The Consumer Rights Act 2015 (‘CRA’) has been a long time coming, with the vast majority of provisions coming into force today. This means a raft of well-established pieces of legislation will be replaced, to the extent that they apply to consumer contracts. While some of the law will remain the same, there are a number of significant changes to take into account.
Unfair contract terms
Parts 1 and 2 of the CRA consolidate and replace the Unfair Terms in Consumer Contracts Regulations 1999 and relevant provisions of the Unfair Contract Terms Act 1977 (‘UCTA’).
‘Fairness’, prominence and transparencyThe starting point is that terms must be ‘fair’ to be enforceable. The effect of the ‘fairness test’ will be the same as the ‘reasonableness’ test under UCTA – a term will be ‘unfair’ if ‘contrary to the requirements of good faith, it causes a significant imbalance in the parties’ right and obligations to the detriment of the consumer’. Where contractual wording is drafted and presented in a way that respects the legitimate interests of the consumer, it is more likely to be considered a ‘fair’ term. The main point of difference under the CRA regime is that contract terms specifying the main subject matter or price of the contract will be exempt from the fairness test only if they are transparent and prominent. These terms ought to make grammatical sense to the consumer and enable the consumer to evaluate the consequences. In particular, the new, express requirement for prominence is a significant development. It means, for example, that if the price is not prominent in the contract, it will be assessable for fairness and if found unfair will be unenforceable.
Grey listThe CRA also expands the list of terms in consumer contracts which may be regarded as unfair (known as the ‘grey list’). Three new terms have been added that relate to exit fees, changes in subject matter, and price change. For example a term allowing the trader to decide the characteristics or subject matter after the consumer is bound by the contract will likely be considered unfair. The terms on the grey list are not automatically unfair, but will be presumed to be unfair in the absence of other factors.
EnforcementThese rules can be enforced by public authorities, including the Competition and Markets Authority (‘CMA’). This means a regulator may consider a complaint about contract term(s), conduct an investigation and then take action. This could vary from the regulator issuing targeted guidance, to an enforcement order to stop a business from breaching certain legislation.
There is scope, also, for individual consumers to rely directly on this regime. A consumer could either resist legal proceedings brought by the trader against them by arguing that the relevant terms are unfair and therefore unenforceable, or instigate proceedings him or herself. If the court agrees with the consumer, the trader will not be allowed to enforce that term against the consumer.
Courts must now also assess the fairness of consumer contract terms of their own initiative, even when not expressly asked to do so by the parties involved.
Most businesses will already be familiar with pre-contractual information requirements and cancellation rules for consumer contracts; under the CRA, such information will now become terms of the contract. As under existing legislation, businesses providing goods and/or services to consumers online or at a ‘distance’ (eg by email or phone) are under various obligations which mean:
- businesses must provide more details about cancellation rights, return costs and complaints and redress mechanisms;
- businesses must provide a refund within 14 days of cancellation of the service contract or receipt of goods;
- the ‘cooling off’ period from when a consumer can voluntarily withdraw from a contract was extended to 14 days;
- consumers must expressly/actively agree to any additional payment before it is taken (eg pre-ticked box for additional payment is no longer be permitted); and
- unless agreed otherwise, goods must be delivered within 30 calendar days.
Further details set are out in our briefing: ‘Consumer law update: new rights for consumers to sue and other changes to consumer contracts’.
Sub-standard goods and services
The CRA specifies the standards which goods and services have to meet. These remain much the same as the standards previously set out in the Sales of Goods Act 1979 and Supply of Goods and Services Act 1982 (for example, goods must be of satisfactory quality and match their description, and services must be performed with reasonable skill and care). But in some cases the CRA is more precise than the previous legislation: for example, goods must be delivered within 30 days (unless agreed otherwise), rather than just in ‘a reasonable time’ as before. The main change is to the remedies that consumers will be entitled to demand where these standards are not met.
Goods remediesFor goods, there is a tiered approach to remedies. If the goods do not meet the specified standards, then in the first instance the consumer is entitled to reject the goods for a full refund within the first 30 days.
Alternatively, the consumer can ask for a repair or replacement of the goods. The trader only gets one chance to repair or replace the goods, and this must be within a reasonable time and without significant inconvenience to the consumer. However, the consumer cannot insist on a repair/replacement if it is impossible or disproportionate compared to other remedies.
If the repair/replacement does not fix the problem, the consumer can reject the goods for a refund (which may be a partial refund if the consumer has had the goods for more than six months, to reflect the use of the goods). Alternatively, the consumer can keep the goods and claim a price reduction to reflect the defect. All refunds must be provided within 14 days of being agreed.
As under previous legislation, the consumer has to prove that there is a fault, but if the fault is reported within the first six months after delivery, then the fault is presumed to have been present at the time of delivery. After the first six months, the burden of proof reverses, meaning the consumer has to prove that the fault was present at the time of delivery.
Services remediesIf services are not up to standard, the consumer can require repeat performance or a price reduction (which could be 100 per cent of the price). The repeat performance must be provided within a reasonable time and without significant inconvenience to the consumer.
One of the big changes introduced by the CRA is that it sets out consumers’ rights in relation to digital content for the first time. Digital content includes software, digital media, apps etc., whether sold in tangible or intangible form. Free digital content is generally excluded from CRA provisions, although the unfair terms rights (see above) and consumers’ rights if the digital content damages other property (see below) still apply.
Digital content has to meet similar standards to goods: be of satisfactory quality, fit for purpose and as described. If the digital content is supplied in tangible form (eg music on a CD), the rights and remedies applicable to goods under the CRA (described above) apply.
For digital content supplied in intangible form, there is no 30 day short-term right to reject (unlike goods). The remedies generally recognise that digital content cannot be ‘returned’ as such. The consumer has a right to repair or replacement, but (unlike with tangible goods) the trader is not limited to one attempt at repair or replacement (as software is routinely updated). If it is not possible to fix the problem by a repair or replacement within a reasonable time or without causing significant inconvenience to the consumer, the consumer is entitled to a price reduction. This may be a full refund, depending on the defect.
If digital content (including free content) causes damage to a device or other digital content, the trader must repair the damages or compensate the consumer for the damage. If the trader does not have the right to supply the digital content, the consumer has the right to a full refund.
The CRA introduces a broad set of enforcement powers, which will largely be enforced by the CMA and local Trading Standards Services (TSS).
A key change is that the CRA amends the Enterprise Act 2002 to widen the scope of the enforceable undertakings which an enforcer can seek under Part 8 of the Enterprise Act – either through negotiation with a trader who has breached consumer law, or in court. These ‘enhanced consumer measures’ mean that a business could have to:
- provide redress to consumers who have suffered loss from breaches of consumer law;
- provide more information to consumers so they can make better informed purchasing decisions; for example, the court could order that a business post an item on their website notifying consumers of their actions; and
- introduce new compliance measures; for example, make changes to staff training or appoint a compliance officer.
This is a significant development, as under the previous regime enforcers could only seek orders to stop the offending conduct.
Direct consumer action – new competition collective action regime
The CRA introduces, for the first time in the UK, an ‘opt-out’ collective action regime. This will allow competition law claims to be brought on behalf of a defined set of claimants. Further details are set out in our briefing:‘Competition Law Reform’.
Outside the competition context, it is also worth noting that since 1 October 2014, consumers have been able to bring direct actions against traders in the civil courts for misleading actions or aggressive practices which have caused them harm, through amendments to the Consumer Protection from Unfair Trading Regulations 2008.