Business Tips - The New Consumer Protection Act

BUSINESS TIPS – The New Consumer Protection Act


By Nikki Viljoen – Viljoen Consulting CC - November 2010

There’s a lot being said about the New Consumer Protection Act that came  into effect at the beginning of April 2011 and like so many of the Acts that we are seeing being introduced of late, there are some good things and some potentially bad things.

I am particularly excited about the clause that deals specifically, with fixed term contracts.  Finally, we Joe Public, will get a little relief from some of the wolves that abound.

I have no doubt that we have all been caught by the contract that we sign, originally for one year and then we have about a nano-second to advise them in writing, that we no longer want to continue with the contract, before it rolls over again and we are locked in for another year.

You know the ‘re-newable’ contracts, like the gym memberships or the cell phone contract or what about the newspaper or magazine subscription?  Yeah – those ones.

Come end of March 2011, not only will these clauses have very little effect but we, as consumers, will also be able to cancel any fixed term agreement prematurely!  Now that’s fantastic news.

Sure there is a procedure needs to be followed but the fact of the matter is it can be cancelled and that is what is important.

The Consumer Protection Act, will allow the consumer to cancel the fixed term contract at any time as long as the consumer gives the supplier 20 (yes twenty) business days notice.

The notice has to be in writing or alternatively “in any recorded manner” (beware of the institutions who say that they are recording you for whatever reason – rather make sure and have your own recording).

To be fair, the supplier also is not left without any recourse.  The supplier ‘may impose a reasonable cancellation penalty for any goods, services or discounts that were supplied to the consumer on the assumption that the agreement would continue for the proposed fixed term” according to Roy Bregman of Bregman attorneys.

Oh – and of course, if the consumer stills owes the supplier any money up to and including the period that the contract was terminated – that still needs to be paid, so don’t be thinking that you can just cancel the contract because you are behind in your payments – you will still be liable for those .

That said, if the consumer did not receive discounts or goods or services that the supplier can claim for, the supplier would be hard pressed to find ‘reasonable’ cause to implement the penalty.  I like Roy’s example of this so I am going to use it (thank you Roy).  If you have signed up for two years worth of dance lessons, you are paid up to date and you did not receive any discounts and you cancel the contract 18 months into the deal, the supplier, in this case would find it very difficult to substantiate a reasonable penalty for early cancellation.

Sure a ‘rolling’ type contract would continue and not come to a dead halt.  That would not be good at all if you say had that kind of contract with your internet provider and then suddenly one Sunday morning, you have no internet coverage because your contract expired on Saturday night at midnight.  From what I understand, these types of contracts “would automatically continue on a month to month basis, unless the consumer expressly directs the supplier to cancel the agreement on expiry date or agrees to a renewal of the agreement for a further fixed term” writes Roy.

In the event that a contract carries this clause, the supplier would have to notify the customer about the contract that is about to expire.

The customer would need to be notified, of this during a period of between 40 and 80 business days prior to the existing contract’s expiry date and any changes to the contract should also be notified at that time.  If notification does not take place the contract would automatically be renewed, but would continue on a month to month basis.

Obviously, once the contract is in the ‘month-by-month’ category, either the customer or the supplier would be able to terminate the contract by giving a single months’ notice.

The bottom line of course, is that it is up to the consumer to READ the contract before signing it.  Sure it is up supplier to be transparent and up front with what their expectations are, but consumers also need to take responsibility for their actions.

In conclusion – don’t sign anything that you haven’t read and that you don’t fully understand.

Nikki is an Internal Auditor and Business Administration Specialist who can be contacted on 083 702 8849 or nikki@viljoenconsulting.co.za or http://www.viljoenconsulting.co.za