One of the biggest burdens on South Africa's economy is the drag caused by mobile operators, consumer credit providers, and the regulations that are supposed to curb their excesses, but fail to do so.
My internet service is under strict instructions never to charge me “out-of-bundle” rates for data, but to alert me a few days in advance so I’d have an opportunity to switch to an alternative data account or buy a new data bundle. Despite this, I was notified one morning that I was now paying the exorbitant out-of-bundle rate. Neither of my requests were fulfilled, and I have no recourse.
A complaint on Twitter elicited many responses alleging similar incidents. Two involved amounts exceeding R30,000. Only one person said they’d never had a problem with the operator.
This is not rigorous market research, admittedly, but I’ve had cause to write for Brainstorm magazine about recurring abuses by network operators before. In each case, they involved different operators. Cancelling contracts is difficult, incorrect defaults get listed on credit bureaux, figuring out what you’re paying for is well-nigh impossible, instructions to customer service agents are ignored, and debit order abuse appears to be common.
The Consumer Protection Act (CPA) and National Credit Act (NCA) were supposed to address some of these problems. Sadly, it appears they are failing. In fact, one hears more about their unintended consequences than about their success.
I recently spoke separately to two property developers, both of whom have a 20 year record of success with their buy-fix-sell model, but are now considered by law to be reckless consumers unable to afford their credit. Both are now liquidating their assets and going out of business, because banks – despite knowing better – are no longer permitted to lend to them.
My former gardener over the years acquired a fridge, a bed, a couch, a television and a hi-fi set, all on credit, one after another. Despite a low income, of which half was sent back to his family, he built up such a good record that he qualified for a credit card. Not anymore. To “protect” irresponsible borrowers, he has been punished for his responsible credit management by being told that the NCA deems him unworthy of any further credit.
In the second column linked above, I told the story of someone who had her 20-year relationship with her bank ruined, because a debit order facility had not been terminated, despite the facts that the account had been closed and that the matter had already been brought to their attention.
You have to go far to meet anyone who doesn’t have some kind of horror story to tell. I have personally been a victim of all these practices: blacklisting for erroneous amounts, blacklisting when accounts are in dispute, threats about debts that either don’t exist or are too old or both, and debit orders that keep coming off months after accounts have been cancelled.
In each case, it took months of bickering to clear up the matter, and in many cases, I doubt I would have succeeded if I only had access to the call centre, like a regular Joe.
In one case, my bank slashed my credit limit while I was overseas, leaving me stranded without money. They apologised and reinstated it, but the damage was done. In another case, the bank told me there was no way to de-authorise a company once debit order authorisation had been given. Unless I could convince them to stop, they had free access to raid my account.
I’m not unique, and my customer-service stories are no more important than anyone else’s. The point is that this kind of abuse is rife.
Companies routinely blacklist consumers for amounts in dispute, erroneous amounts, occasional late payments, or petty amounts that result from complicated billing. As a result, access to credit is a pipe dream for many South Africans.
It’s no wonder we’ve had to “pioneer” pre-paid, and that we consider it normal that customers pay more for offering cash upfront than for being billed after the fact.
Thanks to an uncompetitive market, served by protected, licensed cartels, consumers have little recourse. If a customer disputes a bill, a company can easily blacklist them without the expense of bringing a civil suit. Collection agencies, whose “lawyers” should be the first at the bottom of the proverbial sea, routinely harrass, blackmail and extort fees from hapless consumers.
Consumers, to protect their rights, have no option but to resort to lengthy correspondence or initiate costly legal action themselves. Most just suffer the grave consequences of their presumed guilt, or pay disputed amounts because the consequences are often orders of magnitude larger than the amount at issue.
Instead of being able to take companies to task for high-handed rip-off attempts, such as the “out-of-bundle” fraud, customers are always on the defensive, and always trying to prove that they’re really not as poor and irresponsible as the government says they are.
