Consumer Law Review_Oct 2012

Published on: Oct 26, 2012

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October 2012

Dear Consumer Law recipient

The start of acting commissioner Ebrahim Mohamed’s reign has been quiet compared to what we have become accustomed to under the previous commissioner. There have been indications that the NCC still intends to establish an opt-out database aimed at preventing direct marketers from contacting consumers who have opted out (see Nicola Mawson, ‘DMASA still wants opt-out database’ of 4 October 2012 on ITweb). According to Times Live (see Megan Power, ‘How SABC has bullied you’ on 21 October 2012) the NCC wants the SABC to stop threatening consumers with credit listings if they do not pay for their television licences.

On the legislative front there has been more action. First, we will discuss the new proposed regulations on the labelling of foods containing genetically modified organisms and second, the proposed permanent exemption of members of the financial services industry from the CPA by the Financial Services Laws General Amendment Bill (FSLGAB). It would also seem that the Protection of Personal Information Bill may run into some funding trouble.

Other than that we include the second part of our series on the Protection of the Personal Information Bill (it has not been approved by the NCOP yet) and our plain language tip for this month.

Happy reading,

Elizabeth de Stadler is the editor of the Consumer Law Review, a senior associate at Esselaar Attorneys in Cape Town ( Her practice consists of general regulatory compliance due diligences; training and workshops on regulatory compliance; opinion work on the CPA, the National Credit Act, Banking Law, Gaming and Lotteries, Insurance, Medical Law, Marketing Law, Contract Law; and plain language drafting.

She conducts regular workshops and training sessions on the CPA and other consumer legislation for businesses and for Law@work, a unit situated within the Law Faculty at the University of Cape Town. She is the co-author of a consumer law textbook and a guide to plain language legal drafting, both of which are to be published by Juta Law.


— Unscrupulous debt collectors beware!

— GMO labelling to change

— The Financial Services Laws General Amendment Bill exempts financial service industry from the CPA

— When will PoPI be enacted?

— Intro to PoPI (part 2): When is the processing of information lawful?

— Plain language tip

Unscrupulous debt collectors beware!

On 20 October 2012, the Sunday Times reported that the SABC is under investigation by the NCC for its unscrupulous debt collection methods and wildly inaccurate billing when it comes to unpaid TV licence fees (see ‘How SABC has bullied you’ in the Sunday Times of 21 October 2012). The interesting thing is that the complaints about the SABC's debt collection methods are methods which will probably be familiar to many debt collectors. According to the Sunday Times the complaints relate to the following practices:

·         The debt collectors claim that they placed 'trace locators' on people's credit profiles which indicate that they are wanted for unsettled debt.

·      The letters of demand threatened that judgment would be listed against a consumer's name for 30 years.

·         The letters of demand also stated that a listed judgment would make it 'virtually impossible' to obtain new credit.

·         The SABC's renewal reminders threatens consumers with a listing at all 'major credit bureaus' if they do not renew their licences.

All of these threats are inaccurate or misleading. For instance, according to the Sunday Times, the Credit Bureau Association issued an instruction to stop listing SABC judgments because there were concerns about incorrect billing and listings. Also, judgments are not listed for 30 years (even though they only prescribe after 30 years see the Prescription Act 68 of 1969), but only for 5 years. The report also raises concerns about the accuracy of the SABC's billing and tells some disturbing though all too familiar stories.

The more relevant issue for our purposes is that many consumers probably pay these incorrect amounts out of fear of judgments and adverse credit listings. Why is this a CPA issue? Well, s 40 of the Act (which regulates 'unconscionable conduct') provides that 'a supplier or an agent of the supplier [that would be the debt collector] must not use...coercion, undue influence, pressure, duress or harassment, unfair tactics or any similar conduct, in connection with any...(d) demand for, or collection of, payments for goods or services by a consumer'.

For a change the CPA is quite clear. It is illegal to make consumers pay by using incorrect or misleading threats. What is less clear is whether the CPA prohibits any threats of legal action. The inclusion of the word 'pressure' seems to suggest that, but that, in my opinion, would be going too far.

GMO labelling regulations to change

The regulations on the labelling of products that contain GMOs (genetically modified organisms) are about to change. Currently, regulation 7 read with s 24(6) of the CPA governs this issue. At the moment the regulation only applies to maize, cotton, soy and canola. There is some uncertainty whether only these commodities must be labelled or whether the regulations also apply to products that have these commodities as ingredients.

Here is what the CPA says (in short):

·     The CPA provides that if goods (or, it is said, the ingredients or components) contain more than 5% of GMOs, labelling must display a notice stating that it ‘contains Genetically Modified Organisms’.

·        If the goods are produced using GMOs, labelling must display a notice stating that they are ‘produced using Genetically Modified Organisms’.

·        Suppliers are not allowed to state that goods do not contain GMOs unless the GMO content measures less than 1%.

·       If it is ‘scientifically impractical or not feasible to test goods’ the label must inform consumers that the goods ‘may contain Genetically Modified Organisms’.

