How does the CPA relate to other laws?
The CPA must be interpreted in a manner that gives effect to the purposes of the Act set out in section 3. The following may be considered when interpreting the Act:
- appropriate foreign and international law;
- appropriate international conventions, declarations or protocols relating to consumer protection; and
- any decision of a consumer court, ombud or arbitrator in terms of the Act.
If there is an inconsistency between any provision of the CPA and a provision of the Public Finance Management Act, 1999 (Act No. 1 of 1999), or the Public Service Act, 1994 (Proclamation No. 103 of 1994), the provisions of the Public Finance Management Act, 1999, or of the Public Service Act, 1994, as the case may be, prevail.
If there is an inconsistency between any provision of the CPA and a provision of any other Act:
- the provisions of both Acts apply concurrently, to the extent that it is possible to apply and comply with one of the inconsistent provisions without contravening the second; and
- to the extent that both Acts cannot be applied concurrently, the provision that extends the greater protection to a consumer prevails over the alternative provision.
No provision of the CPA must be interpreted so as to preclude a consumer from exercising any rights afforded in terms of the common law.
In any matter brought before the Tribunal or a court in terms of this Act,the court must develop the common law as necessary to improve the realisation and enjoyment of consumer rights generally, and in particular by poor, illiterate or rural consumers.
When buying a financial product / investment, what does the law say you must be told?
The Financial advisory and Intermediary Services (FAIS) Act stipulates what a financial adviser must do when advising you or selling you a product. The adviser must provide you with the following information:
- How the value of your investment is determined
- The investment’s underlying assets
- The past performance of the product
- The adviser’s and the product’s charges and fees, and the implications of the charges on the value of your investment
- Whether the adviser has a fee rebate arrangement with a product provider, and whether there are rebate arrangements among the providers of the products that he or she recommends
- When and why the product will not pay out benefits
- Whether the product has any guarantees
- How easy it will be for you to access the money you invest
- The consequences if you terminate an investment before date of maturity
- The tax implications of the product
- Whether there is a cooling-off period within which you have the right to cancel the product
- Any Material risks associated with the product and
- How the product is appropriate for your financial needs and risk profile.
Once your adviser has provided you with the above information, he or she must provide you with a written summary of:
- The information on which he or she based his or her advice
- The financial products that were considered
- The products that he or she recommended and why and
- How your risk profile and financial needs align with the recommended products
How do I recognize and avoid investments ‘that sound too good to be true’?
The telltale features of a scam are:
- It claims to pay out double-digit monthly returns
- It claims to be an opportunity of a lifetime
- There are no underlying investments
- You can’t understand how it generates money
- It is not a registered product or a product offered by an authorised financial services provider
- Returns of profits earned by you may be dependent on you introducing more members to the scheme
Verify the legitimacy of a financial services provider before you invest by visiting www.fsb.co.za/Departments/fais/searches/Pages/providers or calling the Financial Services Board on 0800 110 443 .
Variations on a scheme:
- Pyramid scheme
An illegal business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or selling products or services.
- Ponzi scheme
A fraudulent investment operation where the operator pays returns to its investors from capital paid in by new investors, rather than from profit earned by the operator.
Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.
These schemes occasionally begin as legitimate businesses, until the business fails to achieve the returns expected.
It becomes a Ponzi scheme if it then continues under fraudulent terms. The perpetuation of high returns requires an ever-increasing flow of money from new investors to sustain the scheme.
- High-yield investment program
An online Ponzi scheme promising unsustainably high returns. Most of these scams work from anonymous offshore bases, which make them hard work to track down.
