Consumer Law Review - June 2015

Published on: Jun 30, 2015

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June 2015

Dear Consumer Law Review recipient

It has been a while since our last edition. In the mean time Juta has published A Guide to the Protection of Personal Information Act and Commentary on the Consumer Protection Act.

In this edition we discuss the Consumer Goods and Services Ombud scheme which was formally accredited in March 2015. Given the width of the definition of this industry, most suppliers of goods or services to consumers will now be required to comply with its Code, register with the Ombud and contribute towards its funding. A failure to do so constitutes non-compliance with the CPA.

March 2015 also saw the publication of the National Credit Amendment Act 19 of 2014, which took effect immediately, leaving some credit providers scrambling to become compliant. Paul Esselaar explains the changes brought about by the amendment.

POPI has moved a baby step closer to being in force. It has been slow going, but that gives us more time to think about what it means for specific industries. From next month we start a new series of articles called ‘POPI in action’. We will be discussing the application of the Act to specific topics and industries. We will start with POPI and Human Resources.

Forms are not always seen as legal documents and therefore plain language principles are not often applied. But, if you think about it, contracts are often concluded by the submission of application or order forms, making them legal documents in their own right. Plain language requirements aside, if consumers don’t understand forms, they won’t fill them out correctly which will prevent a transaction from being concluded. This month’s plain language tip discusses some ways in which you can make forms more understandable.

Happy reading!

Elizabeth de Stadler

Elizabeth de Stadler is the editor of the Consumer Law Review and a senior associate at Esselaar Attorneys in Long Street in Cape Town ( The firm specialises in consumer law. She is also a founding director of Novation Consulting ( or @NovConSA), a company which specialises in providing regulatory compliance solutions and designing innovative and effective ways to communicate ‘legal’ documents to consumers. She is the co-author of A Guide to the Protection of Personal Information Act (Juta) and a contributor to Commentary on the Consumer Protection Act (Juta).



- The CPA ‘mega ombud’: Introducing the Consumer Goods and Services Ombud

- NCA amendment places pressure on credit industry

- POPI: Where do we stand?

- Plain language tip: 10 ways to design better forms

 The CPA ‘mega ombud’: Introducing the Consumer Goods and Services Ombud (CGSO)

By Elizabeth de Stadler


On 30 March 2015, the Consumer Goods and Services Ombud Scheme and Code of Conduct was accredited by the Minister of Trade and Industry. The event passed largely unnoticed, but it is important to discuss its importance now.

It is mandatory

Compliance with the Code of Conduct is mandatory. This is the result of section 82 of the Consumer Protection Act (CPA) which provides that it is prohibited to contravene an industry code which has been accredited by the Minister. To reinforce this, section 4.2 of the code provides that ‘[i]t is mandatory for all Participants above to comply with the provisions of this Code, to register with the CGSO in accordance with the procedures provided on the CGSO website from time-to-time, and contribute towards the funding of the CGSO’.

In short, if a supplier is part of the Consumer Goods and Services Industry they must register with the CGSO and pay the prescribed registration fee (you can read about participation fees here).

But who is this Consumer Goods and Services Industry? Is the application as wide as it seems?

To whom does it apply?

In the Code ‘Consumer Goods and Services Industry’ has been defined as ‘all Participants and/or entities involved in the Supply Chain that provides, markets and/or offers to supply Goods and Services to Consumers unless excluded in terms of clause 4.4 hereof’ (section 3.1.10). ‘Participant’ is defined as ‘any entity operating within the Industry bound by the Code unless expressly excluded by clause 4.1 hereof’ (section 3.1.29). So in short it seems that the industry is defined as anybody who sells anything to consumers (as defined in the CPA) except if they have been expressly excluded by the CPA or by the Code itself.

The Code exempts the following from its application:

  • transactions which are exempt from the CPA (see the definition of consumer with section 5(2) of that act) (section 4.4).
  • suppliers who are regulated elsewhere by other public regulation (section 4.1).
  • suppliers who are subject to another Code accredited by the Minister of Trade and Industry in terms of section 82 of the CPA. To date only the Motor Industry Ombud enjoys this status (section 4.1).
  • ‘Electronic Communication Services’ as defined in section 1 of the Electronic Communications Act 36 of 2005).
  • transactions with organs of state (clause 4.4).
  • transactions with financial institutions (clause 4.4).

