By all means, opt-out – at your own cost

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Not a month goes by when I don’t re­ceive an SMS from a fi­nan­cial ser­vices provider (FSP) mar­ket­ing its prod­ucts to me. All of these mes­sages give one the op­tion of SMSing the word “STOP” or “NO” to opt out of re­ceiv­ing more mes­sages. But who pays for that SMS?

Often, it’s you and I. Some SMSes cryp­ti­cally state “Std rates”. What? The Con­sumer Pro­tec­tion Act (CPA) says that no per­son may charge con­sumers a fee for ex­er­cis­ing their right to refuse to ac­cept di­rect mar­ket­ing, to in­struct a per­son to dis­con­tinue send­ing di­rect mar­ket­ing and to pre-emp­tively block any such ap­proach or com­mu­ni­ca­tion.

The CPA has been in force for more than five years. How is it that con­sumers are fight­ing this bat­tle five years down the line? Be­cause, by and large, big cor­po­rates in South Africa are not cus­tomer-cen­tric and reg­u­la­tory ar­bi­trage is the or­der of the day. Reg­u­la­tion in some sec­tors is patchy, if not weak. And it doesn’t help that most con­sumers don’t know their rights and, even when they do, they are gen­er­ally ap­a­thetic about en­forc­ing them.

Charg­ing con­sumers to opt out of di­rect SMS mar­ket­ing high­lights this.

In De­cem­ber 2011, Vo­da­com sent a let­ter to wire­less ap­pli­ca­tion ser­vice providers – or WASPs, which are com­pa­nies that use the mo­bile net­works to de­liver ser­vices, such as bulk SMSes, to the public on be­half of their clients, such as banks and in­sur­ers.

The let­ter from Vo­da­com stated that, “Sec­tion 11(5) of the Con­sumer Pro­tec­tion Act, which came into ef­fect on April 1, 2011, re­quires that cus­tomers should not be charged or billed for opt­ing out of di­rect mar­ket­ing.” It went on to say that “re­verse-billed short codes are avail­able for WASPs to utilise, to en­able cus­tomers on the Vo­da­com network to opt out of di­rect mar­ket­ing at no charge, as re­quired by the CPA”.

In other words, the WASPs were told that they should pick up the tab for the cost of the opt-out mes­sages, and that this could be done by us­ing the network’s re­verse-billing fa­cil­ity. In which case, the WASP could, in turn, re­cover the cost from their client.

Fur­ther­more, WASPA, the as­so­ci­a­tion that reg­u­lates WASPs, for­bids charg­ing con­sumers a fee for pro­cess­ing an opt-out re­quest or for reg­is­ter­ing a pre-emp­tive block. How­ever, it all boils down to how you de­fine a “fee”, be­cause the CPA does not pro­vide a def­i­ni­tion.

Ilonka Baden­horst, the gen­eral man­ager of WASPA, says that, if a mem­ber uses a stan­dard-rated short code or num­ber, the mem­ber will re­ceive no in­come, and would tech­ni­cally there­fore not be charg­ing the con­sumer a fee. “The stan­dard rated charge is levied by the mo­bile network op­er­a­tor [and not the WASP].”

But mem­bers may not use a premium- rated short code or num­ber, be­cause the in­come de­rived from a rev­enue share on the premium charge will con­sti­tute a fee, she says.

When I asked Vo­da­com why it charged me for the SMS I sent to 1st for Women to opt out of re­ceiv­ing di­rect mar­ket­ing, they ef­fec­tively blamed a WASP, stat­ing that “WASPs that use Vo­da­com’s ser­vices to bill and col­lect monies for the WASPs’ prod­ucts/ser­vices may only in­struct Vo­da­com to bill and col­lect money for those prod­ucts/ser­vices that have been specif­i­cally re­quested by cus­tomers”. This is all very un­sat­is­fac­tory.

The Na­tional Con­sumer Com­mis­sion is on record as stat­ing that, although no­body can charge you a fee to opt out, the cost to you of com­mu­ni­cat­ing your in­struc­tion to opt out is not cov­ered by the Act.

When I spoke to FSPs about com­ply­ing with the CPA in this re­gard, I got a range of an­swers.

Warwick Bloom, the head of group mar­ket­ing at Hol­lard, says that sec­tion 5(3) of the CPA ex­empts com­pa­nies from com­ply­ing with the pro­vi­sions of the Act where they are dealt with in other laws or by an­other reg­u­la­tor.