On 9 October 2012 the Department or Trade and Industry published proposed amendments to regulation 7 for public comment. The most significant change is that, if passed, the new regulation will apply to all goods which contain genetically modified ingredients instead of only the four commodities previously affected. The new regulation attempts to clear the confusion regarding whether the regulation applies where the genetically modified product is an ingredient of another product. It would appear that the intention is that it must apply although it is still not clear.

The impact of this is almost self-evident. As a result of the low trigger threshold (5%) most suppliers of foodstuffs will have to change their labelling at significant cost. Given the current rises in food prices one would hope that the implementation cost of this regulation has been considered and that it is worth it. This is if one assumes that the GMO content is a food safety issue and should influence consumer choice, which is not a universally held belief.*

The public can make submissions until 9 November 2012. They must be sent to Mr Ntutuzelo Vananda at

* The US Food and Drug Administration’s position is that there is no difference between GMO and non-GMO foods as it relates to food safety. There are of course environmental and economic concerns attached to GM technology, but that is not a labelling issue per se. See Richard B Stewart ‘GMO trade regulation and developing countries’ (2009) Acta Juridica 320.

The Financial Services Laws General Amendment Bill exempts financial services from the CPA

[From the editor: This article was published (for the most part) in the Legalbrief of 9 October 2012 and is based on my blog at We include it here for the benefit of those subscribers who do not receive Legalbrief.]

The Financial Services Laws General Amendment Bill (FSLGAB) was tabled in parliament on 25 September 2012. The aim of the Bill is to ensure that ‘South Africa has a sounder and better regulated financial services industry’ (see the Memorandum on the Objects of the Bill).

The most significant implication of the Bill from a consumer protection standpoint is that it will permanently exempt the long term and short term insurance industry, the pension fund industry, collective investment schemes and securities from the operation of the CPA. It is not my contention that the CPA should regulate the Financial Services Industry. In fact, the complicated nature of these products and the consumer issues which arise makes sector regulation the ideal way to protect consumers, however, that is not to say that the current sector legislation achieves an acceptable level of consumer protection.

In the May/June edition of Consumer Law Review ('Treating Customers Fairly or the Consumer Protection Act') we gave the following background to the possible enactment of the FSLGAB:

Those who follow Treasury literature will recall that the purpose of this exemption was to clear the way for financial sector legislation that would impose a higher standard of consumer protection. The FSB has indicated that this 'higher standard' will be in the form of the Treating Customers Fairly programme (TCF) which is similar to the TCF programme implemented by the Financial Services Authority (FSA) in the United Kingdom.  In the 'Self-Assessment Pilot Report' of December 2011 the FSB indicated that it was still 'formulating the appropriate supervisory approach and structures and building capacity to supervise the TCF outcomes' (p 43).  The question for the FSB is whether they can simply adopt the FSA approach, lock, stock and barrel, given that the FSA didn't have the standards set by the CPA to content with.

In the absence of a final TCF blueprint from the FSB, one would have to argue that the Bill, on its own, fails to introduce this higher standard of consumer protection into FAIS. Therefore if implemented today, it would create a lacuna in South African law and deprive consumers of several protections afforded to them by the CPA.

Based on that article, a submission was made to Treasury to the effect that the CPA should remain applicable until such a time as the Treating Consumers Fairly programme was in place (see ‘Treating customers fairly in South Africa: What to expect’ in the March/April edition of CLR) to ensure that consumers do not fall through the cracks. Treasury's response to the submission was that:

the rendering of financial services as defined in the Act is already excluded from the ambit of the CPA (excluded from the definition of "service" in section 1 of the CPA). The rendering of financial services was excluded from the CPA as it was accepted that the Act already provided for consumer protection at the same if not higher level that the CPA.  The Act already imposes a requirement on financial services providers to render financial services honestly, fairly, with due skill, care and diligence, and in the interest of clients and the integrity of the financial services industry.

This is simply not correct. The rendering of financial services is not excluded from the CPA, only those which constitute advice or intermediary services under the Financial Advisory and Intermediary Services Act and the insurance industry. That is a very narrow exclusion. In addition, the insurance industry exemption was ‘subject to those sector laws being aligned with the consumer protection measures provided for in this Act [the CPA]' before 1 October 2012. A practically identical exclusion was later given to the collective investments schemes industry, the pension funds industry and the security services industry.

These sector laws have not been amended and therefore these industries are now subject to the CPA.

It is also not acceptable to simply state that ‘it was accepted that the Act already provided for consumer protection at the same if not higher level than the CPA’ as Treasury would have it. Accepted by who and on what authority? Why would the NCC have qualified the exclusions to the extent indicated above if this was the case already? A cursory examination of these sector acts also does not support the contention that they provide greater protection than the CPA.

