A lack of clarity plagues the cellular industry, as operators insist subscribers cannot use the Consumer Protection Act (CPA) to get out of deals that predate the new law.
This contradicts the National Consumer Commission's (NCC's) position. The NCC argues that the CPA protects all consumers, allowing them to get out of contracts easily without paying hefty penalties, regardless of when the deal was inked.
However, mobile service providers are adamant this is not the case, and contracts signed before 1 April are subject to the old regime, under which heavy charges can be levied if deals are cancelled before they run to term.
The CPA makes it possible for subscribers to get out of fixed-term contacts by giving 20 days' notice. In addition, cellphone companies are prohibited from charging hefty penalties when contracts are canned.
According to the regulations, which give effect to the Act, only a “reasonable” cancellation fee can be levied. The regulations do not spell out a specific penalty, but provide guidelines on how to work it out.
The new law also resulted in the creation of the NCC to protect consumers, who can lodge complaints with the body.
Fair is fair
NCC commissioner Mamodupi Mohlala says the CPA applies to all fixed-term contracts, including those entered into before April, because the deals operate on a monthly basis.
The “harm” consumers suffer by being stuck in fixed-term contracts is “ongoing”, yet operators only stand to lose a small amount of revenue, which can be recouped by a reasonable penalty, she notes.
Vodacom charges 75% of the balance of the deal, while MTN will charge a month's subscription and R1 710 for the handset, and Cell C says a reasonable fee linked to the value of the handset will be levied.
Previously, cancelling contracts was an expensive exercise as penalties were levied in addition to the total outstanding amount of the contract. This practice still seems to be alive and well, despite changes in cellphone companies' official position, as a recent ITWeb investigation revealed.
Tough luck
The differing standpoints and interpretations leave consumers with no easy way out.
Vodacom's executive head of corporate communications, Nomsa Thusi, says all contract customers can get out of fixed-term deals by giving 20 days' notice, but they will pay a penalty of 75% of the balance of the contract. Previously, this amount was 100%.
MTN's chief service officer, Robert Madzonga, says: “MTN is of the opinion that 24-month contracts entered into before the CPA became effective are not covered by the CPA.”
However, if the contract was set to run until two years after the CPA came in, it would fall under the new law, explains Madzonga. MTN stands by its interpretation, despite Mohlala's position, as does Cell C.
Cell C group general counsel Graham Mackinnon says the CPA “clearly states” it does not apply to “the marketing of goods or services or transactions or agreements” entered into before it came into effect.
Nashua Mobile's executive head of marketing, Tim Walter, argues the CPA only covers contracts that were entered into after it came into operation, unless contracts expire more than two years after 1 April 2011.
Walter adds cancellation fees are worked out taking into account the circumstances of each case, which is “to a large extent” in line with the regulations.
Justin Hume, Autopage's marketing director, says the CPA only applies to previous fixed-term contracts in certain instances. However, the company has taken the decision to apply the Act to older contracts and will charge a “reasonable” cancellation fee, usually the “balance of contract”.
Deliberately obstructive?
Stephen Logan, of Logan Attorneys, argues cellphone companies are deliberately making it difficult for consumers to cancel contracts. He says the CPA applies to all fixed-term contracts, regardless of when they were entered into and their duration.
Cellphone companies should have resolved these issues long before the Act came into effect, argues Logan.
Operators that stand in the way of the NCC and intentionally obstruct it face hefty penalties, says Mohlala. “It's always wise for operators to co-operate with the commission.”
The NCC is investigating several areas of the ICT sector, including cellphone companies, fixed-line operators and broadcasting, because of the volume of complaints received, notes Mohlala. She says the investigations probe issues with billing, as well as terms and conditions.
Mohlala says an analysis of terms and conditions found that not one contract fully complies with the provisions of the CPA. The NCC is in talks with the operators around this issue, so Mohlala could not provide further details just yet.
Since its inception, the NCC has received almost 300 cellular industry complaints, says Mohlala. The issues reported by consumers include faulty handsets, dropped calls, quality of service, cancellation of contracts, incorrect billing, and expiry of data bundles.
Mohlala points out that the bulk of these complaints have been resolved. However, disputes over consumers' rights to cancel contracts under the CPA will move to the second stage of resolution - conciliation - next month.
Operators are initially given seven days to resolve an issue and, failing that, conciliation is the next step, explains Mohlala. If that fails, the matter goes to the tribunal, where hefty penalties of up to R1 million, or 10% of turnover, can be imposed.
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