Referral selling: Is it legal to share your contacts' details?

Listen to today's Consumerwatch topic below, or read the details under the podcast.

Clearly our details are valuable to companies which do marketing campaigns. So do we have the right to “sell” the details of our friends and family members?

And do companies have the right to ask us to do that?

It’s called referral selling, and the Consumer Protection Act prohibits it.

The Act states, and I’ll paraphrase the section to make it easier to understand: “A person must not induce a consumer to accept any goods or services on the representation that the consumer will receive a rebate, commission or other benefit if the consumer subsequently gives the supplier the names of consumers..”

Which brings me to my experience. As a client of Outsurance and I got a call from one of their reps a few weeks back. He started off telling me about the no-claim bonus I’m due to get at the end of the month, which I knew about because they’d sent me a couple of emails about it.

Then the conversation turned to my premium and I was made a very tempting offer. My premium would be reduced by R400 a month if I gave them names and numbers of people I know, so that Outsurance could add them to their marketing database, and then approach them with a view to getting them to agree to an insurance product.

I didn’t find out how many leads I was expected to offer up to get that discount and for how long it would apply, and what other terms and conditions applied - there’s nothing that would induce me to violate my privacy of my friends and family members in that way. So I simply refused.

I’ve since found out that you only get the premium reduction for SUCCESSFUL referrals. 

Okay, so I am an existing customer, so what the insurer did was strictly speaking not referral selling, but clearly the CPA legislators took a dim view of companies inducing consumers to give up their contacts details in exchange for some kind of rebate or benefit.

And clearly I’m not the only one who finds this practice repugnant.

Sean Crookson tweeted of Outsurance recently: “I had another phone call from the same guy who said he would keep calling me until I provided a list of referrals from my cellphone.”

Outsurance’s head of client relations, Natasha Kawulesar, confirmed to me that the company does solicit referrals from its clients “in order to grow our business”. 

“In the past, we would increase the clients OUTbonus if successful referrals were made. Now offer clients significant premium discounts in return for successful referrals.

“Although you may feel that this is in bad taste, we know that such referrals can be positive for the client as well as the referees as we are often able to save consumers thousands of rand every year on personal, business or life insurance.

“Participating in our referral promotion is at the clients discretion and we respect that there may be clients who are not comfortable in participating. Clients wishing to not participate or not be contacted again in this regard can be added to our 'do not contact' list.”

“We sometimes fail here and erroneously contact the client again for the same purpose. We consider this unacceptable behaviour and such instances are investigated and appropriate action taken. For many clients though, they are very happy to receive a possible discounted premium and thus happy to participate in the promotion.”

Well, I’m sure they are, but I’m also sure that if many of those friends and family members knew that what they’d done they’d be less than impressed.

The reality is that our details are extremely valuable to companies and their marketing agents. And it’s really not okay for someone to offer them on a platter to a company without our permission.

As for the CPA - insurance related services are excluded from the CPA as they fall under the Financial Services Board legislation.

I asked the SA Insurance Association what it thought of the practice, and was told that the organisation is a representative body, not a regulatory one, and thus it “does not have a mandate to become involved in business decisions of our members if such decisions are within the relevant legal framework and does not contravene our Code of Conduct.”

Legally, a company may contact you to sell you something - once - and if you say you don’t want to be contacted again, even by a company you already do business with, they have to respect that.

You also have the right to know where you details were obtained, but my experience many telemarketers make stuff up, saying things like “The National Consumer Database”, which doesn’t exist.

The Direct Marketing Association of SA has an “Opt Out” database that you can register on, in order not to get any so-called spam, but only the organisation’s members are obliged to recognise the wishes of people on that list. To register: https://www.nationaloptout.co.za/DNC.aspx

The CPA makes provision for a government-run national consumer do-not-contact database, but sadly that’s never been set up.

If you get a call from someone wanting to sell you cosmetics or an insurance policy, know that they could well have got your details from someone very close to you.