In terms of section 10.3 of the Code, the Ombud’s jurisdiction is limited by some factors in respect of specific claims. The most noteworthy limitation is that the Ombud does not have jurisdiction where the consumer has legal representation. The remaining limitations concern standard limitations such as prescription, vexatious claims or claims which fall within the jurisdiction of another ombud or court.

Essentially what this means is that the National Consumer Commission has out-sourced its alternative dispute resolution to the CGSO − Adv Neville Melville (the CEO and Ombudsman) refers to the CGSO as ‘a mega-ombud scheme’ (see the CGSO Annual Report for 2014/15). For those who have been frustrated with the NCC in this regard, this ought to be good news and it will leave the NCC free to prosecute systemic issues.

What duties does it impose?

In addition to the duty to register and pay the required fees, the main duty it introduces is that suppliers must have an effective complaints handling process (section 5.1.1). In addition it is required that the CGSO’s ‘decal’ must be displayed to indicate that the supplier is subject to the Code and how the CGSO can be contacted (section 5.1.2).

Another central duty is that suppliers will now be required to keep detailed records of all complaints for 3 years. The information which must be retained includes the details and nature of the complaint, the number of similar complaints, details of the resolution of the complaint (such as the remedies offered to the consumer and whether they were accepted or not), the time taken to deal with the complaint, an explanation of why the complaint could not be resolved and a record that the consumer was referred to the CGSO (section 5.1.6) This duty is important as it will enable the CGSO and by extension the NCC to monitor compliance and detect recurring claims which may indicate prohibited conduct on the part of the supplier.

Suppliers are required to ensure (and should keep records of) that the relevant staff and agents are trained on the CPA (and regulations), the Code and its own internal complaints-handling process (section 5.1.5).

What happens in the event of non-compliance?

The Code has not given the CGSO the power to make binding determinations. It is an alternative dispute resolution agent. However, contraventions of the Code or the CPA will be referred to the NCC (a protocol has been put in place). In addition the National Consumer Tribunal can be approached to declare conduct to be prohibited under the CPA.

To their (and the CGSO’s) credit, many suppliers (91 suppliers in total) have already registered. They include all the major retailers, many furniture suppliers, restaurants, a telecoms giant and some manufacturers and producers. Many suppliers are either unaware of their obligation to register or are employing a wait and see approach. Whatever the case may be, they will be required to register the first time the CGSO receives a complaint about them or risk being prosecuted for prohibited conduct under the CPA.

Is this a good or bad development?

Undoubtedly, the ‘industry’ will not be happy with the registration fee, but on the whole it is important to support the Ombud. The Consumer Protection Act is here to stay and any development which may lead to certainty should be supported. The decisions thus far have been of a high quality and fair. More importantly, they are available on for all suppliers (and their attorneys) to see. In addition the Ombud has published several ‘advisory notes’ on contentious parts of the CPA which are available on its website.

 NCA Amendment places pressure on credit industry

By Paul Esselaar

On the 19th of March 2015 the National Credit Amendment Act 19 of 2014 was published. The amendments set out in this amendment Act came into force immediately leaving all credit providers, credit bureaux and debt counsellors with insufficient time to become compliant. Frankly, it beggars belief that a parliament and the president of South Africa could expect the multi-billion Rand credit provider and credit bureau industry to change their business processes overnight and, of course, they have not. Be that as it may, the National Credit Act (NCA) is now a different beast as a result of the amendment Act and so it is useful to consider from a high level the changes that the amendment Act has made.

Payment Distribution Agents and Alternative Dispute Resolution Agents must be registered (s 44A)

While the NCA made provision for the registration of credit providers, credit bureaux and debt counsellors, a curious gap emerged in practice in that payment distribution agents (people who receive the money from debtors under debt review and pay the money over to the creditors) emerged in an almost organic way and were largely unregulated. The amendment Act changes this and forces payment distribution agents and alternative dispute resolution providers (people who help reach settlements between debtors and creditors by means of negotiation, mediation and arbitration) to register with the NCR and be subject to various administrative requirements.

The NCR has more scope to refuse applications to be a credit provider (s 45) and can levy administrative fines if organisations fail to renew registration on time (s 51)

In the past the NCR has been somewhat restricted in its ability to refuse an application to become a credit provider. The amendment Act provides significantly greater power to the NCR to refuse to approve the registration of a credit provider based on criteria that the Minister of Trade and Industry can prescribe. In addition (s 48) the NCR can now assess an application to become or renew the registration as a credit provider in terms of a Code of Conduct and affordability assessment regulations when deciding whether to allow the applicant to register as a credit provider.

