Major South African bank fined for misleading advertising

The Financial Sector Conduct Authority (FSCA) has imposed an administrative penalty of R700,000 on African Bank for an ad campaign presenting a credit product as an investment product.

The fine relates to African Bank’s ‘Ke Festive’ social media campaign, which was found to have factually incorrect and misleading statements, the authority said.

The ad ran on African Bank’s social media channels 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”.

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.

“By misleading financial customers and failing to provide clear and accurate information about the nature of the product, African Bank contravened sections of the Conduct Standard,” the FSCA said.

The bank was found to be in contravention of Conduct Standard 3 of 2020, which requires banks to conduct their business in a manner that treats customers fairly.

The specific sections that were violated include:

• 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.

In addition, the FSCA also found deficiencies in African Bank’s governance and oversight processes relating to the review and approval of the ad.

The FSCA said financial customers who rely on misleading adverts or false impressions are more likely to select unsuitable products, which could result in financial losses or other prejudicial outcomes.

“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,” it said.

African Bank cooperated fully during the investigation and took prompt remedial action to address the concerns raised.

Considering the nature of the contravention and 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.

This is 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,” the FSCA said.

“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,” it said.

The FSCA said that the fine imposed in this case should remind companies that misleading and false advertising will not be tolerated.

“Fair customer treatment is integral to maintaining public trust and confidence in the integrity of the financial system,” it said.