What dealerships need to know

The Consumer Protection Act is going to make South African consumers the most protected consumers in the world. CAITLYN MOONY simplifies the important points of this act impacting on dealerships.

The Consumer Protection Act (CPA) was drafted for the purpose of protecting consumers from harm, exploitation or being misled, according to Jeff Osborne, chief executive officer of the Retail Motor Industry (RMI). The act will only become fully operational on 24 October 2010, 18 months after it was signed, to give businesses plenty of time to align their practices with the law. There are several points that stand out as particularly important to dealers.

Possibly the most controversial of these points is that dealers, along with producers and distributors are now liable for damaged products or services more than ever before. “Although the entire act will apply directly to dealers, by far the biggest change with the most impact is the clause regarding liability. In fact this clause has already been in play as of April 24 2010,” attorney Malcolm Roup explains. “It will mean that dealerships will be responsible for any defective product they sell, whether it is their fault or not. In the past, customers would have had to prove negligence on the part of the dealership, now they only have to prove they bought the product from that particular dealership.”

Another concern for dealers is the consumers’ right to examine goods, even after purchase and delivery. Dealers will have to provide consumers with adequate opportunity to examine goods, and if they do not measure up to expectations set up by description or model, the consumer has the right to request a refund or replaced product, even if the product has already been bought and handed over. This will all be at the dealers’ own risk and expense.

According to the implied warranty by the CPA, if within six months of delivery the product does not meet expected standards, the product must either be refunded or repaired according to the consumer’s choice. If the consumer chooses repair, and the same or a new defect occurs within the next three months, the dealer must replace the goods or refund the purchase price.

Roup explains that dealerships trying to claim, “we only just received it from the manufacturers,” will not be a valid excuse. Dealerships may then be able to take up the fault with the manufacturers but they will be the first to be held responsible. The cause effectively flips the power relationship, changing it from “Purchaser Beware” to “Seller Beware”. It is no longer the responsibility of the consumer to check the quality of the product.

In terms of how the dealer should handle incidents where they will be held liable, Roup advises that they increase their insurance to be able to cover themselves, and obviously make sure that the product is of the highest quality in the first place. Further advice from Osborne is that dealers should do everything possible before a complaint reaches the court. “We tell our customers to forward complaints to the RMI, rather than deal with them themselves, since RMI has a very high rate of success at resolving these complaints out of court.”

The CPA will regulate agreements and warranties so businesses or consumers cannot waive the terms of this act. In terms of repair or maintenance work, a particular concern for dealers, the consumer has the right to request pre-authorisation for any work done. They have the right to request written cost estimates, for which it will be illegal to charge. Consumers have the right to pre-authorise or refuse any additional repairs to the original estimate, and are not liable to pay for these repairs if approval was not granted.

There are several regulations regarding fixed-term agreements; the most important concerns notifying consumers of when the agreement is set to expire, and giving them the option of renewing or cancelling the contract. Contracts can be cancelled, with no penalty to the consumer, if the terms of contract are not being adequately met.

Fines for not complying with the act are extremely heavy – dealers and even suppliers can be fined up to R1 million and can even be slapped with jail time – and chances of having to pay these fines if incompliant are higher than ever before. The act has also put in place several measures to help consumers enforce their rights, by accrediting consumer groups for lodging complaints, and even providing financial support to consumers enforcing their rights.

In order to make the regulations of the CPA clearer to those in the transport industry, RMI, along with other organisations such as NAAMSA, has been asked by the Department of Trade and Industry (DTI) to write a set of codes of good practice. “The codes are there to clarify what role the dealer or supplier plays in terms of ethical practice,” explains Osborne. The codes will be available as part of the act once the DTI approves them.

For the reasons listed above, the sooner businesses get in line with the CPA the better.