Consumer Protection Act demands a lot of homework for most companies

The Consumer Protection Act (CPA) which is due to come into effect on 31 March 2011 is complex legislation that will have an impact on everybody, holding serious ramifications for all individuals, companies and organisations that sell products or provide services.

The financial threshold that will for most of the CPA exclude companies from protection under the Act is currently proposed at R3-million either in turnover or in assets.

Ettiene Retief, a tax and corporate law specialist at FTR Tax and Corporate Administration, says all service providers, retailers, and generally all businesses, will have an obligation to apply the Act and to protect the rights of consumers.

“Nevertheless, if providers of goods and services fail in their obligation to meet the terms of the Act, the legislation allows for a penalty of R1-million or 10% of annual turnover, whichever is the greater. The Act also requires that products for sale must be properly packaged with all required warnings, no false statements or empty promises and clearly priced, including the VAT portion.”

The CPA is a very complex and very detailed Act, together with the pending regulations, and businesses of all sizes will have to ensure that they become familiar with the requirements that will affect their operations.

To help SME businesses understand and cope with the provisions of the Act, Softline Pastel Accounting and Payroll software developers, is hosting a seminar at which Retief will provide a simplified overview in plain language and highlight the most important aspects in achieving compliance with the new law.

“This Act has been promulgated and is therefore legislation; it just has not been applied as yet. Companies now have a four-month window in which to organise themselves, become familiar with it and implement the applicable sections,” said Retief. “Its complexity means that companies will have to devote time to clearly understand their obligations.”

The depth of the Act leaves no stone unturned. It deals with consumer rights over a broad perspective ranging from fixed term contracts, limited time periods, cancellation clauses, notice terms, penalty clauses, refunding of deposits and the right of persons to have a contract prepared in a language they can understand, among others.

Retief says the Act stipulates the use of plain language for contracts with short concise sentences, no contradictions, explicit conditions and no “legalese”, even though this may initially be difficult to apply and control.

“The objective is to ensure that the person the contract is intended for will be able to fully understand it. The default language is English but companies must be prepared to offer alternative languages that suit the demographics of the area or areas in which the company operates.”

To illustrate the depth of the CPA, Retief refers to some examples. When a person takes a car to a service organisation such as a panel beater for repairs, the panel beater must provide a written estimate. If that estimate changes at any time the customer must be immediately informed or the customer can insist on paying the initial price quoted if the amended estimate was not accepted. The estimate must be accepted prior to work being performed.

“The Act describes very clearly the process of estimates when goods are taken for service or repair to the extent that any organisation that does not properly follow the cost estimate process, will be at great risk.”

Retief adds that all goods and services must be priced including VAT when the supplier is a registered VAT vendor, in terms of the Value-Added Tax Act. Consumers must be able to identify the price for each product item especially in the retail environment. If two prices show on a single product, the lower price applies. If a consumer presents a product at the till and is told the price on the package is incorrect and the actual cost is higher, the price originally on the product will be paid.

The well-known “terms and conditions apply” that consumers regularly see on product promotions must be done in such a way that the consumer can review the terms and conditions before accepting or signing on the dotted-line.

“This is indicative of the detail explored by the Act,” says Retief. “It is clearly telling retailers and other businesses that consumers must be fully informed so that they can make the best choice when purchasing goods on the basis of what you see is what you actually get, with no surprises.”

The Act is also explicit regarding the return of faulty goods, obligation to repair, replace or provide a full refund.

“The consumer’s right to choice and to quality, safe goods is strongly supported by the Act. The seller can no longer offer the buyer a credit note to buy something else. If the product packaging claims that a drill will go through 10mm thick steel and it does not, the buyer should be entitled to a full refund.”

“It is now the consumer who dictates what he wants, in terms of replacement or repair. If a supplier repairs and the product fails again within three months the Act requires the supplier to replace the goods or refund the full price paid.”

Retief summarises by saying nothing escapes attention in the Act. Warranties, contracts, renewals, cancellations, use of trading names, marketing, advertising, consumer contact lists and many more have all come under the spotlight. “Companies have a lot of homework to do to ensure their compliance.”