FSCA slaps African Bank with R700 000 penalty for misleading advertising
The Financial Sector Conduct Authority (FSCA) has imposed an administrative penalty of R700 000 on African Bank due to misleading advertising that violated the Conduct Standard 3 of 2020 (Banks).
This follows an extensive investigation into the bank's festive season social media campaign, dubbed #KeFestive, which featured misleading financial statements that could misrepresent vital information to consumers.
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In December 2023, the FSCA identified a social media advertisement that encouraged potential borrowers with the phrase 'It's not a skoloto chomi! Ke investment'.
This misleading representation suggested that the personal loans on offer were investment products rather than credit facilities. Such mischaracterisation could significantly mislead customers about the nature and risks associated with the financial product.
The FSCA determined that African Bank had contravened essential sections of the Conduct Standard, namely sections 6(1), 6(3)(a), and 6(3)(b), which mandate banks to ensure that advertisements are:
Clear, fair, and not misleading,
Factually correct, and
Not containing fraudulent or untrue statements.
Moreover, deficiencies were noted in African Bank's governance protocols, particularly the approval processes for advertisements. The lack of oversight in this regard was a further violation of section 6(9) of the Conduct Standard, which necessitates a review mechanism involving senior personnel of appropriate expertise within the bank.
"Taking into account the nature of the contravention, as well as the remedial stepsimplemented by African Bank, R200 000 of the R700 000 administrative penalty imposedon the bank has been suspended for a period of two years subject to African Bankremaining fully compliant with the Conduct Standard during the suspension period," it said.
"The FSCA confirms that African Bank has paid the immediately due amount of R500 000."
The FSCA reminded all financial institutions regarding the importance of delivering clear and truthful information to customers. It said that decisions about which financial products to purchase were significantly influenced byinformation conveyed in advertising and marketing material for many financial customers.
The financial sector watchdog said financial customers who relied on misleading adverts or false impressions were more likely to select unsuitable products, which could result in financial losses or other prejudicial outcomes.
It said that in this matter, by positioning the product as an investment rather than a credit product, financial customers were misled about, among other things, the longer term risks and potential costs associated with taking up the product.
The FSCA reiterated its commitment to enforcing stringent regulatory standards among financial institutions, aiming to nurture a financial sector characterised by transparent governance and ethical customer treatment.
The developments surrounding African Bank's case highlight the critical need for robust internal governance and thorough review processes in shaping marketing material that reflects the true essence of financial offerings.
As customers increasingly look for clear guidance in navigating the complexities of financial products, the integrity of the financial system depends on the unambiguous, fair representation of information. The FSCA's stance against misleading advertising underscores the vital necessity for public confidence and trust in financial services.
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