Consumer Law Review May/Jun 2012

Published on: May 29, 2012

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June 2012

Dear Consumer Law recipient

Another month has gone by and the developments in the area of consumer law show no sign of slowing down. The range of issues addressed in this month’s CLR illustrates the diversity of consumer law.

The NCC seems to be in a shambles as a result of the clashes between the Department of Trade and Industry and National Consumer Commissioner, Madoupi Mohlala-Mulaudzi. One has to wonder what kind of impact this will have on on-going and new investigations in terms of the CPA.

On the legislative front, it appears that two pieces of consumer legislation are going to be considered soon. One is the Protection of Personal Information Bill and the other the Financial Services Laws General Amendment Bill. Each is controversial in its own right.

The courts were called upon to decide on the constitutionality of section 89(5)(c) of the National Credit Act in terms of which unregistered credit providers can lose their right to re-claim loan amounts advanced in terms of void credit agreements.

We have also included a follow up article on plain language along with our customary plain language tips.

Kind Regards

Elizabeth de Stadler

The editor of the Consumer Law Review is Elizabeth de Stadler, 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. In addition to writing her dissertation (The consumer’s right to quality goods: a comparative analysis of the Consumer Protection Act 68 of 2008), 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.


- What is going on at the National Consumer Commission?

- The latest on the Protection of Personal Information Bill

- Plain Language: More than just ‘plain’ words

- Treating Customers Fairly or the Consumer Protection Act?

- Section 85(9)(c): Breaking the NCA’s big stick

- Plain language tips


What is going on at the National Consumer Commission?

It would appear that all is not well at the National Consumer Commission.

National Consumer Commissioner Madoupi Mohlala-Mulaudzi took the Department of Trade and Industry to court after her post was advertised in the Sunday Times without consulting her (see ‘NCC and DTI conflict bad for all’ in the Legalbrief of 16 May 2012). Mohlala-Mulaudzi approached the Labour Court which has ordered the DTI to withdraw the advertisement ( This is probably a hollow victory as the DTI will be able to advertise the post again, once it has consulted with the beleaguered Commissioner.

It is doubtful that the working relationship between the Chief Commissioner and the DTI will mend after all of the allegations which have been aired. It has also become apparent that the NCC’s work is being hampered by monetary constraints. Mohlala-Mulaudzi has even lodged a complaint with the public protector that money is being withheld from the NCC by the DTI, something which she has described as an abuse of power (  She has also drawn a connection between this and her ruling against Rael Levitt in the Auction Alliance saga, in an interview with the Saturday Star (19 May 2012).

Mohlala-Mulaudzi’s contract comes to an end in September. She has already indicated that she will reapply for her current position.

The latest on the Protection of Personal Information Bill

By Russell Opland (Associate Director, PwC)

At present, South Africa does not have comprehensive privacy or data protection legislation, however, some aspects are covered in various other statutes, such as the Consumer Protection Act, the National Credit Act, the Electronic Communications and Transactions Act, and so on.

In order to give effect to the right to privacy entrenched in South Africa's Constitution, and in order to align South Africa with the many other international jurisdictions that have privacy or data protection legislation in place, government introduced the Protection of Personal Information Bill (Bill 9 of 2009) (PoPI) in parliament. Under the auspices of a ‘technical sub-committee’, the Bill has evolved since 2009 into its seventh and final draft, which will be presented to the Portfolio Committee on Justice and Constitutional Development for consideration in the coming weeks. It will then be circulated to the two houses of parliament for approval, before submission to the President for signature, which is anticipated in the second half of 2012.

It should be noted that certain aspects of the final draft Bill, upon which the sub-committee was unable to reach agreement, still necessitate further discussion and decision-making by the Portfolio Committee, which may delay its passage.

The Bill defines ‘personal information’ in the broadest possible terms, and, notably, includes both natural and juristic persons in its definition. Both public and private bodies are subject to its provisions, and it applies when the information is processed within South Africa (but not when it is only transmitted through the Republic). Limited exceptions include information in the public domain, ‘purely personal or household activity’, de-identified information, and very limited government functions. Some information is defined as ‘special personal information,’ including religious or philosophical beliefs, race or ethnic origin, trade union membership, political persuasion, health or sexual life, and criminal behaviour, which are subject to additional restrictions.

