Not a month goes by when I don’t receive an SMS from a financial services provider (FSP) marketing its products to me. All of these messages give one the option of SMSing the word “STOP” or “NO” to opt out of receiving more messages. But who pays for that SMS?
Often, it’s you and I. Some SMSes cryptically state “Std rates”. What? The Consumer Protection Act (CPA) says that no person may charge consumers a fee for exercising their right to refuse to accept direct marketing, to instruct a person to discontinue sending direct marketing and to pre-emptively block any such approach or communication.
The CPA has been in force for more than five years. How is it that consumers are fighting this battle five years down the line? Because, by and large, big corporates in South Africa are not customer-centric and regulatory arbitrage is the order of the day. Regulation in some sectors is patchy, if not weak. And it doesn’t help that most consumers don’t know their rights and, even when they do, they are generally apathetic about enforcing them.
Charging consumers to opt out of direct SMS marketing highlights this.
In December 2011, Vodacom sent a letter to wireless application service providers – or WASPs, which are companies that use the mobile networks to deliver services, such as bulk SMSes, to the public on behalf of their clients, such as banks and insurers.
The letter from Vodacom stated that, “Section 11(5) of the Consumer Protection Act, which came into effect on April 1, 2011, requires that customers should not be charged or billed for opting out of direct marketing.” It went on to say that “reverse-billed short codes are available for WASPs to utilise, to enable customers on the Vodacom network to opt out of direct marketing at no charge, as required by the CPA”.
In other words, the WASPs were told that they should pick up the tab for the cost of the opt-out messages, and that this could be done by using the network’s reverse-billing facility. In which case, the WASP could, in turn, recover the cost from their client.
Furthermore, WASPA, the association that regulates WASPs, forbids charging consumers a fee for processing an opt-out request or for registering a pre-emptive block. However, it all boils down to how you define a “fee”, because the CPA does not provide a definition.
Ilonka Badenhorst, the general manager of WASPA, says that, if a member uses a standard-rated short code or number, the member will receive no income, and would technically therefore not be charging the consumer a fee. “The standard rated charge is levied by the mobile network operator [and not the WASP].”
But members may not use a premium-rated short code or number, because the income derived from a revenue share on the premium charge will constitute a fee, she says.
When I asked Vodacom why it charged me for the SMS I sent to 1st for Women to opt out of receiving direct marketing, they effectively blamed a WASP, stating that “WASPs that use Vodacom’s services to bill and collect monies for the WASPs’ products/services may only instruct Vodacom to bill and collect money for those products/services that have been specifically requested by customers”. This is all very unsatisfactory.
The National Consumer Commission is on record as stating that, although nobody can charge you a fee to opt out, the cost to you of communicating your instruction to opt out is not covered by the Act.
When I spoke to FSPs about complying with the CPA in this regard, I got a range of answers.
Warwick Bloom, the head of group marketing at Hollard, says that section 5(3) of the CPA exempts companies from complying with the provisions of the Act where they are dealt with in other laws or by another regulator.
“In respect of the direct marketing of insurance products, Hollard’s activities are regulated and governed by the Financial Advisory and Intermediary Services Act, the Short Term Insurance Act and the Long Term Insurance Act.” He says these Acts do not restrict charges for opt-outs.
So, charging consumers to opt out does not breach the CPA insofar as it applies to insurance companies.
However, Bloom says irrespective of the legal position, Hollard supports the idea that an opt-out should be free, and will engage with its lead providers [WASPs] to ensure that this is the case in future.
When asked whether Different Life is charging consumers to opt out of receiving such SMSes, Different Life chief executive Philip Tomlinson said the company does not do any direct marketing ; it uses a number of “affiliate marketing companies” that provide the company with leads. Lead providers include WASPs, and if a lead provider is charging explicitly for an opt-out, Different Life would view this as a breach of the CPA, Tomlinson says.
On the question of “standard mobile operator charges on an opt-out SMS”, he says his understanding is that it is not in contravention of section 11 of the CPA.
Treating Customers Fairly
Ian Middleton, the managing director of Masthead, a company that provides compliance services to FSPs, says the first principle of Treating Customers Fairly (TCF) states that “customers are confident that they are dealing with firms where the fair treatment of customers is central to the firm’s culture”. Where customers have to pay to opt out, and the provider hides behind technicalities, this is not treating customers fairly.
“Unfortunately, we haven’t seen any significant steps, through penalties or sanctions, taken against operators,” Middleton says.
Personal Finance asked the Financial Services Board (FSB) what the regulator of FSPs was doing about this, given that it’s a breach of TCF.
Jo-Ann Ferreira, the head of the regulatory framework for insurance at the FSB, says the regulator “will be consulting soon on a comprehensive review of the Policyholder Protection Rules, including introducing more stringent marketing requirements”.
“We will specifically address unwanted direct marketing by requiring insurers or any persons acting on their behalf to afford policyholders and potential policyholders to whom insurers market policies through mobile phone voice or text messages, the right to demand, during or within a reasonable time after the messages, that the insurers or persons acting on their behalf desist from initiating any such further communication. Insurers or any persons acting on their behalf may also not charge a fee or allow a mobile phone service provider to charge a fee for making a demand. So although the current practises are not regulated, we intend to introduce standards in the near term.”
Fortunately for us, when the Protection of Personal Information (Popi) Act is fully in force, we will no longer have to fight this battle.
In terms of Popi, companies can send direct marketing communications only to consumers who have given their explicit and informed consent.
Direct marketing messaging must make provision for an opt-out, with no strings attached, and any further marketing to a consumer who has opted out is unlawful.