Simon Colman, Head of Commercial Solutions at SHA.
A total 3495 cases of consumer complaints were opened at the Consumer Goods & Services Ombud (CGSO) during the financial year March 2015 – February 2016, with the top five complaints relating to cellphones (951), services (795), furniture (523) electrical appliances (343) and computer accessories (140). While not all consumer complaints do become a liability issue, it is important that all South African businesses understand the consumer protection framework and what types of complaints can progress into legal liability claims.
This is according to Simon Colman, Head of Commercial Solutions at SHA Specialist Underwriters – the largest liability underwriting management agency (UMA) in Southern Africa – who says for many years in SA, consumers had no efficient way of pursuing recourse against businesses if they felt they had been treated unfairly. “The court processes are complex, expensive and in the end do not really service the average ‘man in the street’ who is often without financial and legal resources. The implementation of the Consumer Protection Act (CPA) changed all this because this piece of legislation dictates how consumers must be treated with regards the supply of goods and services in SA.”
He says the Act serves a noble purpose, protecting consumers and also providing businesses with a blueprint to good customer service. “However, any piece of legislation is useless without good enforcement. The National Consumer Commission (NCC), the Tribunal and the various alternative dispute resolution forums are all set up to provide a levelled playing field between businesses and their customers.”
Colman explains that typically a consumer lodges a complaint initially with the retailer or supplier of product/service and the normal complaints handling process between the retailer and the consumers then takes its course. “Most complaints are actually resolved at this level but those that are not are then referred either to the NCC or to a recognised industry body if one exists.”
“The NCC is a statutory body that is responsible for overall regulation of the consumer environment whilst the CGSO is a recognised alternative dispute resolution forum, empowered by the NCC to resolve disputes. Once the ombud has ruled on an issue at the CGSO, disgruntled consumers can still approach the NCC if they are unhappy with the outcome,” states Colman.
Not every industry subscribes to the CGSO as participation is voluntary and involves the payment of subscription fees, he says. “A business that is not a member will by default either fall under the NCC's jurisdiction or under some other more specific industry body if one exists, for example the motor industry has its disputes heard by the Motor Industry Ombudsman.”
Looking at the disputes that went before the CGSO last year 43% were related to goods whilst 29% related to services and 21% to allegedly unfair agreements/contracts, he says. “Not all of these complaints would result in a liability claim under an insurance policy. A product liability insurance policy generally responds to third party claims after there has been some form of injury or damage caused by the product/service.
“Many of the complaints that are lodged at the various dispute forums relate to some kind of failure or defect in the product/service but do not necessarily cause any injury or damage. In those instances the consumer is often simply seeking a replacement or a refund and that would not generally be an insurable claim, especially not under a product liability insurance policy.”
He points to an example in the CGSO report where a lady alleged that a defect in sandals she bought caused her to fall and injure herself. “Due to the fact that there is an allegation of an injury being caused by a product that would be what we would call an indemnifiable (covered) event. If the supplier had a product liability policy in place and it was alleged that the sandals caused the injury, the defense costs and the damages may have been covered by insurance. Contrarily, if the consumer simply claimed for a new pair of sandals because the others were of poor quality and there was no injury or damage caused by the product supplied, that would not be a claim under the policy.”
The NCC and the various dispute resolution bodies that deal with these matters can assist in bringing about the resolution of a dispute but they do not ‘side’ with the consumer as this would be unfair, he says. “They do of course investigate the complaints to check if the consumer has grounds for protection under the CPA. Businesses that blatantly flout the law can face stiff penalties (up to 10% of their annual turnover) so it is in their interests to participate in the process and to comply with the requirements of the CPA.”
“The CGSO creates an easily accessible platform so that consumers can ‘have their say’ without having to incur the costly legal expenses associated with actually approaching the courts. The time taken to resolve a dispute is generally much shorter in the CGSO (57 days on average) than in the High Court where it can take over a year to get resolved,” Colman concludes.
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