The Bill provides rights for individuals to:

  • know the reasons that their information is collected;

  • know the purposes for which it will be used;

  • have the rights to object, on reasonable grounds, to uses of their information; and

  • inquire whether an organisation holds information about the individual; view and correct that information; and ask that it be deleted.

Organisations are obliged to only collect and use the minimum information necessary to accomplish their objectives, to maintain such information accurately, to safeguard personal information, and to delete or destroy information when it is no longer needed. Notably, organisations will be required to notify the individual(s) and the new Information Regulator of any compromises of their personal information, including loss, theft, unauthorised access or disclosure, hacking incidents, and so on.

Revisions in the latest drafts of the Bill include the following:

  • The definition of ‘biometric’ has been aligned with the EU definition to include physical, physiological, and behavioural characteristics, and blood type.

  • The term ‘blocked’ information which is personal information that is no longer used, but has not been deleted or destroyed has been introduced. The ‘collection, storage or updating of blocked information’ has been excluded from the provisions of the Bill.

  • Two definitions of ‘child’ have been included for consideration. The first is that a child will be a person under 13 years of age. Under this definition, anyone older than 13 years can consent to the use of their information, even though they are still minors in the eyes of the law. If, however, the definition of ‘child’ in this Act is the usual ‘person under the age of 18 years’, only a major will be able to consent to the use of their information.  

  • ‘Online identifier’ (such as IP address) has been included in the definition of personal information.

  • The definition of ‘filing system’ was amended to include ‘whether centralised, decentralised or dispersed on a functional or geographical basis’.

  • The inclusion of provisions, which are currently being drafted, to clarify the applicability of the Bill to cloud computing activities.

  • Three options for the wording of the exclusion of the processing of personal information for literary or artistic expression from the provisions of the Bill have been provided.

  • The ‘Privacy by Design’ concept has been included in the Accountability condition (principle).

  • The following requirements have been included under the Openness condition (principle):

- notification to the data subject of the right to complain to the Regulator;

- the contact information of the Regulator;

- if applicable, notification to the data subject that their information will be passed to a third country or international organisation, and the  level of protection thereof by reference to any relevant adequacy decisions by the Regulator; and

- when information is not collected directly from the data subject, identification of the source of that information.

  • The requirement to notify the Regulator ‘immediately’ of data breaches has been included.

  • In previous drafts, the term ‘sexual life’ had been deleted from the definition of special personal information dealing with health information, but it has now been re-included.

  • The processing of information pertaining to children without consent, unless specifically approved by the Regulator, or required by law is prohibited.

  • The maximum financial penalty has been increased to R10 million (from R1 million).

Thus far, the banking industry has been the leader in South Africa in initiating compliance activities, with the insurance and retail industries becoming involved more recently. As this Bill affects all South African companies, and has substantial impact on many functional areas of the business, including operations, HR, IT, and procurement, all organisations should:

  • establish a multi-functional steering committee:-

  • provide awareness training:-

  • inventory their personal information:-

  • conduct a gap assessment: and-

  • plan and budget for implementation of their privacy programme.

Russell Opland is an associate director in the Technology team of PwC Advisory Services in Johannesburg. He leads PwC's national privacy practice in South Africa. He is a specialist in information privacy and security. Russell has over 10 years of hand’s-on information privacy and security experience as a Chief Privacy Officer and Chief Information Security Officer developing, implementing, and leading programs for extremely large, complex, and prestigious organizations in the United States. He has particular expertise in the health care and higher education sectors, and also in the public sector.

Plain Language: More than just ‘plain’ words

By Ruth Baitsewe

Documents for consumers have traditionally been drafted in language that is often not understood by the layperson. Since the enactment of the Consumer Protection Act (CPA) on 1 April 2011, drafters of contracts as well as writers of other documents for consumers have become concerned with rewriting their documents into plain language in order to comply with section 22 of the CPA. What these writers do not realise, however, is that the comprehension of a document does not only depend on the words but also on the organisation, form and use of illustrations, headings or ‘other aids to reading and understanding’.

