Does the Consumer Protection Act apply to Non-Profit Organisations?

The Consumer Protection Act 68 of 2008 (CPA) came into effect in April 2011. Unknown to many Non-Profit Organisations (NPOs), the CPA applies to non-profit sectors. This could include amongst others; social, religious and educational organisations. It is a given that all NPOs are to be registered with the Department of Social Development and obtain an NPO Certificate including a registration number.

What impact does the CPA have on NPOs?

NPOs as suppliers of goods and services

It is common that goods are donated to the NPOs and there is no need for those specific goods. In most instances, these goods are sold to consumers and the proceeds received from the sales are used for the upkeep of the premises or for other various reasons. Other examples would be that religious organisations offer child care services by way of opening a crèche to generate income for the organisation.

Marketing of goods and services

Section 54(1) of the CPA states that when a supplier undertakes to perform any services for or on behalf of a consumer, the consumer has a right to:

1. The timely performance and completion of those services, and timely notice of any unavoidable delay in the performance of the services.
2. The performance of the services in a manner and quality that persons are generally entitled to expect.
3. The use, delivery or installation of goods that are free of defects and of a quality that persons are generally entitled to expect if any such goods are required for the performance of the services.
4. The return of any property or control over any property of the consumer in at least as good a condition as it was when the consumer made it available to the supplier for the purpose of performing services, having regard to the circumstances of the supply, and any specific criteria or conditions agreed between the supplier and the consumer before or during the performance of the services.

Section 55(2) of the CPA states that every consumer has a right to receive goods that:

1. Are reasonably suitable for the purposes for which they are generally intended.
2. Are of good quality, in good working order and free of any defects.
3. Will be usable and durable for a reasonable period of time, having regard to the use to which they would normally be put and to all the surrounding circumstances of their supply.
4. Comply with any applicable standards set under the Standards Act, 1993 (Act No. 29 of 1993), or any other public regulation.

The sale of goods

Goods that are defective and do not comply with applicable standards can be returned to the NPO without penalty and at the expense of the NPO. Keep in mind that at the direction of the consumer and within 6 months of delivery, the consumer can return the product and elect for same to be repaired, replaced or for a refund. Section 56 of the CPA makes reference to the implied warranty of quality.

Services rendered by NPOs

Most services require terms and conditions to be in place in order for the parties to understand what is fully expected of them. Bearing in mind that the Service Level Agreements are generally drawn up by the party providing the service, NPOs need to be wary of the fact that Section 48 of the CPA would apply to them.

Section 48 of the CPA states that a supplier must not:

1. Market any goods or services, or negotiate, enter into or administer a transaction or an agreement for the supply of any goods or services, in a manner that is unfair, unreasonable or unjust.
2. Offer to supply, supply, or enter into an agreement to supply, any goods or services at a price or terms that are unfair, unreasonable or unjust.
3. Enquire a consumer, or another person to whom any goods or services are supplied at the direction of the consumer:
   1. to waive any rights;
   2. assume any obligation; or
   3. waive any liability of the supplier, on terms that are unfair, unreasonable or unjust, or impose any such terms as a condition of entering into a transaction.

It is important for NPOs to ensure that their terms and conditions, contracts and other similar documents are not excessively one-sided in favour of the supplier. The NPO is required to bring any terms and conditions which may adversely affect the consumer, to the attention of the consumer.

Section 26 of the CPA states that the supplier of the goods or services must provide a written record of each transaction to the consumer to who the goods or services are supplied. The CPA further stipulates the bare minimum that needs to be on the documents. NPOs are therefore obliged to comply with the above.

An NPO must not carry on doing business, advertise, promote, offer to supply or supply goods or services or enter into an agreement with a consumer unless its name is registered in terms of the CPA or any other public regulation. Trading under an unregistered name may, therefore, be prohibited in terms of the CPA. Section 79 to 81 of the CPA has not taken effect as yet and we await an announcement from the Minister. Once this has been done, all trading names will need to be registered at the Companies and Intellectual Property Commission.

Marketing by NPOs

Section 11(1) of the CPA states the right of every person to privacy includes the right to:

1. refuse to accept;
2. require another person to discontinue; or
3. in the case of an approach other than in person, to pre-emptively block, any approach or communication to that person, if the approach or communication is primarily for the purpose of direct marketing.

Direct marketing is commonly used by NPOs in the process of obtaining donations. The above section allows the consumer to block communications from the NPOs, prohibiting them from communications which form part of the NPO’s fundraising.

In order for the NPOs to be above board in terms of the CPA, the NPOs need to look at:

1. Whether their contract terms and reasonable, fair and just to all parties.
2. Training staff on the impact of the CPA on NPOs.
3. Ensuring that goods and services comply with the standards that are set out in the CPA.
4. Seeking assistance and legal advice on how to become compliant in terms of the CPA.
5. Identifying and eliminating risks, capitalising on the prospects that arise from the CPA.

Failure to comply with the CPA will result in but are not limited to:

1. A CPA offence attracts the possibility of a fine or imprisonment for a period not exceeding 12 months or both.
2. A tribunal may impose administrative fines for prohibited or required conduct.
3. An administrative fine may not exceed 10% of the respondent’s annual turnover during the preceding financial year or R1 000 000

ABOUT THE AUTHOR

Ashlin Naidoo is an admitted attorney who obtained his LLB degree from the University of KwaZulu-Natal. He worked as a professional assistant prior to joining SEESA and specialised in civil litigation. He is currently a SEESA Consumer Protection & POPI legal advisor at our Durban office.