South African bank penalised by regulator for misleading advertisement

The amount of US$38,000 (R700,000) is termed an ‘administrative penalty’ and relates to an ad that ran on the bank’s social media channels in December 2023. 

However, part of the penalty has been suspended for two years, subject to African Bank remaining fully compliant with the FSCA’s Conduct Standard during the suspension period. 

The advertisement, which featured a well-known public figure, encouraged consumers to take out personal loans using a vernacular phrase which the FSCA found 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 in a press statement. 

Conduct business in a manner that treats customers fairly 

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 noted. 

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

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