Research has shown that consumers, especially those who need to read documents such as contracts, have a very negative perception of those very contracts that they need to sign. Often this perception translates into the consumer not reading a contract before signing it, as they are of the attitude that a) they would not understand the contract and b) they have no power to change anything that they disagree with in the contract. In addition to that, another major reason for readers not reading contracts is that they do not find them visually appealing.

Readers can often be placed into two categories: readers who read because they want to, versus readers who read because they have to. Readers of consumer documents such as contracts tend to fall within the second category: readers who read because they have to. This means that even before the reader starts reading the contract, he or she has a negative attitude towards the contract placed before them, regardless of what the contract might look like. An unappealing contract further fuels the negativity as a reader is given no incentive to read the document. At no stage does the layout and external structure of the document entice the reader to read it because as writers and drafters, often, when we are confronted with plain language requirements, we are under the mistaken belief that only the words need be understandable. We are not necessarily aware how the design and layout of the document can greatly contribute to the comprehensibility of the contract.  

How could the external structure or layout increase the reader-friendliness of your document? External structure is a mechanism that can aid your reader to engage with the content of your document. The reader will be more motivated to read your document because the external structure empowers the reader to read selectively. Some of the elements of external structure that can be used are:

  • descriptive headings;

  • table of contents (for longer documents);

  • text boxes to highlight important text sections;

  • legible font type and size;

  • white spacing; and

  • capital letters.

For example by making use of descriptive headings, a writer enables the reader to find, understand and use the information they need within a document as soon as possible. In addition to descriptive headings, a table of contents can help the reader to navigate a document much faster. A technique that is not widely used for contracts yet, are the use of text boxes to highlight important information with a document. Instead of using bold, italics or underlining, text boxes help to draw the reader’s eye immediately to the blocked information. This technique is very effective only when used sparingly; it can lose its effect when overused.

As illustrated briefly in this article, the CPA gives writers the opportunity to focus on the needs of their readers for the information and the structure that would best assist understanding of the content of the document. Although it is still early days yet for the CPA, writers can make use of usability testing to ascertain how consumers experience their documents. This tells one what consumers really would consider plain and understandable language. By testing a document on a number of consumers within the same class, a writer can, firstly, obtain a fairly clear picture of consumers’ experience and comprehension of the document. Secondly it would be an opportunity to build a positive relationship with consumers by projecting a favourable image.

Ruth Baitsewe is the head of the Unit for Document Design at the Stellenbosch University (SU) Language Centre. The SU Language Centre offers specialist training in plain-language usage which includes critical analysis of documentation, usability testing, reader-focused testing, redesign and rewriting of organisational documentation. Visit the Stellenbosch University Language Centre’s website at

[From the editor: This article should be read with ‘In search of the plain language standard’ which appeared in the April edition of CLR. Archived editions are available from]

Treating Customers Fairly or the Consumer Protection Act?

By Warren Radloff and Elizabeth de Stadler

The Consumer Protection Act is dead, long live Treating Customers Fairly? This is something that many compliance officers may well have been thinking, upon hearing about the Financial Services Laws General Amendment Bill, 2012 (the Bill). Section 65 of the Bill proposes to amend section 28 of the Financial Services Board Act to exempt any financial service, product or institution regulated by the Financial Services Board (FSB) and the FSB itself from the scope of the Consumer Protection Act (CPA). This is quite a wide exemption as the financial services and products contemplated here are banking services, insurance products, pension funds, collective investment schemes and security services.

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 contend 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.

This could be addressed in a number of ways.

Firstly, if the FSB chooses to follow a principle-based approach, then the Bill must introduce a Treating Customers Fairly principle into FAIS. For example by adopting the following paragraph:

6 B Treating Customers Fairly

(1) The Registrar, for the purposes of this Act, by notice on the official website must determine requirements for financial services providers that oblige them to pay due regard to the interests of their customers and treat them fairly.

