On 1 July 2014, the second reading of the new UK Consumer Rights Bill (the “Bill”) took place in the House of Lords. The government expect the Bill to become law in late 2015/early 2016, with a six month transition period likely to be put in place.
The intention of the Bill is to reform and consolidate the vast majority of UK consumer law, including provisions relating to the supply of goods, the supply of services, unfair contract terms, defective digital content and enforcement powers. The changes need to be considered alongside the recent implementation of the Consumer Rights Directive.
The Bill will significantly affect further and higher education providers and independent schools, on the basis that students are considered consumers for the purposes of the consumer law framework in the UK. It is therefore essential that such education providers fully appreciate the impact the Bill will have on their activities, whether based in the public sector or in the private sector. The key relationship is the one that the education provider has with each of its students, or with the parents of its students in the case of independent fee charging schools.
Whilst in no way an exhaustive list of the provisions contained in the current draft of the Bill, set out below are the three key areas of the Bill which we believe are likely to affect education providers to the greatest extent.
The effect of pre-contractual information
Education providers need to be aware of the inclusion of provisions in the Bill which relate to pre-contractual information provided to students by providers and their agents.
Under the Bill, every services contract, including educational service contracts, will be treated as including, as a term of the contract, anything said or written to a consumer, where: (i) it is taken into account by the consumer when deciding whether to enter into the contract; or (ii) it is taken into account by the consumer when making any decision about the service after entering into the contract.
Education providers will therefore need to consider carefully the extent to which communications made to prospective students/parents will incorporate additional terms into their contracts. This may require providers to undertake a wholesale critical review of, for example, marketing materials, telephone scripts, websites and other pre-contractual documentation and processes. Providers may also need to consider what training they provide to any staff members and/or volunteers who speak to potential applicants/parents at open days.
Fairness of terms in educational services contracts and notices
The key change to current unfair terms legislation that education providers need to be aware of is the change in the assessment of fairness. Under current legislation, a term in a contract will not be assessed for fairness to the extent that it is in plain and intelligible language, and it specifies either the main subject matter of the contract or the adequacy of the price payable. This is particularly relevant to education providers given the recent reports published by the Office of Fair Trading (which has now been replaced primarily by the Competition and Markets Authority) about the fairness and reasonableness of conditions contained in some universities’ student contracts, particularly with regards to academic sanctions for non-payment of non-tuition fee debt.
However, to benefit from this exclusion, an education provider will now be required to ensure that the term is “transparent and prominent”. A term will be considered transparent if it is in plain and intelligible language and is legible (if in writing). A term will be considered prominent if it is brought to the student’s/parent’s attention in such a way that an average consumer would be aware of it.
This is a fundamental change which will require providers to review how they present and emphasise to students/parents key provisions and pricing terms in contractual documentation and notices.
Statutory remedies – Service contracts
The Bill introduces the following “tiered” statutory remedies in respect of services contracts with consumers:
Tier 1 - Re-performance: a right to require a service provider to perform defective services again, to the extent necessary to complete its performance in conformity with the contract.
Tier 2 - Reduction in price: a right to a “reduction in price of an appropriate amount” (i.e. the price is reduced by the difference between what was paid for the service and the value of the service actually provided).
This is the first time statutory remedies have been introduced for services and applied generically, for example, to the services of a plumber and to the educational services provided by institutions. It will take time to work out how these generic provisions will work when applied in the education context.
A consumer cannot require re-performance if it is not possible, for example, if the service was time specific. However, it is currently unclear whether the courts will consider it possible for educational services to be re-performed, particularly when a student enrols to complete courses within an agreed timeframe.
Please note that these statutory remedies do not prohibit a student/parent from seeking other remedies for a breach of a contractual term. Such additional remedies include damages (that is, financial compensation) and a right to treat the contract as terminated.
Matthew Gough, Head of Eversheds’ Consumer Law Team said:
“The Bill will have a significant impact on the education sector, alongside the recent changes introduced following the implementation of the Consumer Rights Directive. It is clear that the changes will mean that education providers will need to consider what steps are needed to ensure that they are compliant with the new provisions. The clock is ticking, and plans needs to be put in place now to ensure future compliance.”