The momentum to reform consumer law in the UK continues apace with the recent publication of the regulations to deliver new rights of redress for consumers affected by breaches of the Consumer Protection from Unfair Trading Regulations 2008 (the CPRs). Consumers will be able to bring court claims to enforce their new rights from October.

Additionally, from mid-June, businesses providing goods and/or services to consumers online or at a ‘distance’ (eg by email or phone) will be under new pre-contractual, cancellation and refund obligations.

In this briefing, we examine the key changes and the impact these may have on consumer facing businesses.

New rights of consumer redress

The CPRs essentially criminalise misleading and aggressive commercial practices by businesses towards consumers. At the moment, where these occur, they can only be enforced by the Competition Markets Authority or Trading Standards (following the abolition of the OFT on 1 April); consumers themselves have no direct right of action. The rights of action  that do exist, under the law of misrepresentation and duress, are complex and are little used. However, reforms have been on the table to address this issue for a number of years, and last autumn the government consulted on the introduction of new consumer rights of redress – see our September 2013 briefing ‘Proposed new rights for consumers to sue for misleading and aggressive practice’.

Parliament has now passed the Consumer Protection (Amendment) Regulations 2014. This means that, from 1 October, consumers will be able to bring a claim in the civil courts for redress where misleading actions or aggressive practices by businesses are found to have occurred and to have caused them harm. No right to bring a claim arises where there has been a misleading omission.

The new regulations also extend the right to bring a claim beyond consumer contracts for  the sale or supply of a product (the definition of which includes both goods and services) to demands for payment for the supply of a product; and the definition of product has also been changed to include digital content.

To succeed in a claim, consumers will need to show that the misleading action or aggressive practice in question was a significant factor in his or her decision to enter into the contract or make the payment.

Assuming the claim is made out, the new remedies available to the affected consumer are:

  • a right to unwind: assuming the product has not been fully consumed, and provided the consumer rejects it within 90 days of the later of the date of the contract or of its delivery or supply, the consumer will be entitled to end the contract and receive a full refund (provided any goods supplied are made available for collection by the trader);
  • a right to a discount: this is available in respect of past or future payments due under  the contract. The new regulations entitle consumers to a 25, 50, 75 or 100 per cent discount on the payments. The level of the discount depends on the seriousness of the incident complained of, which is assessed by reference to behaviour of the trader, the impact of the practice on the consumer and the time which has elapsed. Different rules apply when the value of the product exceeds £5,000 and the consumer paid (or has agreed to pay) more than its market price at the time of the contract. In these cases, the amount the consumer will receive is the percentage difference in value between the market price of the product and the amount payable under the contract. Note it is not possible to seek to unwind a contract as well as to receive a discount; and
  • an entitlement to seek damages: damages will be available for two types of loss: (a) consequential financial loss; and/or (b) alarm, distress or physical inconvenience or discomfort as a result of the incident complained of. Traders do though have a due diligence defence in respect of the right to claim damages.

The new rights apply to business and consumer contracts entered into, or payments made, on or after 1 October. The government is expected to issue guidance for business and consumer organisations on the new rights before they come into force.

The Consumer Contracts Regulations

From 13 June, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 will implement the remaining provisions of the 2011 Consumer Rights Directive; the provisions on payment surcharges having been implemented last year.

This means that for those consumer contracts that are within scope, different contractual rules are imposed depending on the means by which the contract was concluded. A greater range of rules apply in relation to distance contracts (contracts made online, by email, telephone or post) and off-premises contracts (contracts made away from the businesses’ premises, for example visiting a person’s home) than to on-premises contracts (defined as neither a distance contract nor an off-premises contract). Therefore, online retailers and businesses who conclude contracts away from their business premises need to be particularly alive to the changes the 2013 Regulations bring about. These include:

  • pre-contract information requirements: the list of pre-contract information that a business must give to a consumer has been extended. Businesses must provide more details about cancellation rights, return costs and information concerning complaint and redress mechanisms. Failure to provide particular information (eg relating to cancellation rights or costs of returning goods) could result in a fine;
  • cancellation rights: there will be an extension of the period from when a consumer can voluntarily withdraw from a contract (the ‘cooling off period’) to 14 calendar days;
  • refunds: businesses must provide a refund within 14 days of cancellation of the service contract or receipt of goods. Businesses will be allowed to withhold a refund until the goods are returned (or evidence of return is provided). Businesses will also be able to reduce the amount of money refunded to reflect any diminished value in the goods;
  • additional payments/pre-ticked boxes: consumers must expressly/actively agree to any additional payment before it is taken. This means that a pre-ticked box which results in an additional payment will no longer be permitted;
  • delivery: unless agreed otherwise, goods must be delivered within 30 calendar days;
  • helplines: where businesses offer telephone helplines for consumers, consumers must not be charged more than the basic rate for the call. This means that a premium rate number would fall foul of the rules but a landline or mobile rate is acceptable;
  • digital content: for the first time the concept of digital content (eg streaming or downloading music) is introduced into English consumer law. New rules on the cancellation of contracts for the supply of digital content will be introduced. For example, consumers will not have a right to cancel once a download has started, provided that the business has told the consumer this and obtained their explicit acknowledgement; and
  • excluded contracts: certain sectors are excluded such as gambling, most financial services contracts and rental of accommodation for residential purposes, whereas for others, for example passenger transport services, including car rental, the rules only partially apply.

The provisions in the Consumer Contracts Regulations will apply to all contracts within its scope made on or after the 13 June 2014. BIS has already published implementing guidance and the European Commission intends to publish guidance on the overall application of the Consumer Rights Directive shortly.

What we think of the forthcoming changes

New rights of consumer redress

  • These could prove to be a significant addition to the ‘consumer empowerment’ agenda which the government is committed to introducing. Businesses will need to ensure they are up to speed with the requirements of the CPRs in terms of understanding the behaviours and practices which are not permitted and that appropriate protocols are in place regarding staff training and due diligence more generally. Businesses need to be especially alive to the fact that they could face actions for damages from consumers, as well as having to unwind the contract or discount payments. If awarded, these payments could be significant. And this could be in parallel with enforcement action taken by regulators.
  • There have already been some high profile examples where major retailers’ pricing practices fell short of the requirements of the CRPs. Earlier this year the former OFT concluded its investigation into the use of misleading reference pricing by certain furniture and carpet businesses. The newly created Competition Markets Authority will be taking over this role and these sorts of investigations are not likely to decrease. Businesses in sectors subject to an investigation are likely to be targeted by consumers anxious to test their new rights of redress.
  • The new Regulations do set out more detail than we saw in the previous draft. However, guidance will provide further clarity (for example, in relation to how the discounting provisions should be applied).
  • And remember that alongside these new rights, there are also proposals in the Consumer Rights Bill currently before parliament that would see the Competition Markets Authority and Trading Standards given powers to seek collective rights of redress on behalf of groups of affected consumers where the offending behaviour or practice is anti- competitive.

Consumer Contracts Regulation

  • The new contractual rules are very far reaching. Many consumer-facing businesses will be affected.
  • We recommend that you carefully review your sales documents and processes to test if they comply with the requirements of the 2013 Regulations. It may be necessary to change your terms and conditions, web and social media pages, and delivery/return policies, as well as to train staff accordingly on the new provisions.
  • Note especially the requirement for certain pre-contractual information to be provided to consumers up-front before the contract is concluded.
  • You should review any pre-ticked boxes that you have in your consumer contracts.

They must not result in the consumer being required to make any additional payments.