As I reported in last week’s column, the final regulations pertaining to some very crucial aspects of the Consumer Protection Act (CPA) – made public last Friday afternoon – came as quite a shock in some respects.
For months – based on the first draft of the regulations put out by the minister in November – the media had been reporting that with respect to fixed-term contracts such as gym and cellphone contracts signed after April 1 this year, consumers would be able to give 20 days’ written notice of cancellation at any time, and pay just 10 percent of the remaining subscriptions.
But the final regulation made no mention of that 10 percent. It states that, if a consumer cancels a fixed-term contract early, the supplier can demand a “reasonable” amount as a cancellation penalty, taking into account quite a few factors such as the consumer having to pay back the value of goods which remain in their possession – and that would include a cellphone.
The regulation does state that the cancellation fee may not have the effect of negating the consumer’s right to cancel such a contract early, but therein lies the rub.
What is reasonable? The 10 percent penalty was finite and applied across the board. The final regulation is open to interpretation, which is confusing for all.
Virgin Active has apparently settled on a penalty of 30 percent of remaining subscriptions, for example. Will its clients regard that as reasonable should they decide they don’t want to be members for a full two years?
I contacted all the cellphone networks to find out what they have settled on, but it seems they are still figuring it out. So said Vodacom and Cell C.
Another thing – the final regulations state that a fixed-term contract can’t be for longer than 24 months, but that’s not cast in stone, because the regulation adds a rider: “Unless a longer period is expressly agreed with the consumer and the supplier can show a demonstrative financial benefit to the consumer.”
Graham Mackinnon, Cell C’s group general counsel, said this would enable the cellphone industry to continue to offer consumers early upgrades on their contracts.
The key bit there is that it must be with your consent. You will be asked to upgrade or extend your contract, and it is up to you to weigh up your options, read the small print and decide if this will benefit you or not.
Now that the cellphone and fitness industries are able to determine their own cancellation penalties, within reason, this will become a competitive issue, so, when you are looking to sign a contact, don’t just compare prices and hardware, check out what it will cost you should you want to cancel early.
In the past week I have been bombarded with questions from, not just consumers wanting to know how the CPA applies to their lives, but from business owners who apparently don’t know how to source information on the act – particularly the final regulations, published on April 1 – in order to comply.
Several call centres have e-mailed me to ask about the hours that they may – and may not – contact consumers at home, which is among the contents of those final regulations. (It is now illegal for any direct marketer to contact you at home before 8am or after 8pm on weekdays; before 9am or after 1pm on Saturdays and they may not contact you at all on Sundays and public holidays.)
And I have just received an e-mail from a clothing importer, questioning the act’s “implied warranty of quality” section.
“Please forward me all the documents I need to read so I don’t have any misunderstandings,” he writes. “And I would appreciate a contact number so that I can call you should I need to know anything else relating to this act.”
For some reason, the final regulations had not been posted on the Department of Trade and Industry’s website, nor is there any information about the National Consumer Commission.
I tried calling the department’s customer contract centre – a premium cost 0861 number, ironically – but hung up after holding on in vain for 10 minutes.
An update of the consumer-protection section of the department’s website is urgently required.
So, in the interest of clearing up confusion about aspects of the act which appear to be concerning consumers most, I have picked two typical reader questions from my inbox.
1. Returns: a small boutique owner in Stellenbosch writes: “I have the following sales policy on my swing tickets and it is also displayed in the store.”
* No refunds.
* No returns or exchanges on sale goods.
* No returns or exchanges without till slip.
* Exchanges within 10 days of purchase only.
“I do not give refunds on goods returned. The customer can either select another item to the same value on the day of return or we issue a credit note for future redemption.
“In the boutique business I find that there are unscrupulous customers who purchase an item, wear it and then attempt to return it. As a small retailer, does the act afford me a degree of protection, and how will it affect this policy?”
Answer: That “no refunds” notice is now illegal. The first thing to understand about returns is that, if there is nothing wrong with an item, a supplier is not compelled to accept it back. That takes care of the “wear it and then return it” brigade. Suppliers may choose to take it back, on their terms – such as “exchanges within 10 days of purchase” – but they are not compelled by this law, or any other, to do so.
But if the item – including a sale item – proves to be defective within six months of purchase, the consumer has the right to choose whether they want a refund, a repair or a replacement item.
If they choose a repair, and the item “fails” in some way within three months of being returned to the consumer, the supplier has the choice of issuing a refund of the purchase price or replacing the item.
2. Cancelling a fixed-term contract: Morgan writes: “I am unemployed and contacted Vodacom to ask them whether I could cancel my contract but they told me that, because my contract ends in January 2012, I would need to either continue with the contract or pay more than R3 000 to cancel it. Does the new Consumer Protection Act allow one to cancel a contract and would I be eligible since the contract was taken out before the act came into force?
Answer: I have written previously that the act does not apply to contracts signed before April 1, 2011. Mostly that is true, and it is certainly true of all cellphone contracts, for the following reasons.
The act does apply with respect to cancelling pre-existing fixed-term contracts that expire after April 1, 2013. That rules out all pre-existing two-year contracts, but if you signed a three-year gym contract in the past year, for example, meaning it expires after April 2013; you can cancel early with 20 days’ written notice, and pay whatever the gym regards as a “reasonable” cancellation penalty.
So Morgan does not have the benefit of the CPA’s early cancellation of fixed-term agreements provision, unfortunately, because his contract expires before April 2013. If he wants out, he will have to settle all remaining subscriptions, plus the cost of his handset, in full. - Pretoria News