The Financial Sector Conduct Authority (FSCA) has imposed a R700 000 penalty on African Bank for misleading advertising that violated Conduct Standard 3 of 2020. The fine follows the FSCA’s investigation into the bank’s 2023 festive season campaign, #KeFestive, which included misleading financial statements that could misrepresent critical information to consumers.

In December 2023, the FSCA identified a specific social media advertisement that mischaracterized African Bank’s personal loans. The advert encouraged potential borrowers with the phrase, “It’s not a skoloto chomi! Ke investment” (It’s not a debt, friend! It’s an investment), implying that the loan was an investment product rather than a credit facility.

The FSCA found that this misrepresentation could significantly mislead consumers by distorting their understanding of the risks and long-term costs associated with the financial product. As the regulator stated, “financial customers were misled about, among other things, the longer-term risks and potential costs associated with taking up the product.”

African Bank was found to have violated sections 6(1), 6(3)(a), and 6(3)(b) of the Conduct Standard, which mandate that financial advertisements must be:
1. Clear, fair, and not misleading.
2. Factually correct.
3. Free from fraudulent or untrue statements.

Additionally, the FSCA highlighted deficiencies in African Bank’s governance protocols, stating that the advertisement approval process lacked proper oversight.

The report further noted a violation of section 6(9), which requires banks to have a review mechanism involving senior personnel with appropriate expertise. As a result of these violations, the FSCA imposed a R700 000 administrative penalty on African Bank. However, R200 000 of the fine was suspended for two years, conditional upon African Bank maintaining full compliance with the Conduct Standard during the suspension period.

The FSCA confirmed that African Bank has paid the immediate amount due of R500 000.

Highlighting the broader impact of misleading marketing, the FSCA reiterated the importance of transparency and ethical communication with consumers in the financial sector. It warned that deceptive advertising could lead customers to purchase unsuitable financial products, resulting in financial losses or long-term consequences.

The FSCA emphasized: “Decisions about which financial products to purchase are significantly influenced by information conveyed in advertising and marketing material for many financial customers.”

With a firm stance on consumer protection, the FSCA reaffirmed its commitment to enforcing regulatory standards, ensuring that financial institutions uphold fair marketing practices, transparent governance, and ethical customer treatment. As financial customers operate within an increasingly complex industry, the case against African Bank highlights the necessity for responsible advertising and robust internal review processes ensuring that consumers can make informed financial decisions based on accurate and honest information.