The Covid-19 pandemic and the resulting travel bans and restrictions on gatherings have resulted in a flood of cancellations of flights, accommodation and other services, which will clearly have a negative impact on consumers, suppliers and the economy, said the Ombud for Consumer Goods and Services, Magauta Mphahlele.
“There is widespread confusion about the rights and responsibilities of affected parties relating to claims for refunds,” she said.
“The Consumer Protection Act (CPA) always tries to balance the rights of consumers and suppliers. The CGSO empathises with businesses who stand to carry massive losses due to cancellations.
“We urge all parties to act reasonably and fairly as well as work together to minimise the impact on the economy, individuals and households. We also hope that the government will consider some relief measures for suppliers to stem potential job losses and the collapse of the economy,” said Ms Mphahlele.
“While it is our view, based on the interpretation of the spirit and intent of the CPA, that consumers have a right to a full refund in these circumstances, if a postponement is possible we urge consumers to take this option instead of requesting a refund to minimise the impact on suppliers who are also not at fault,” said Ms Mphahlele.
Suppliers should treat each case on its merits and develop incentives to encourage consumers to accept postponements where possible.
Sections 17 and 47 of the CPA regulates voluntary cancellations by a consumer as well as cancellations arising out of the inability of a supplier to provide a service either through their own fault or circumstances that are outside their control.
The declaration of a state of national disaster has forced both consumers and suppliers to cancel advance bookings and reservations due to the travel bans and restrictions on gatherings.
It is common cause that in most cases none of the parties is at fault where a cancellation must be processed.
The ombud said Section 17 of the CPA deals with consumers’ rights to cancel bookings and reservations, which means suppliers can charge a reservation deposit and a reasonable cancellation fee should a customer cancel prematurely.
However, Section 17(5) provides that, among others, a supplier may not impose any cancellation fee if the consumer is unable to honour the booking, reservation or order because of the death or hospitalisation of the person who made the booking or reservation”.
It is clear “that consumers are not to be penalised for a cancellation that is due to illness or death”.
Although many people have not been tested for the Covid-19 virus, the restrictions imposed by the president and the health department is treating everyone as being “ill”, hence the restrictions.
“It is our interpretation, based on the intention of the CPA, that consumers are entitled to full refunds when they cancel due to the travel bans and restrictions on gatherings.
“However, there is some respite for suppliers. Section 47 deals with overbooking and overselling. In this context suppliers are not at fault. This section explains what should happen if cancellations are beyond the supplier’s control.
“If a supplier makes a commitment or accepts a reservation to supply goods or services but it fails to keep to the agreement because of insufficient stock or capacity to supply the goods or services, or similar, the supplier must refund to the consumer the amount, plus interest at the prescribed rate from the date on which the amount was paid until the date of reimbursement; and, in addition, compensate the consumer for costs directly incidental to the supplier’s breach of the contract, except to the extent that the subsection provides otherwise.
“This means the consumer is entitled to two types of recourse if the supplier is at fault, a full refund with interest plus compensation for direct incidental costs.
“However, where the supplier is not at fault and has taken reasonable steps to inform consumers about the shortage of stock or capacity, the consumer is only entitled to a refund and not consequential damages. But it does not apply if the shortage of stock or capacity is due to circumstances beyond the supplier’s control, and if the supplier took reasonable steps to inform the consumer of the problem as soon as it was practicable to do so in the circumstances,” the ombud said.
The CGSO’s view is that consumers cannot be charged a cancellation penalty and be refused a refund irrespective of who initiates the cancellation due to the travel bans and restrictions on gatherings.
Many suppliers are offering consumers the option to postpone the bookings or reservations to a future date instead of a refund.
This raises questions of whether suppliers have the right to do so and if consumers must accept that offer.
Section 47(4) does allow the supplier to rely on a legal defence against a claim for a refund if they make an alternative offer to satisfy the promise to deliver, but the consumer has to choose if they want to accept that offer.
Where the consumer is being unreasonable, the supplier has some recourse if, among others, the consumer has unreasonably refused the offer.
It is important for consumers to consider alternative offers by suppliers in place of a cancellation refund and be reasonable considering the circumstances.
However, suppliers must understand that they cannot impose a blanket no refund, voucher policy or other alternative.
Ms Mphahlele cautioned suppliers not to use the pandemic to circumvent the law and unnecessarily inflate the prices of goods and services.
She warned businesses to ensure that their cancellation policies are in line with the CPA, are communicated to consumers through accessible channels and that the claims and disputes contact details and channels are displayed or communicated in plain language.
Visit www,cgso.org.za or email firstname.lastname@example.org or call 011 781-2607, Sharecall: 0860 000 272 (CPA) or fax: 086 206 1999 for help and information.