Landscape for Consumer Recourse in South Africa’s Financial Services Sector

Consumer protection and education are important in all financial service markets, but particularly in South Africa, where the policy, legal and regulatory environments are being changed in an effort to improve access to financial services.

As access to financial services increases, less literate, more vulnerable consumers are likely to enter the market and will need adequate protection. Consumers need to know where to get advice, where to complain, and on what basis they can complain. This is not only important for the functioning of the market, but necessary to develop the trust in the financial sector to draw more people in.

Knowing that they can get help when someone has cheated them, or if they feel aggrieved, is part of establishing trust among consumers.

The objective of this study is to investigate the landscape for recourse in South Africa’s financial services sector, to examine the effectiveness of consumer recourse mechanisms for poorer consumers, and make recommendations for structural changes that would likely lead to financial service markets working better for lower-income consumers.

The assignment included an understanding of the mechanisms for consumer recourse and their appropriateness, and the possible influence of changes in the landscape as a result of the National Credit Act, 2005, the Financial Services Ombud Schemes Act, 2004 and the Consumer Protection Bill.

It also included four desk-based international case studies, qualitative research on consumers accessing recourse, and extensive interviews with a range of relevant parties.