Contract killing woes
If you sign a two-year cellphone or gym contract, your financial obligation automatically ends on the "expiry date", right?
Well no, but many consumers assume that, and understandably so. But it's an assumption that can be very costly.
Yes, the small print on the contract states that the contract ends only when the consumer submits written notification - usually 30 days in advance - of cancellation but those clauses are easy to miss and easy to forget.
Clearly, over the years, companies have made a lot of money out of consumers who did not realise that they had to cancel in writing.
In the Consumer Protection Act, legislators tried to put a stop to that by compelling companies to notify customers, 40 to 80 days before that end date, of their options: renew or cancel. If the customer doesn't respond, the contract rolls over on a month-to-month basis.
And here's the important bit - the act says this notification must be "in writing or in any other recordable form". In other words, the companies must be able to prove that they sent this notification to the customer.
As I said in this column last year, to my mind it follows that, if a company can't prove that it notified a customer of the expiry date, it has no right to continue to debit his bank account after the expiry date. So I was more astonished to discover that the National Consumer Commission doesn't see it that way.
Spokesman Trevor Hattingh put it like this: "As much as the law requires the supplier to notify the consumer in a recordable form of the impending expiry of a contract, it also requires that the consumer cancel a contract on its expiry or at any other time. There is thus a shared responsibility.
"What is very clear in the law is that one party's obligation is not dependent on that of the other."
At the time, I commented: "So bearing in mind that gyms, and other companies offering fixed-term contracts, would really prefer their customers not to cancel their contracts, there appears to be nothing to stop them from simply claiming they notified a customer that their contract would roll over to month-to-month if they did not cancel."
So I was thrilled to learn that the Consumer Goods and Services Ombudsman, Neville Melville, believes that companies have no right to keep taking a consumer's money after a contract's end date if they can't prove that they sent the required notification.
The dispute that came before the ombudsman in December was one that featured in this column last year. Jane Snethlage's daughter, Caitlin, signed a six-month contract with Perfect Health Gym, in Stellenbosch, in 2012, and stopped using the gym after that time [six months], but her mother unwittingly carried on paying the membership fee for more than two years by debit order.
When she discovered this, early last year, she asked to be refunded but the gym claimed that her daughter had been sent notification of the impending end of the contract, and of the need for a written cancellation.
But Perfect Health could not prove this, saying the business had lost four-and-a-half years of call recordings because a hard drive had failed. The gym said it would refund only half of the over-payments, arguing that Snethlage should have managed her personal finances better.
But Melville, the ombudsman, said the act's wording "must notify the consumer in writing or any other recordable form" makes it clear that the legislature intended this to be complied with.
"The section does not expressly state the consequence of non-compliance with the obligation to notify the complainant in a recordable form, but it can be logically deduced that such a failure would mean that the contract does not continue in any form.
"Accordingly, the supplier was not entitled to receive any payments after the expiry date."
Melville concluded that, in this case, Snethlage ought to have realised sooner that the gym fees were still being deducted from her account, thus the gym must repay not 100% of the over-payments, but 75%.
So where do these contradictory views between the National Consumer Commission and the ombudsman leave the consumer?
Melville said there remains a "lack of authority on the interpretation of the act. It is necessary for the ombud and other similar bodies to attempt to divine how the tribunal and the courts will interpret the act when cases come before them".
More consumer advice at www.wendyknowler.com
If you did not get notification from your fitness club or cellphone service provider 40 to 80 days before your contract expired, telling you when it would expire and how to go about either cancelling or renewing it, failing which it would roll over to a month-to-month basis, and the debit order remained active, demand proof that you were sent that notification.
If they can't provide it, or the notification didn't spell out when and how you had to cancel, the company is obliged to refund monies taken after the contract expiry date.
The Consumer Goods and Services Ombudsman enforces the Consumer Goods and Services Industry Code of Conduct by receiving and dealing with consumer goods complaints free of charge and investigating alleged contraventions. Contact: Sharecall 0860 000 272 (CPA), e-mail email@example.com or fax 086-206-1999.