ notice, because they were signed long before the act came into effect – just as my own cellphone contract, signed in April last year, “locks” me in to paying my monthly subscription until April next year, regardless of whether I choose to use the service or not.
In November, Trade and Industry Minister Rob Davies published regulations pertaining to the act, which included his specification that the maximum penalty a supplier could impose on a person who gives 20 days’ notice of early cancellation is no more than 10 percent of the amount that would have been payable by the contract holder for the remainder of the fixed term.
That’s because the cost of the cellphones, which are given to those who sign two-year contracts, is built into that monthly subscription.
As the act stands, a person could sign a two-year contract, take the phone, cancel within a few months, keep the phone and only be required to pay a 10th of the remaining total subscription.
Companies had until the end of last month to submit their responses to Davies’ regulations pertaining to this and other sections of the act.
I asked the networks for their views. Here’s what they said:
Vodacom: We have raised our concerns about the 24-month contract length limitation and 10 percent cancellation penalty limit in our official comments to the (Department of Trade and Industry) on the draft regulations. We urgently require clarity on these provisions because as currently set out they could undermine the subsidised handset cellphone contract model. We are putting contingency plans in place, but cannot comment in detail until we receive feedback on our comments to the department. – Nomsa Thusi, executive head: corporate communications
MTN: In light of the regulations not being finalised by the department at this stage, MTN believes that it is premature to comment on the possible separation of goods and services from a contractual perspective – Robert Madzonga, chief corporate services officer for MTN SA
Cell C: Cell C is changing its various customer facing agreements to bring them in line with requirements of the Consumer Protection Act and we are confident that Cell C will be compliant with the act in all respects as of April 1. – Graham Mackinnon – group general counsel, Cell C corporate legal.