Massive win for consumers as Vodacom slapped with R1m fine

The National Consumer Tribunal has imposed an administrative fine of R1 million on Vodacom after it found that the mobile service provider’s conduct was unconscionable when it imposed terms and conditions on clients who wanted to cancel their fixed-term contracts

It found the mobile service provider did not adhere to the provisions in the Consumer Protection Act for cancelling fixed-term contracts.

Vodacom: Hefty cancellation penalty

According to Thezi Mabuza, acting commissioner of the National Consumer Commission (NCC), the regulatory body received and investigated numerous complaints between 2020 and 2022 of Vodacom allegedly contravening various sections of the Consumer Protection Act (CPA).

Consumers claimed that Vodacom denied their right to cancel their fixed-term contracts by imposing a hefty cancellation penalty of 75%.

In addition, Vodacom required them to pay all outstanding fees and the cancellation penalty before their contracts were cancelled.

Consumers also alleged that they were coerced to sign the acceptance quotation letter that was valid for 12 days and return the letter to Vodacom with proof of payment.

Bulk of complaints received during Covid-19

“The NCC received the bulk of these complaints during the peak of Covid-19 when many complainants lost their jobs or their salaries were cut, making it impossible for them to proceed with the SIM-only [Simo] contracts,” Mabuza said.

The commission’s investigation revealed that Vodacom engaged in prohibited conduct by contravening section 14 of the CPA, read with Regulation 5.

Section 14 (3) (b) (i) provides that the supplier may impose a reasonable cancellation penalty for any goods or services supplied to the consumer, while regulation 5(2) lists what service providers must consider in deciding on a reasonable cancellation penalty and regulation 5 (3) states that a supplier may not impose a cancellation penalty that makes it too expensive for the consumer to cancel.

Mabuza said Vodacom’s 75% cancellation penalty constituted a contravention of this section.

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Failure to cancel contracts in time

“Vodacom failed to cancel consumers’ contracts timeously after consumers asked to cancel as required by the CPA and therefore contravened section 14(2) (b)(i) (bb). The refusal to cancel consumers’ contracts on the basis that any cancellation is subject to payment of a cancellation fee before a contract can be cancelled, constituted a contravention of section 14(2) (b).”

Vodacom also failed to cancel consumers’ contracts within 20 business days of notice of cancellation and instead sent consumers quotation letters with a cancellation penalty of 75%, contravening section 14 (3), she said.

Section 14(2)(c) provides that suppliers must, in the case of a fixed-term consumer agreement, inform the consumer in writing or any other recordable form within 40 to 80 business days before the expiry of the contract that it will expire.

This notification must include any material changes that would apply if the agreement is renewed or otherwise continue beyond the expiry date and the options available to the consumer.

Mabuza said Vodacom’s failure to inform consumers that their contracts were about to expire and to advise them of their options, contravened section 14 (2)(c).

‘Unreasonable’ penalty not in ‘spirit of promotion of CPA’

“Vodacom unconscionably imposed an unreasonable cancellation penalty of 75%, making it impossible for consumers to cancel. In addition, Vodacom required payment of all outstanding fees and the cancellation penalty before contracts were cancelled, exacerbating consumers’ financial wellbeing at that time. This conduct is not in the spirit of the promotion of the CPA.”

Vodacom conduct ‘unconscionable and prohibited’ – tribunal

The tribunal also found that Vodacom’s conduct is unconscionable because it continued to bill consumers after they duly cancelled their contracts, or attempted to do so, and by referring them to debt collectors, blacklisting them with credit bureaus and threatening them with legal action.

By repeatedly denying consumers the right to cancel the contracts, Vodacom contravened section 40(1)(b) and (d) of the Act. Vodacom also contravened section 29(b)(i)(ii) and (v) read with section 41(3), by marketing a data bundle package that was not available and not provided.

Apart from the administrative fine, the tribunal declared Vodacom’s conduct unconscionable and prohibited.

“The Commission welcomes this judgment as we believe that it is going to deter other suppliers or operators from engaging in the same conduct. We further see this as a victory for South African consumers who for the longest period were subjected to contracts that were in favour of the supplier,” Mabuza said.

Vodacom says it amended 75% policy, reimbursed customers

Asked for comment, Vodacom said the commission referred it to the tribunal in terms of a previous policy levying 75% of the outstanding fees for the premature termination for SIM-only contracts.

The tribunal ordered Vodacom to pay an administrative fine of R1 million by 13 November 2023.

“Vodacom will comply with the tribunal’s determination and plans to continue co-operating with the commission, as has been its practice, on any future consumer- and customer-related concerns,” a spokesperson for the mobile giant said.

“Vodacom amended the 75% penalty for prematurely terminated SIM-only contracts in October 2022 and substituted it with a policy requiring customers to give 30 days’ notice for such termination.

“Vodacom had, even before the ruling, reimbursed customers who suffered prejudice because of the former policy.”

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