Secondly, experience has shown that TCF - as a principle-based approach, is more inclined to incremental development through a process of give and take between stakeholders and the regulator, than the immediate implementation of strict guidelines. Such a principle-based approach allows the regulations to be sufficiently flexible to deal with unusual products and services, while at the same time not compromising the commitment to quality and adequate consumer protection. In contrast a static approach i.e legislation, runs the risk of being rapidly dated and inappropriate for products and services which are, like the financial services sector, constantly evolving. For this reason a principle-based approach is preferable on a theoretical level. However, this will be a small consolation for South African consumers as the TCF policies may not be sufficiently developed in time to provide for a higher standard of consumer protection when the CPA protections are removed.

This concern could be addressed by adopting the following paragraph:

6B (2) Up until [date], no provision of this Act must be interpreted so as to prevent a consumer from exercising any rights the consumer already had under the Consumer Protection Act 68 of 2008.

This insertion is in keeping with the provisions of the CPA relating to the concurrent application of legislation. In this regard section 2(9) provides that if there is an inconsistency between the CPA and another Act--

(a) the provisions of both Acts apply concurrently, to the extent that it is possible to apply and comply with one of the inconsistent provisions without contravening the second; and (b) to the extent that paragraph (a) cannot apply, the provision that extends the greater protection to a consumer prevails over the alternative provision.

There are concerns arising from the concurrent jurisdiction between the various ombuds in the financial industries to which the Bill applies, i.e the FSB and the National Consumer Commission (the NCC). The CPA also contains provisions aimed at addressing that contingency. First, any regulated industry can apply for an exemption from all or part of the Act in terms of s 5(3). The banking, collective investment schemes, pension fund and security services industries have in fact all made use of this section already. A second option would be to conclude an agreement with the NCC in terms of 97(2) to ‘co-ordinate and harmonize the exercise of jurisdiction over consumer matters within the relevant industry’.

In light of these measures in the CPA, it seems unnecessary to deprive consumers of their rights. The CPA should remain in force until such time as the FAIS Act is amended and TCF is implemented. Only at this point will it be appropriate to consider the exemption of the financial services industries from the operation of the CPA.

Warren obtained his B Juris and LLB at the University of Port Elizabeth and his LLM at the University of Cape Town. Warren has lived in UK for the last 8 years where was admitted as a Solicitor of the Supreme Court of England and Wales and obtained an Investment Management Certificate from the CFA Society of the UK. In the UK he worked for the Financial Services Authority where he specialised in the regulation of Asset Management firms and Banks before joining Kinetic Partners LLP in 2008, one of the leading Asset Management consultancies in London. Warren is a member of the FAIS committee of the Compliance Institute of South Africa and currently advises clients on various aspects of the financial services sector in South Africa and Europe where he can bring his considerable international experience to bear.

Section 85(9)(c): Breaking the NCA’s big stick

By Paul Esselaar (a partner at Esselaar Attorneys (

One of the biggest threats to credit providers who failed to register with the National Credit Regulator was that their failure to register could result in their entire debtor’s book being forfeited to the state (in addition to the forfeiture of interest and other charges). The good news for credit providers is that on 17 April 2012, the Western Cape High Court held that the responsible section of the National Credit Act (section 89(5)(c)) is inconsistent with the right to property as found in section 25(1) of the Constitution and thus invalid.

While this matter is on its way to the Constitutional Court for confirmation, it is useful to consider the background to this matter and the implications for credit providers.

In this matter the Applicant, Mr Oosthuizen, loaned a total amount of R7 million to his erstwhile friend, the first Respondent, Mr Boonzaaier, for the purpose of property development in Cape Town. There were two loans which were concluded in 2009 and the Respondent duly failed to repay the loans on the due dates.

The Applicant then applied for the sequestration of the first Respondent and was successful in obtaining a provisional order. He failed to obtain a final order before Judge Binns-Ward, due to some difficulties raised by the judge relating to the National Credit Act (NCA). It emerged from the matter that although a sum of R7 million rand had been loaned to the first Respondent, the Applicant was not a registered credit provider at the time, nor did he apply to be a registered credit provider, as he was required to do in terms of section 40 of the NCA.

