African Bank Limited faces R700,000 penalty for misleading advertising
Discover how the FSCA imposed a R700,000 penalty on African Bank Limited for misleading advertising practices that could affect consumer trust in financial institutions.
The Financial Sector Conduct Authority (FSCA) says it has imposed a R700,000 administrative penalty on African Bank Limited for misleading advertising, which was found to violate Conduct Standard 3 of 2020 (Banks). The regulation aims to ensure banks uphold fair customer treatment when marketing financial products and services.
According to the FSCA, this decision follows its investigation into African Bank's #KeFestive social media campaign, where advertisements were deemed factually inaccurate. One such ad, flighted in December 2023, featured a well-known public figure encouraging consumers to take out personal loans, stating: 'It's not a skoloto chomi! Ke investment.'
The FSCA ruled that this statement misrepresented the loan, suggesting it was an investment rather than a credit facility. The bank thereby contravened sections 6(1), 6(3)(a), and 6(3)(b) of the Conduct Standard, which mandate that financial advertising must be clear, fair, and factually correct, avoiding misleading statements, promises, or forecasts.
The FSCA says this further investigation uncovered governance deficiencies in African Bank's internal review and approval processes for advertisements. This violated section 6(9) of the Conduct Standard, which stipulates that banks must have robust oversight mechanisms, ensuring advertisements are approved by suitably qualified individuals.
Despite the regulatory breach, the FSCA acknowledged African Bank's cooperation during the inquiry, including its swift remedial action. Given these efforts, R200,000 of the R700,000 penalty has been suspended for two years, conditional on African Bank's compliance with the Conduct Standard. The bank has already settled R500,000 of the fine.
Financial institutions are urged to take heed of this ruling, as misleading advertising can significantly influence consumer decisions, potentially leading to financial losses or unsuitable product selections. The FSCA emphasised the need for banks to adopt strong governance in their marketing processes, ensuring customers receive accurate, transparent information.
'Fair customer treatment is integral to maintaining public trust and confidence in the integrity of the financial system,' the FSCA stated, warning that it will continue taking firm regulatory action against financial institutions that fail to uphold these standards.
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