If I am wrong in my interpretation of the FSLGAB, I invite Treasury to correct me. Whatever the case may be, consumers deserve a great deal more transparency. The negotiations (if they are taking place) between the DTI (who controls the National Consumer Commission) and Treasury need to be made public and the rationale for claiming that consumers will have more protection than under the CPA must be explained. Certainly a cursory rejection based on a patently incorrect interpretation of the Act will not suffice.

When will PoPI be enacted?

The Protection of Personal Information Bill is in limbo for the moment. It was approved by the National Assembly on 11 September 2012, but still awaits approval by the NCOP.

Now it would seem that its implementation might be delayed by budgetary constraints at the Department of Justice and Constitutional Development. PoPI will be enforced by an Information Regulator which must still be established. It is presumably this expense (because it will be expensive) which has forced the Justice Department to pause for reflection (see ‘Daar is nie geld om landdroste aan te stel’ in Die Burger of 20 October 2010).

Intro to PoPI (part 2): When is the processing of information lawful?

This is the second part in our series on PoPI. In the first part (see the September edition of the CLR) we explained the application of PoPI by looking at the definitions of ‘processing’ and ‘personal information’. This part deals with the lawfulness of the processing of personal information, focussing on the requirement of consumer consent.  There are only a limited number of instances where the processing of personal information will automatically be lawful. Processing will be lawful if:

·         it is needed in order to conclude or perform a contract with the consumer (s 11(1)(b));

·         the responsible party* is obliged to do it ‘by law’ (s 11(1)(c));

·         it protects a ‘legitimate interest’ of the consumer (s 11(1)(d));

·         it is necessary for the performance of a ‘public law duty’ (s 11(1)(e)); or if

·         it is done in pursuit of the ‘legitimate interest’ of the responsible party* or a third party.

*The 'responsible party' is the person(s) who determines the purpose for which and the way in which the information will be processed, i.e. the processor (who will often also be the supplier). This is the party who will be held accountable if the Bill is not complied with.

If none of these are applicable, the processor will have to ask the consumer’s consent to use/process the consumer’s personal information (s 11(1)(a)). ‘Consent’ is defined as ‘any voluntary, specific and informed expression of will in terms of which permission is given for the processing of personal information’. This definition, together with the fact that personal information ‘must be collected for a specific, explicitly defined and lawful purpose’ (s 13(1)) and that the supplier must ensure that the data subject is aware of the purpose for which the information is being collected (s 18(1)(c)) leads to the conclusion that a blanket consent to use information will not be sufficient to render the processing of personal information lawful.

In most instances the supplier will need the consumer’s consent again if the supplier wants to use information already in its possession for a different purpose from that for which it was obtained. This is subject to the presence of any of the other legitimising facts listed in s 11(1) and the provisions of s 15 which deals with the ‘further processing’ of personal information. The bottom line is that the further processing must be ‘in accordance with’ or at least ‘compatible with’ the purpose for which it was collected, otherwise it is a new purpose which must also be lawful, i.e. one of the factors in s 11 must be present.

Section 11(2)(a) provides that the supplier bears the burden of proof if the consumer’s consent is disputed.

There are many other specific instances where the consent of the consumer is required or can save otherwise unlawful processing, but the provisions relating to consumer consent in the context of direct marketing are of particular interest (also see ‘Direct marketing: Opt-in or opt-out’ in the August edition of the CLR). In terms of s 69, the consumer’s consent must specifically be obtained before a supplier can engage in any direct marketing to that consumer. Of course, the supplier can contact the consumer once to obtain the consent, unless the consumer has previously withheld such consent. This obligation is softened in respect of existing customers but only if the following requirements are met:

·         the supplier must have obtained the consumer’s information ‘in the context of the sale of a product or service’;

·        the consumer must have known that the information is being collected for purposes of direct marketing;

·         the direct marketing in question must be for that supplier’s own, similar products or services; and

·         the consumer must have been given a reasonable opportunity to object (a) free of charge and without unnecessary formality, (b) at the time at which the information was collected, and (c) again during each communication for the purpose of marketing.

Here are some general comments regarding the form of consent:

·         It cannot be a blanket consent, it must be informed and specific.

·         It must be in plain language.

·        The difference between opting in and opting out must be kept in mind. For instance, where a consumer is asked to consent to the use of his or her personal information by means of a tick-box, and cannot be ticked by default as this would mean that the consumer has to opt-out instead of opting in.

Plain language tip

We have analysed the definition of plain language used in the CPA in previous editions (see the March/April and May/June editions of CLR). We also use Annetta Cheek’s definition:

Communication is in Plain Language if it meets the needs of its intended audience - by using language, structure and design so clearly and effectively that the audience has the best possible chance of readily finding what they need, understanding it and using it.

In order to assess your contract, ask yourself the following questions:

·         Who is my intended audience?

·         What are their needs? Or, put differently, what is the function of this contract?

·         Will the audience be able to find what they need?

·         Will the audience be able to understand it?

·         Will the audience know how to use what they have found? Or, put differently, will the audience be able to act on what they have found?

© Elizabeth de Stadler and the Unit for Document Design at the Stellenbosch University Language Centre.




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