Secondary

FAIS and the CPA

The Consumer Protection Act is a landmark piece of legislation, aimed at protecting consumers from dubious business practices. The FAIS Act aims to regulate financial advice and intermediary services, with the stated intent of achieving the same objectives. The “Treat the customer fairly” initiative is a further step in this direction.

In an article published in FANews on 9 September 2009, Amelia Costa, Associate, Deneys Reitz Inc, summed up the purpose of the CPA as follows:

The CPA is aimed at establishing a uniform national benchmark for improved standards of consumer protection and at promoting historically disadvantaged market participants’ rights.

The CPA came into operation in October 2010. In the meantime, suppliers such as insurers have an opportunity to redraft their agreements and to offer the required insurance to the suppliers of goods and services.

The CPA applies to any goods or services nationally promoted or supplied.

“Services” include services provided by insurance companies but the Short-term Insurance Act and Long-term Insurance Act (“the Insurance Acts”) are excluded from the CPA’s ambit, subject to these Insurance Acts being in line with the consumer protection measures stipulated in the CPA by April 2011.

A legal update dated 5 June 2009 from Momentum elaborates on this matter:

The Long Term and Short Term Insurance Industries have been given a reprieve from the provisions of the Act for a period of 18 months, after which the Acts governing the industries must amend the respective Acts to be aligned to the Consumer Protection Act, failing which the provisions of the Consumer Protection Act will apply.

I am not aware of such changes to the Long- or Short-terms Acts having been published in the Government Gazette.

Until these changes are effected, there is no safety net for consumers of financial services products under the Consumer Protection Act. Given that a defective toaster or kettle is a far less serious financial risk than the kind of monetary lay-out involved in financial services, one must express the hope that these changes will be implemented soon.

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