Redressing cellular and the CPA

May 03 2011 10:18
Simon Dingle
SOME weeks ago I wrote about the new Consumer Protection Act (CPA) and what it means for cellular subscribers in South Africa. The information that article contained was accurate at the time of writing, but things have since changed prompting some reaction from readers and requests for a revisiting of the subject.

It is a matter of great concern to South Africans who are fleeced for telecommunications services and have, in the past, been bound by service provider contracts that Satan himself would be proud of.

The legislation that relates to cellular service providers and their subscribers has changed since my last article on the topic. At the time, draft legislation indicated that only 10% of outstanding contract fees could be included in the penalties subscribers would pay for late cancellation. They also suggested that service providers would have to accept used handsets back from consumers in lieu of outstanding payments on those handsets.

This was quite harsh on service providers, but it was hard to feel sorry for them given what they got away with in the past.

That was before the service providers made their submissions to authorities and the legislation was finalised.

In its final form the legislation is less restrictive for service providers. It is also rather vague on exactly how much you will be expected to pay for the early cancellation of contracts. In short, while consumers will have greater recourse in the future, I'm afraid there won't be much of a difference in terms of how easily one will wiggle out of contracts.

Now, the regulations stipulate that the calculation of reasonable contract cancellation charges have to take 10 points into consideration. 

These points include some sensible considerations, such as outstanding contract fees up to date of cancellation, the consumer's average monthly spend, the value of handsets that will remain with the consumer after cancellation and those that will be returned to the service provider, the duration of the initial contract, losses suffered or benefits accrued by the consumer and the length of the cancellation notice.

However, they also contain some subjective and potentially vague matters, like the "reasonable potential" of the service provider to find an alternative consumer, general practice of the relevant industry and the nature of goods and services that were detailed in the contract.

In the final version of the CPA it refers to "cancellation charges" instead of "penalties", but it seems there is leeway for cellular service providers to lash consumers for cancellations.

The act also doesn't do much to curb contract periods. The usual 24-month contracts are still allowed, and the act even makes it possible to have 36-month contracts, as long as "demonstrable financial benefit to the consumer" is shown.

The contract terms we have in South Africa are fairly typical of what you will find in most of the world. Contracts of 24 months are common in the USA and UK, for example - although prices are somewhat lower than what we pay in South Africa for instalments, data, and especially voice calls.

The stipulation of the CPA relating to demonstrable financial benefit to consumers is wish-washy and doesn't do much to encourage more reasonable fees and cancellation charges. How does one demonstrate financial benefits? Will this calculation take the spending patterns, income and personal budgets of each cellular subscriber into consideration?

That said, the CPA is a vast improvement over what we had before. It allows for recourse where consumers feel they have been wronged. It also brings the national consumer commission (NCC) into being as a body that will enforce the National Credit Act and protect consumers.

Controversial former director general of the department of communications Mamodupi Mohlala has been made commissioner of the NCC and she is about the last person in SA you want to tangle with - just ask Siphiwe Nyanda if you don't believe me. I can't imagine a much better bulldog to be put in charge of consumer rights.

Ultimately, however, it is the free market that does the best job of protecting consumers. In a highly competitive environment customer service and fairness towards consumers is a differentiator and something that service providers have to be better at than their competitors if they are to retain customers.

You might not like hearing this - but the service providers also have their own businesses to protect and contracts are a form of commitment that shouldn't be taken lightly. Consumers are more likely to make bad decisions about signing contracts if those agreements are easy to get out of later.

A contract is serious business and South Africans should be less eager to sign them. The CPA brings a reasonable level of protection while still making contracts serious business.

You should think twice before you sign with anybody. And that shouldn't change.
consumer protection act



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