The NCR has the power to levy administrative fines if organisations fail to renew their registration on time (s 51).

A debtor can require a debt counsellor to provide a clearance certificate (s 71)

The amendment Act makes the provision of a clearance certificate mandatory rather than discretionary and further provides penalties if the debt counsellor fails to provide the clearance certificate to the NCR and the credit bureaux. Crucially the clearance certificate must now be provided if the debtor is up to date on the rearranged debt (rather than the terms of the original debt) which has created significant unhappiness with credit providers who argue a debtor who is not up to date to his/her payments in terms of the original agreement should not be provided with a clearance certificate. This has the further (unintended) effect of creating a disincentive for credit providers to agree to a repayment plan. However a repayment plan can be mandated by a magistrate in a debt restructuring agreement so this is not necessarily within the control of the credit provider.

Affordability assessment guidelines are now mandatory (s 82)

In the past the affordability assessment that a credit provider performed was based on the credit provider’s own business rules. Now, as a result of s 82, there is much less flexibility as the credit provider must follow the NCR’s affordability assessment guidelines.

Termination of debt review just got harder (s 86)

In the past it was unclear when credit providers could terminate a debt review. In essence what would happen is that the debtor would apply to court to go under debt review, but, pending the hearing of this application, 60 business days would elapse and the credit provider would then terminate the debt review before the actual hearing date occurred. Section 86 now prevents credit providers from terminating the debt review if an application has been made but not yet heard.

Automatic forfeiture of loan removed (s 89)

In s 89 of the NCA a court was required to forfeit the proceeds of a loan to the state if the credit agreement was unlawful. This requirement has now been deleted (as a result of a Constitutional Court ruling) and the court is now empowered to make a ‘just and equitable order’.

Selling of prescribed debt illegal (s 126(B))

In the past credit providers have sold their debtors book to various people where the debts in question have prescribed (older than 3 years). The purchasers of these debts then use various methods (generally not including the courts) to obtain the money from the debtors despite the debtor not needing to pay the debt as it has become prescribed. Section 126(B) now makes the act of selling a debtors book of prescribed debts illegal.

Section 129 letter must be delivered in person or by registered mail (s 129)

Despite it being clear that registered mail has an extremely poor delivery rate, s 129 has been amended to require that a s 129 letter (which suggests that the debtor consider debt review as a result of defaulting on the terms of the credit agreement) must be delivered in person or by registered mail and that the choice of the method of delivery is up to the consumer. This has a potentially massive effect, because the consumer can elect that not only the summons but also the s 129 letter must be delivered by a person (quite possibly the sheriff could deliver both, although only the summons must be delivered by the sheriff). This amendment is likely to increase the cost of recovering debts particularly if consumers are aware of this and consistently require personal service of the s 129 letter. Even worse there is the likelihood that the recipient of the s 129 will refuse to sign the acknowledgement of receipt as required by s 129(7) making it difficult for a credit provider to prove compliance with s 129 (which is required before a summons can be issued).


Reckless lending can be determined by the National Consumer Tribunal (NCT) (s 134)

The NCT’s powers have been expanded to allow it to consider reckless lending and – in so doing – provide a cheaper and easier alternative for consumers to follow to have their credit agreement declared to be a case of ‘reckless lending’. This is probably good news for consumers and bad news for (some) credit providers who rely on the procedural difficulties facing debtors to avoid allegations of reckless lending.

Training by accredited providers is now mandatory (s 163)

The amendment Act now makes it mandatory for credit providers, debt counsellors and payment distribution agents to make their employees undergo training. In addition the training that is provided must be at a standard that the Minister prescribes.

 POPI: Where do we stand?

By Elizabeth de Stadler

POPI was signed into law on the 19th of November 2013. Since then there has been a lot of noise (mostly from attorneys – including this one), but very little by way of any real indication of when the Act will come into effect.

Here is a reminder of what needs to happen next: The President has to publish a commencement date in the Government Gazette. Different dates can be prescribed for different sections of the Act, different bodies or even different classes of information. Once the commencement date is published, responsible parties have to be compliant within 1 year. This period can be extended to a maximum of 3 years in respect of certain classes of information or bodies.

