If the draft amendment to the Consumer Protection Act (CPA) regulations is passed into law, direct marketers will be required to register annually on the opt-out registry, facing penalties for non-compliance. However, it remains uncertain whether financial services, a prominent sector in direct marketing, will be subject to the CPA’s consumer protection provisions.
On 28 October, the Department of Trade, Industry and Competition (DTIC) released draft amendments to the CPA regulations. The proposed amendments, now open for public comment, aim to improve the operational aspects of the CPA regulations. They outline the procedures regarding when, who, how, and where individuals can register a pre-emptive block and the establishment of an opt-out registry.
According to the amendments, consumers will be able to register to block unwanted messages by submitting their personal details, which will be managed by the National Consumer Commission (NCC) to ensure data privacy.
Direct marketers will have to register annually and comply with consumers’ preferences. They will not be allowed to contact individuals for direct marketing unless they have registered on the opt-out list. Marketers will be required to update their databases monthly, avoid contacting opted-out individuals, and ensure transparency in their contact information.
Read: No more spam calls? Proposed amendment introduces opt-out registry
Non-compliance with the opt-out registry can result in violations of the CPA, with complaints filed with the NCC. According to section 112 of the CPA, the National Consumer Tribunal (NCT) may impose an administrative fine, potentially reaching the greater of 10% of the wrongdoer’s annual turnover or R1 million.
In South Africa, electronic communications, including telephone calls, play a significant role in direct marketing. The use of telemarketing is widespread, especially in industries such as financial services, telecommunications, and retail.
Financial products and services are marketed directly through call centres, online ads, and more personal approaches such as agent meetings. Companies in this sector use direct marketing to offer investment plans, insurance products, and retirement solutions.
If these regulations are enacted, the consequences for non-compliance could reshape how companies approach direct marketing strategies.
Financial services, however, could face a unique challenge under these new regulations. Although the draft amendments focus on protecting consumers from unsolicited marketing across various industries, it remains unclear whether financial services will be fully subjected to these CPA protections.
Billy Seyffert, Moonstone Compliance’s chief operating officer, explains that the CPA excludes intermediaries regulated by another act from the CPA and makes some exclusions from the definitions of “services” including advice as provided for in the Financial Advisory and Intermediary Services (FAIS) Act and the banking or similar financial services regulated by FAIS Act or the Long-term Insurance Act (LTIA).
“This results in most financial services not being subject to CPA protections.”
However, he adds that this does not mean that amendments to the CPA cannot be worded in a way to include the marketing of financial products by means of direct marketing.
“It hasn’t done so up to now because of the direct marketing provisions in the General Code of Conduct (GCOC). We’ll have to consider the amendments when they appear before we can really include or exclude it. The other scenario would be to simply make similar amendments to the GCOC,” says Seyffert.
Rosalind Lake, a director at Norton Rose Fulbright specialising in data privacy, cyber, competition, and consumer law, says the draft regulations are mainly updates to regulations introduced in 2011 to develop an opt-out registry that was never established.
“This is part of a general approach of the Information Regulator and the NCC to address consumer concerns regarding unsolicited marketing. This should have no impact on the way in which financial services providers address their direct marketing practices and encourage financial inclusion,” Lake says.
Ahmore Burger-Smidt, director and head of regulatory practice at Werksmans Attorneys, explains that financial services are excluded from the “goods and services” category under the CPA. This exclusion is supported by section 10(1) of the Financial Sector Regulation Act, which distinguishes financial products and services from typical consumer goods.
However, she adds that in instances where the NCC elects to work with the FSCA, a pre-emptive block could be registered in respect of direct marketing of financial products and services.
“Section 9(7) of the CPA specifically states that the NCC may by agreement with another regulatory body regulate matters of common interest. One would surely be able to argue that direct marketing constitutes a matter of common interest. This will then allow for the opt-out registry to cater for the financial services sector as well,” says Burger-Smidt.
Going nowhere fast
Although the amendments to the CPA represent a positive step forward, industry critics argue that the legislation allowing individuals to block unwanted direct marketing communications has been long overdue.
Section 11(1) of the CPA directly addresses the privacy of consumers and direct marketing:
“(1) The right of every person to privacy includes the right to –
- refuse to accept;
- require another person to discontinue; or
- pre-emptively block,
any approach or communication to that person, if the approach or communication is primarily for the purpose of direct marketing.”
Burger-Smidt points out that, since the enactment of the CPA in 2011, provisions have been established for the NCC to create or recognise an authoritative registry. However, she notes, 13 years have passed since the CPA became operational, yet it still lacks an opt-out registry.
“The Direct Marketing Association of South Africa (DMASA) has created its own opt-out database; however, this database is only accessible to DMASA members,” she says.
Balancing interests
Another aspect to consider, says Burger-Smidt, is the complex nature of the direct marketing landscape, with various competing interests, including those of consumers, direct marketers, and regulators.
In 2009, before the CPA came into effect, the South African Law Reform Commission (SALRC) acknowledged the various competing interests within the direct market landscape. She explains that the DTIC made a strategic decision to promote call centres in South Africa and to offer incentives to attract call centre businesses to the country.
“This initiative aimed to ensure that vulnerable consumers have access to goods and services through telemarketing.”
From this premise, the SALRC recommended that a “regulatory framework for direct marketing be promoted that will balance the rights of consumers not to be targeted unreasonably, with the right of business to communicate effectively with the public”.
Burger-Smidt questions whether this balance has been achieved 15 years later.
“It is argued that a delicate balance must be reached, which requires careful legislative regulation. This process involves weighing and balancing the competing interests of consumers, direct marketers, and regulators, as well as considering the direct marketing laws of South Africa, particularly the CPA and the Protection of Personal Information Act.”
She describes the direct marketing landscape as a complex prism, where various competing interests represent different rays of light.
“Ideally, these should converge into a single, unified ray of light that signifies a balanced approach, protecting the interests of all stakeholders. Considering that the proposed amendments aim to improve and strengthen the opt-out registry, this could serve as a constructive starting point.”