“In re­spect of the di­rect mar­ket­ing of in­sur­ance prod­ucts, Hol­lard’s ac­tiv­i­ties are reg­u­lated and gov­erned by the Fi­nan­cial Ad­vi­sory and In­ter­me­di­ary Ser­vices Act, the Short Term In­sur­ance Act and the Long Term In­sur­ance Act.” He says these Acts do not re­strict charges for opt-outs.

So, charg­ing con­sumers to opt out does not breach the CPA in­so­far as it ap­plies to in­sur­ance com­pa­nies.

How­ever, Bloom says ir­re­spec­tive of the le­gal po­si­tion, Hol­lard sup­ports the idea that an opt-out should be free, and will en­gage with its lead providers [WASPs] to en­sure that this is the case in fu­ture.

When asked whether Dif­fer­ent Life is charg­ing con­sumers to opt out of re­ceiv­ing such SMSes, Dif­fer­ent Life chief ex­ec­u­tive Philip Tom­lin­son said the com­pany does not do any di­rect mar­ket­ing ; it uses a num­ber of “af­fil­i­ate mar­ket­ing com­pa­nies” that pro­vide the com­pany with leads. Lead providers in­clude WASPs, and if a lead provider is charg­ing ex­plic­itly for an opt-out, Dif­fer­ent Life would view this as a breach of the CPA, Tom­lin­son says.

On the ques­tion of “stan­dard mo­bile op­er­a­tor charges on an opt-out SMS”, he says his un­der­stand­ing is that it is not in con­tra­ven­tion of sec­tion 11 of the CPA.


Ian Mid­dle­ton, the manag­ing direc­tor of Mast­head, a com­pany that pro­vides com­pli­ance ser­vices to FSPs, says the first prin­ci­ple of Treat­ing Cust o mers Fairly (TCF) states that “cus­tomers are con­fi­dent that they are deal­ing with firms where the fair treat­ment of cus­tomers is cen­tral to the firm’s cul­ture”. Where cus­tomers have to pay to opt out, and the provider hides be­hind tech­ni­cal­i­ties, this is not treat­ing cus­tomers fairly.

“Un­for­tu­nately, we haven’t seen any sig­nif­i­cant steps, through penal­ties or sanc­tions, taken against op­er­a­tors,” Mid­dle­ton says.

Per­sonal Fi­nance asked the Fi­nan­cial Ser­vices Board (FSB) what the reg­u­la­tor of FSPs was do­ing about this, given that it’s a breach of TCF.

Jo-Ann Fer­reira, the head of the reg­u­la­tory frame­work for in­sur­ance at the FSB, says the reg­u­la­tor “will be con­sult­ing soon on a com­pre­hen­sive re­view of the Pol­i­cy­holder Pro­tec­tion Rules, in­clud­ing in­tro­duc­ing more strin­gent mar­ket­ing re­quire­ments”.

“We will specif­i­cally ad­dress un­wanted di­rect mar­ket­ing by re­quir­ing in­sur­ers or any per­sons act­ing on their be­half to af­ford pol­i­cy­hold­ers and po­ten­tial pol­i­cy­hold­ers to whom in­sur­ers mar­ket poli­cies through mo­bile phone voice or text mes­sages, the right to de­mand, dur­ing or within a rea­son­able time af­ter the mes­sages, that the in­sur­ers or per­sons act­ing on their be­half de­sist from ini­ti­at­ing any such fur­ther com­mu­ni­ca­tion. In­sur­ers or any per­sons act­ing on their be­half may also not charge a fee or al­low a mo­bile phone ser­vice provider to charge a fee for mak­ing a de­mand. So although the cur­rent prac­tises are not reg­u­lated, we in­tend to in­tro­duce stan­dards in the near term.”

For­tu­nately for us, when the Pro­tec­tion of Per­sonal In­for­ma­tion (Popi) Act is fully in force, we will no longer have to fight this bat­tle.

In terms of Popi, com­pa­nies can send di­rect mar­ket­ing com­mu­ni­ca­tions only to con­sumers who have given their ex­plicit and in­formed con­sent.

Di­rect mar­ket­ing mes­sag­ing must make pro­vi­sion for an opt-out, with no strings at­tached, and any fur­ther mar­ket­ing to a con­sumer who has opted out is un­law­ful.

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