March is promoted as Consumer Rights Month with World Consumer Rights Day celebrated on the 15th of March this year. Over and above the basic human rights we all have in terms of the Constitution, consumers in South Africa also enjoy various rights in terms of a legion of legislation:

• The Consumer Protection Act 68 of 2008
• The National Credit Act 34 of 2005
• The Financial Advisory and Intermediary Services Act 37 of 2002
• The Medical Schemes Act 131 of 1998
• The Protection of Personal Information Act 4 of 2013, and many more.

So, if we as consumers have a legion in our corner, why are we still being taken in by the promise of quick money?

The Organisation for Economic Co-operation and Development (OECD) once again conducted an international financial literacy survey in 2020 and produced the OECD/INFE 2020 International Survey of Adult Financial Literacy report.¹

The elements of financial literacy that the report scores are financial knowledge, behaviour and attitude. Twenty-six countries and 125 787 individuals in Asia, Europe and Latin America participated. Some of the key results of the survey are as follows:

• Financial literacy is low across the participating countries.
• Many individuals do not have sufficient savings.
• Financial stress is common. That is, people are worried that they cannot provide for themselves on a day-to-day basis.
• Individuals are not confident that they have control over their finances or that they can absorb a financial shock.
• Many participating individuals lack the necessary financial literacy and financial resilience to deal effectively with everyday financial management.²

Unfortunately, South Africa was not part of the 2020 survey as in 2016, but some of the findings between the two reports overlap. In 2016, for example, it was also found that overall levels of financial literacy are low across participating economies, and that financial resilience is a concern.⁴

According to the South African Reserve Bank’s Financial Stability Review⁵ the household debt-to-disposable income ratio increased sharply to 85,3% in the second quarter of 2020. This was mainly due to a drop in income⁶ and coincided with the national hard lockdown due to the Covid-19 pandemic. But the lockdown also had a positive effect as household deposits showed a massive increase.⁷ The reasons for this growth are noted as ‘the expectation of households that transitory income windfall (due to unemployment benefits or cash flow relief related to debt repayment holidays) will subside’ and the fact that it was impossible to buy certain goods during the lockdown.⁸

So, let’s meet one of the generals in charge of our legion and find out what they are doing for us.

The Financial Sector Conduct Authority (FSCA) oversees various pieces of legislation including the Collective Investment Schemes Control Act, the Pension Funds Act, the Credit Rating Services Act, the Long-term Insurance Act and the Financial Advisory and Intermediary Services Act (FAIS Act). The latter is of specific importance for consumers who deal with financial advisors and directly with insurance companies when they obtain financial products. These financial products can be anything from car insurance, life insurance, retirement annuities, medical aid, or shares.

Your financial advisor has several obligations in terms of the FAIS Act and the FSCA must ensure that the financial advisors comply with these obligations. When you meet your advisor, he/she will have to conduct an in-depth analysis of your current financial situation and advise you on how you can best provide for your retirement and other life events taking into consideration your knowledge of financial products, affordability, and other factors.

Over and above the regulation of various financial institutions, the FSCA also has a Consumer Education Department whose mandate it is ‘to provide guidance to consumers in order to make better financial choices and to live a financially successful life’.⁹ Their website (www.fscamymoney.co.za) encourages good financial habits by teaching consumers how to budget, explaining the different types of retirement funds, explaining the importance of having a will, setting out how cryptocurrency works, and even providing some tips on how to take care of your business’ finances.

The FAIS Act also established the Office of the Ombud for Financial Services Providers (FAIS Ombud). Consumers can submit a complaint to the FAIS Ombud that relates to financial services by a financial services provider and if the claim is not worth more than R800 000. No fee is payable by the complainant to the FAIS Ombud for submission of a claim. The objective of the FAIS Ombud is to consider and dispose of the complaints they receive in a fair, informal, economical and expeditious manner taking into account any contract between the parties and the FAIS Act.¹⁰

The FSCA also has a complaints portal available on their website where consumers can submit complaints about the conduct of the financial institutions that the FSCA regulates and any instance where one of the pieces of legislation that the FSCA regulates was contravened. It is important to note though that in all instances complainants should always first try and exhaust the internal process of the financial institution before approaching the FSCA or any Ombud.

The FAIS Act will be largely replaced in due course with the Conduct of Financial Institutions Bill (COFI Bill). Once enacted this legislation aims to, amongst others, ‘protect financial customers, promote the fair treatment and protection of financial customers by financial institutions’, and ‘to provide for remedial actions for financial customers.’¹¹

Prevention is better than cure.

We should not leave it all up to others though and make it our mission to educate ourselves about our finances. There are some basic steps you can take to protect yourself:

• Ensure that the financial advisor you deal with is registered with the FSCA. The FSCA issues a license certificate with a FSP number to all authorised financial services providers. Ask to see this certificate. It is also important to make sure that the financial products that he/she is advising you on are covered by the license. The products the FSP is licensed for is listed in an annexure to the license certificate. The information on the certificate can be verified on the website of the FSCA.
• Let your financial advisor explain to you all the costs involved in taking out any investment or other financial product.
• Read through all documents before you sign it and ask for an explanation if you do not understand something. Do not sign any documents unless all details required about/from you have been inserted.
• When you invest there are no risk free, get rich quick schemes. Follow the saying: “when it sounds too good to be true, it usually is”. Start saving and investing as early in your life as possible even if it is just a small amount every month.

At wauko we truly believe in applying the spirit of these consumer rights protection legislations (and beyond) and continue to endeavor to educate our clients in what we do.

We believe that the more our clients understand about what we do, the more they will appreciate the value we bring.

If you have any questions about your financial sector consumer rights please do not hesitate to connect with us.

References:

1. OECD (2020), OECD/INFE 2020 International Survey of Adult Financial Literacy
   www.oecd.org/financial/education/launchoftheoecdinfeglobalfinancialliteracysurveyreport.htm
2. OECD (2020), OECD/INFE 2020 International Survey of Adult Financial Literacy, page 7 and further
3. OECD (2020), OECD/INFE 2020 International Survey of Adult Financial Literacy, page 64 and further
4. OECD (2016), “OECD/INFE International Survey of Adult Financial Literacy Competencies”, OECD, Paris, page 7 and further
   www.oecd.org/finance/OECD-INFE-International-Survey-of-Adult-Financial-Literacy-Competencies.pdf
5. South African Reserve Bank Financial Stability Review Second Edition 2020
   https://www.resbank.co.za/en/search-result?searchTerm=financial%20stability%20review
6. South African Reserve Bank Financial Stability Review Second Edition 2020, page 84
7. South African Reserve Bank Financial Stability Review Second Edition 2020, page 85
8. South African Reserve Bank Financial Stability Review Second Edition 2020, page 85
9. https://www.fscamymoney.co.za/Pages/About-Us.aspx
10. Section 20(3) of the FAIS Act
11. Preamble to the COFI Bill