The commencement date has not been announced yet. So, in short, we don’t know when the Act will be in force. However, there has been some movement on the appointment of the Information Regulator. The following paragraph appeared in a speech by the Deputy Minister of Justice and Constitutional Development on the 19th of May 2015:

‘I am pleased to announce that with regards to the appointment of an Information Regulator in terms of the Protection of Personal Information Act, that agreement has been reached with treasury on the grading of the Regulator and a letter will soon be sent to the Speaker, requesting her to initiate the nomination process envisaged in section 41 of the Act. This section requires a multi-party committee of the National Assembly to assist with the nomination of persons who are eligible for appointment as members of the Regulator. The appointment of the members of the Regulator will, in turn, facilitate the commencement of the remainder of the Act.’*

Clearly, we are still a long way away from POPI being enforceable. So why bother now as many companies are? Because good information governance and security is good for business and has become a prerequisite for trade (particularly with countries who have their own data protection laws). Increasingly, information is recognised as an asset and deserves protection. Lastly, consumers have the expectation that their personal information will be treated responsibly. This is and will remain to be the case with or without POPI.

In our next edition we will start a new series on POPI dealing with its application to specific industries or activities. We will start the series with a topic which will be relevant for every company in South Africa: POPI and Human Resources.

*Another interesting reference in the speech is to the Cybercrimes and Related Matters Bill which will be released for comment by the Department for public comment soon.

 Plain language tip: 10 ways to design better forms

Many consumer contracts reach consumers as part of an application form. While most attorneys will not consider the form as part of the contract, it often is because the form describes the product and price – the essential terms in a contract of sale. Terms and conditions are also often integrated with the form. All the rules set out below applies to them too.

Plain language has as much to do with the way you package and present your information as the words you choose. Essentially, design elements contribute to your reader’s first impression of your document and shape the attitude with which they approach the form. Always remember that readers of forms and terms and conditions are reluctant readers. This means that forms and terms and conditions have to be as easy to read as possible in order to encourage the reader to read them.

Whether you’re using printed or online forms, here are 10 ways to improve your forms today.

1.      Use more white space. You probably don’t have enough white space on your form, especially if it is a printed form. White space is one key element that you can use to make a form look more appealing and easier to complete. Surrounding information with blank space emphasises its importance.

2. Choose a legible type size. This sounds easy enough, but you really have to consider the needs of your audience. The average reader will be able to read 10 point type without too much effort.

3. Avoid using all capitals. Lower case letters with their ascenders and descenders (the portions of letters that extend above and below the mean line of a font) create more distinctive outlines than capitals and are easier to read.

4. Use bold and italics sparingly. While bold text is very useful for emphasis it decreases legibility when large strings of text are presented in bold. The dense black type tends to create after-images, noticeable as bright glowing areas between lines. Italics are less legible in continuous text and low literacy audiences will find that they make the text look blurry. Rather find other ways to emphasise important terms. But, always remember that if everything is emphasised nothing is emphasised.

5. Avoid centering text. Centering text in the middle of the page is a problem for less skilled readers because they tend to lose the flow of text and there is no rhythm to reading the text.

6. Use the optimum line length of between 60 and 65 characters per line. The minimum line length for comfort is about 40 characters.

7. Avoid full justification. Align your text flush left with a jagged right edge. This also makes for an easier read.

8. Choose text and background colours with enough contrast. Most readers fare best with black text on white background. If you use colour for emphasis consider how it will look if the reader prints the form. Consider using a darker colour for text and a lighter colour for lines or blocks to decrease the clutter on the form.

9. Use graphics, illustrations and screens carefully. Graphics and illustrations are often useful in explaining a concept, but they can just as easily clutter the page. You should place them carefully so that they do not interrupt the normal flow of reading. Avoid any images or screens behind the text as this will make it hard to read − especially to low literate audiences.

10 Choose lines over blocks in most cases. Form designers often use blocks in an effort to encourage the reader to write legibly. Research has shown that providing blocks doesn’t have this effect and in fact slows down the speed at which the information is provided and captured. Using lines is much more efficient. Blocks are useful for numerical information such as ID numbers and birthdays.

Don’t miss the next edition when we’ll talk about Language and Logic in form design.

© Stellenbosch University Language Centre and Elizabeth de Stadler

Commentary on the Consumer Protection Act
Advertising Law
Guide to the Protection of Personal Information Act, A



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