Section 89(5) provides that if a credit provider fails to register as a credit provider when it is obliged to do so then a court must order:

  • that the credit agreement was void (not voidable) from the date it was entered into;

  • that the credit provider must refund the consumer any money paid with interest; and

  • any purported rights which would normally be due to the credit provider ‘under the credit agreement’ are either cancelled or forfeited to the state.

It is immediately apparent that it is no exaggeration to call this section the ‘big stick’ of the NCA. The effect of section 89(5) essentially would result in the Applicant no longer being a creditor of the Respondent’s since the loan agreements entered into between the parties were void in terms of section 89(5). As a result, the Applicant (in this case) did not have any standing to bring the application for sequestration and had no option but to challenge the section itself on the basis that it constituted an arbitrary deprivation of property in conflict with section 25(1) of the Constitution.

In defence of section 89(5) the National Credit Regulator (NCR) argued that the failure of the previous Acts governing credit provision (the Usury Act and the Credit Agreements Act) was partly due to there being no overwhelming sanction imposed if a credit provider failed to register. Judge Binns-Ward agreed that the intention of section 89(5) of the NCA is sound (the state had to get control of the micro-lending industry), but added that a great deal was lost in the translation of this intention into the actual provisions of the NCA. The Judge found that there was no way in which section 89(5)(c) could be ‘read down’ to allow it to avoid being inconsistent with section 25(1) of the Constitution, which indicates that, ‘no one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property’. As a result he duly declared section 89(5)(c) of the NCA to be invalid, subject to confirmation thereof by the Constitutional Court.

If this order is confirmed by the Constitutional Court then the practical result of this will be that a credit grantor who fails to register as was required, will be unable to recover interest and charges from the consumer, but will be able to recover the original loan amount from the consumer. Effectively this would place the parties in the position where they were before the loan was granted, albeit with some financial penalty to the credit provider.

In my view, what the NCA fails to acknowledge, is the existence of a group of credit providers who fall between non-arm’s length transactions (such as loans to family) which are exempt from the provisions of the NCA and the registered credit providers. The group normally comprises people who provide a loan to a friend of theirs at least partly for the reason of their relationship. Put differently the provision of credit would never have occurred had there not been some underlying personal relationship between the credit grantor and the recipient. However, this relationship is insufficient – in the eyes of the NCA – to allow for the exclusion of that loan from the ambit of the NCA.

Clearly, this area is quite a slippery slope. If the NCA would have allowed for ‘friendly’ loans to be excluded from the ambit of the NCA, there can be no doubt that unscrupulous credit providers would leverage such a provision to run a business where all their loans would have been provided on a ‘friendly’ basis. On the other hand the NCA as it currently stands has the somewhat unintended consequence of forcing people who are not in the business of providing credit (such as employers) to register as a credit providers. This has had a chilling effect on ‘friendly’ loans such as employee loans and loans to friends, as the risk and the burden of compliance are simply too onerous.

Bearing in mind that the unconstitutionality of section 89(5) was raised even when the NCA was in bill form, it seems unfortunate that this result was only arrived at now, five years after the NCA came into force.

Paul Esselaar is the owner of Esselaar Attorneys, which focuses on commercial law in general with a specific emphasis on the areas of consumerism, credit, ICT, companies, compliance and financial services.  His background as a legal advisor for a software company and as part of the Western Cape Law Society’s ICT committee ensures that he has a good understanding of how technology interfaces with law. He has presented on the National Credit Act throughout South Africa and on the Consumer Protection Act and is a WASPA adjudicator and Notary of the High Court.


‘Nominalisation’ occurs when a verb is turned into a noun. Avoid nominalisation where possible by changing nouns into active verbs. This will make sentences more direct and easier to read.

  • Nominalisation: The accused submitted an application for bail.

  • Active verb: The accused applied for bail.

Another example:

  • The company is tasked with the management of the pension fund.

  • The company manages the pension fund.






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