African Bank Fined R700,000 For Misleading Loan Advertisement

The Financial Sector Conduct Authority (FSCA) has imposed a R700,000 administrative penalty on African Bank for a social media advertisement that misrepresented a personal loan as an investment product. This decision follows an investigation into the bank's #KeFestive campaign, which aired in December 2023 and featured a well-known public figure.

The controversial advertisement included the slogan, "It’s not a skoloto chomi! Ke investment," which translates to "It’s not a quick loan, it’s an investment." The FSCA found this statement to be factually incorrect and misleading, as it implied that the personal loan was an investment rather than a credit facility. This misrepresentation raised serious concerns about customer understanding and the potential risks associated with the product.

According to the FSCA, African Bank's advertisement violated Conduct Standard 3 of 2020, which mandates that banks conduct their business in a manner that treats customers fairly. Specifically, the bank contravened several sections of this standard, including:

• Section 6(1): Banks must ensure their financial products and services are advertised clearly and fairly.


• Section 6(3)(a): Advertising must be factually correct and not misleading.


• Section 6(3)(b): Advertisements should not contain any fraudulent or untrue statements.

Additionally, the FSCA discovered deficiencies in African Bank's governance and oversight processes regarding the review and approval of the advertisement, violating Section 6(9) of the Conduct Standard. This section requires banks to have robust procedures in place for the approval of advertising methods, ensuring that a senior person with expertise within the bank oversees such advertisements.

In light of these violations, the FSCA imposed a total fine of R700,000 on African Bank. However, R200,000 of this penalty has been suspended for two years, contingent on the bank's compliance with the Conduct Standard during this period. African Bank has already paid R500,000 of the fine, demonstrating its willingness to cooperate with the regulatory body.

The FSCA emphasized the importance of clear and accurate information in financial advertising, stating, "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." The authority reminded all financial institutions of their responsibility to provide truthful advertising to maintain public trust and confidence in the financial system.

Furthermore, the FSCA's investigation highlighted the critical need for financial institutions to strengthen their advertising approval processes. The regulator warned that misleading advertisements can cause real harm, especially as many South Africans face financial difficulties and rely heavily on accurate information when making important financial decisions.

In a statement, the FSCA noted, "Misleading ads can lead customers to choose unsuitable products, resulting in financial losses or other negative outcomes." The authority's strong stance against African Bank serves as a reminder that the financial sector must prioritize fair treatment of customers and adhere to established standards.

As the investigation concluded, the FSCA affirmed its commitment to taking firm regulatory action against any financial institutions that fail to prioritize customer fairness. This penalty against African Bank is part of a broader effort to ensure that customers are adequately informed about the nature of financial products and services being offered to them.

In summary, the FSCA's actions against African Bank underscore the importance of transparency and accuracy in financial advertising. The financial sector must remain vigilant in its efforts to provide clear communication to customers, ensuring that they understand the differences between loans and investments and the associated risks.

The FSCA's message is clear: misleading advertising will not be tolerated, especially in an environment where consumers are increasingly pressured to make informed financial decisions. The integrity of the financial system relies on the fair treatment of customers, and the FSCA will continue to hold institutions accountable for their advertising practices.