The very government itself is in on the act. Lawyers for the SABC threaten people they believe to be television owners with 30 years and a criminal record. The hoops one has to jump through to prove otherwise – how do you prove that you do NOT own something? – are complex, time-consuming and ridiculously bureaucratic. The irony is that the SABC threatens its customers with criminal charges for having been the victim of a robbery.
The same lot harrassed an acquaintance of mine at 8pm on a Friday during his 68th birthday dinner, and demanded that he supply them, right there, over the telephone, with his ID number, home address and bank account number. Presumably they wanted to attach his house for an overdue TV licence. Or commit identity theft and move in.
This is the behaviour of a crime syndicate, not a government protecting citizens, or a law firm enforcing the legitimate claims of its clients.
I take no issue with credit providers who demand that customers pay them. This is only fair, and companies have every right to enforce their claims. However, their methods are slipshod – riddled with errors and outright fraud.
Telecoms operators, coddled in their collusive cartel, are among the worst offenders. At most, they’re at risk for a single month’s payment, in the case of a contract customer. Yet they ruin lives over this.
The CPA and NCA are well-intended and very helpful in some regards. The plain-language requirements for consumer contracts in particular are a great step forward. However, these laws clearly aren’t working. In fact, they’re known more for their unintended consequences than for achieving their goals.
I’d like to propose harsh new regulations that ban telcos from reporting defaults, or even doing any credit checks themselves. They should also be banned from using debit order facilities, because they have shown they are not responsible enough for this privilege. While the regulators are at it, they can ban a whole lot of other abusive behaviour, like charging a 1000% premium for out-of-bundle data, or charging exorbitant fees for international roaming. These are only possible because of monopoly or cartel abuses.
More generally, consumer credit providers should not be able to report small defaults – below, say, the minimum wage for a domestic worker – to credit bureaux. Or if they want to retain that right, enforce the requirement that they make multiple attempts to notify the customer, by mail, telephone and email, in case one or other contact detail has changed, and then prohibit credit bureaux from reporting them to enquiring credit providers until there are more than, say, three, which would suggest a pattern of genuine delinquency on the part of the non-paying customer. This would eliminate most of the petty, erroneous and outright fraudulent abuse of credit bureaux.
In addition, penalties for abuses such as failing to cancel debit orders, or automatically charging out-of-bundle rates without notifying customers in advance, should be severe. This constitutes theft.
Telcos will protest loudly, and threaten to raise rates, but this is posturing. Like they do in the US, they can simply offer contracts that terminate when a customer stops paying. If they want even less risk, they can make the main contract fee payable in advance, with only extras being charged to the next month. The risk to telcos will be limited, they will still have legal recourse for bona fide non-payment, and millions of consumers may finally have the clean credit record they always wanted, and always deserved.
If this sounds like heavy-handed regulation, it is. In an ideal world, access to justice would be cheap and easy, and companies that abused their customers would be subject to vigorous competition. In the real world, where the government has created uncompetitive cartels with high barriers to entry, and given them regulations that define exactly to what extent they may legally exploit their customers, the market’s ordinary remedies are not available. If the government decides how many operators a market can bear, and creates these monsters as a consequence, the government is responsible for protecting rights that otherwise could have been protected by competition.
It’s time to crack down on telecommunications companies in particular, and consumer credit providers in general. Not to limit their lending, or restrict their services, or drive up their costs, but to protect the legitimate rights of the consumers who have little option but to do business with them.
And while the government dithers, unsure of why their attempts to remedy the situation are failing, maybe it’s time for a great big kick-ass lawsuit, so everyone who has ever lost R50, R500 or their financial reputation to one of the rapacious and litigious network operators can get their own back.
The cost and hassle is not only justified, but would gain us a nation of credit-worthy consumers and entrepreneurs.
That would be a damn fine bit of “stimulus” for our economy. DM
Star Wars was the first major film to be dubbed in Navajo.