Twin Peaks and the impact of the Consumer Protection Act on financial products and services

Vessio, Monica

Abstract

The Financial Sector Regulation Act came into force on 29 March 2018. The object of the Act is to achieve a stable financial system that works in the interests of financial customers and that supports balanced and sustainable economic growth by establishing, in conjunction with the specific financial sector laws, a regulatory and supervisory framework. It has overhauled the financial services and products sector and repealed and amended several pieces of legislation. The effects of the Financial Sector Regulation Act on the Consumer Protection Act can be found in section 10(1) of the Act. The intention behind section 10 is somewhat oblique. The legislative approach has been to make the Consumer Protection Act applicable to all acts, transactions, functions and financial products and services which are not regulated by the National Payment System Act or any of the financial sector laws that are in themselves subject to the Financial Sector Conduct Authority. However, and despite the specificity of section 10(1)(a), 10(1)(b) exempts too, any matter related to the Reserve Bank, the Prudential Authority, the Financial Sector Conduct Authority, the Prudential Committee, the Executive Committee, the Chief Executive Officer, the Commissioner or a Deputy Commissioner from the application of the Consumer Protection Act, ultimately making the division between section 10(1)(a)and (b) redundant. The National Credit Act is not listed as a financial sector law; however, there is interplay between it and the National Payment System Act and it is therefore not immune to the operations of section 10 of Twin Peaks. The current wording of section 10(1)(a) (whether wittingly or unwittingly) appears to oust the application of the Consumer Protection Act to goods and services that are the subject of a credit agreement once any part of the agreement enters the national payment system. The question remains open as to whether the strict liability and monitoring and recall sections of the Consumer Protection Act would still apply to the supply chain when dealing with the financial sector, and it is unlikely that section 10(1) can be labelled as an exemption. The inclination is therefore to reason that sections 60 and 61 of the Consumer Protection Act no longer apply to the financial sector. Further difficulties are created by the facility with which products and services may be absorbed under the financial products and financial services definitions, creating uncertainty as to whether the Consumer Protection Act applies or not. It has been suggested that ousting the applicability of the Consumer Protection Act to the financial sector would leave consumers to risk exposure. The suggestion has also been made that the legislature might have incorporated a clause which gives precedent to the section of the Act, whether a financial sector law or the Consumer Protection Act, that gives more or better protection to the consumer. The applicability of section 10(1) is not straightforward and practitioners will want to look very closely at the acts, transactions, functions, financial products and financial services which are being affected, and, if litigating, it would be wise to claim in the alternative.

Citation

Vessio, M. (2019). Twin Peaks and the impact of the Consumer Protection Act on financial products and services. In Annual Banking Law Update (ABLU). Juta Law

• Publication Date: Oct 16, 2019
• Deposit Date: Oct 28, 2020
• Publisher: Juta Law
• Book Title: Annual Banking Law Update (ABLU)
• ISBN: 9781485135524
• Public URL: https://uwe-repository.worktribe.com/output/6821544