The Financial Sector Conduct Authority says the R700 000 fine it imposed on African Bank for misleading advertising highlights the importance of providing clear and accurate information to customers about financial products and services.
The Authority this week issued a statement about the fine – of which R200 000 was conditionally suspended – that followed an investigation into the bank’s #KeFestive social media campaign flighted in December 2023.
The advert, which featured a well-known public figure, encouraged consumers to take out personal loans with the phrase “It’s not a skoloto chomi! Ke investment”. The FSCA found this statement to be factually incorrect and misleading because it implied that the product was an investment rather than a credit facility.
By misleading financial customers and failing to provide clear and accurate information about the nature of the product, the FSCA said African Bank contravened sections 6(1), 6(3)(a) and 6(3)(b) of the Conduct Standard 3 of 2020, which require the following:
Section 6(1): A bank must ensure that its financial products and financial services are advertised to financial customers in a way that is clear, fair, and not misleading.
Section 6(3)(a): Advertising by the bank must be factually correct; and (b) not contain any statement, promise, or forecast which is fraudulent, untrue, or misleading.
The FSCA also found deficiencies in African Bank’s governance and oversight processes relating to the review and approval of the advert. This was a contravention of section 6(9) of the Conduct Standard, which requires the following:
A bank must have in place processes and procedures for the approval of advertisements and advertising methods by a person of appropriate seniority and expertise within the bank, which must form part of [its] governance arrangements.
The objective of the Conduct Standard is to ensure that banks conduct their business in a manner that prioritises the fair treatment of customers when offering financial products and services.
The FSCA acknowledged African Bank’s co-operation during the investigation, including taking prompt remedial action to address the Authority’s concerns.
The FSCA imposed a penalty of R700 000. However, after taking into account the nature of the contravention, as well as the remedial steps implemented by African Bank, R200 000 of the penalty has been suspended for two years subject to African Bank remaining fully compliant with the Conduct Standard during the suspension period.
The FSCA confirmed that African Bank has paid the R500 000.
The Authority said the fine imposed on African Bank is a reminder that it will not tolerate misleading advertising, particularly as consumers increasingly find themselves under pressure to make important decisions about their financial resilience and well-being.
“For many financial customers, decisions about which financial products to purchase are significantly influenced by information conveyed in advertising and marketing material. Financial customers who rely on misleading adverts or false impressions are more likely to select unsuitable products, which could result in financial losses or other prejudicial outcomes,” the FSCA said.
In this matter, by positioning the product as an investment rather than a credit product, financial customers were misled about, among other things, the longer-term risks and potential costs associated with taking up the product.
Financial institutions must have robust internal governance and approval processes to ensure compliance with all requirements of the Conduct Standard, including the development and publication of marketing material and other key information disclosed to customers.
The FSCA said it will continue to take regulatory action against financial institutions that do not prioritise the fair treatment of customers across their governance arrangements, business processes, and procedures.
