South Africa: FSCA penalises African Bank for misleading 'investment' advertisement

Zawya

25-04-2025

The Financial Sector Conduct Authority (FSCA) has imposed an administrative penalty of R700,000 on African Bank for an advertising campaign that presented a credit product as an investment offering.
Investigation
The penalty followed an investigation by the FSCA into African Bank's #KeFestive social media campaign, which was found to contain factually incorrect and misleading statements.
As part of its ongoing supervisory activities, the FSCA identified and assessed a social media advertisement flighted by African Bank in December 2023.
The advertisement, which featured a well-known public figure, encouraged consumers to take out personal loans with the phrase 'It's not a skoloto chomi! Ke investment".
It said in a statement: "The FSCA found the above statement to be factually incorrect and misleading as it misrepresented the nature of the loan product that was on offer, implying that it was an investment rather than a credit facility."
The FSCA said African Bank contravened sections 6(1), 6(3)(a) and 6(3)(b) of the Conduct Standard, which require the following:
- Section 6(1): A bank must ensure that its financial products and financial services are advertised to financial customers in a way that is clear, fair, and not misleading.
- Section 6(3)(a): Advertising by the bank must be factually correct; and (b) not contain any statement, promise, or forecast which is fraudulent, untrue, or misleading.
Further to the above, the FSCA also found deficiencies in African Bank's governance and oversight processes relating to the review and approval of the aforementioned advertisement. This was a contravention of section 6(9) of the Conduct Standard, which requires the following:
- Section 6(9): A bank must have in place processes and procedures for the approval of advertisements and advertising methods by a person of appropriate seniority and expertise within the bank, which must form part of [its] governance arrangements.
Fully cooperative
The FSCA said African Bank fully cooperated during the investigation of this matter and took immediate action to remedy the concerns raised.
"Taking into account the nature of the contravention, as well as the remedial steps implemented by African Bank, R200,000 of the R700,000 administrative penalty imposed on the bank has been suspended for two years, subject to African Bank remaining fully compliant with the Conduct Standard during the suspension period.
The FSCA confirms that African Bank has paid the immediately due amount of R500,000.
All financial institutions are urged to take note of this sanction and are reminded about the importance of providing clear and accurate information to financial customers regarding the nature of products and services being offered. For many financial customers, decisions about which financial products to purchase are significantly influenced by information conveyed in advertising and marketing material."
According to the FSCA, financial customers who rely on misleading advertisements or false impressions are more likely to choose unsuitable products, potentially leading to financial losses or other adverse outcomes. In this case, by presenting a credit product as an investment, African Bank misled customers about key aspects of the offering, including the long-term risks and potential costs associated with taking up the product.
The FSCA said financial institutions must have robust internal governance and approval processes to ensure compliance with all requirements of the Conduct Standard, including in respect of the development and publication of marketing material and other key information disclosed to customers.
"The administrative penalty imposed in this case serves as a reminder that misleading advertising will not be tolerated, particularly as financial customers increasingly find themselves under pressure to make important decisions regarding their future financial resilience and well-being.
Fair customer treatment is integral to maintaining public trust and confidence in the integrity of the financial system," it concluded.
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