The Department for Business, Innovation and Skills (BIS) last month brought forward secondary legislation comprised in two draft regulations adding to the planned overhaul of consumer rights law recently kicked off by the draft Consumer Rights Bill (Bill) published in June. The two new draft regulations are:
- Consumer Contracts (Information, Cancellation and Additional Payments) Regulations 2013 (“Consumer Contracts Regulations“); and
- Consumer Protection from Unfair Trading (Amendment) Regulations 2013 (“Consumer Protection Regulations“).
The Bill and the new draft regulations implement the EU Consumer Rights Directive (2011/83/EU) (“CRD”). The key changes arising from: (a) the Consumer Rights Bill, and (b) new draft regulations in the form of secondary legislation are set out below.
- Primary Legislation
Consumer Rights Bill
Previous legislation did not cover ‘paid-for’ digital content; it now covers digital content which has been supplied in return for money or tokens (such as virtual currency). This would now cover multimedia games, music and other forms of premium content or downloads.
In addition, digital content must now comply with representations regarding technical and functional specifications. Even though a consumer will not have a right to reject defective digital content, if such content is faulty, a user will be able to require the supplier to repair or replace the content within a reasonable time. For instance, if you have downloaded a track from iTunes or Spotify and it is faulty, the service provider will be obliged to provide a replacement. Significantly, if defective digital content is pre-loaded within a device, that may permit the consumer to reject the goods in question (e.g. the smartphone). This is a landmark development which provides more robust remedies than a consumer may have been entitled to previously.
Faulty Goods (other than Digital Content)
Consumers may return faulty goods within 30 days and get a full refund (unless the consumer has indicated it has accepted the goods). After 30 days, the consumer may instead require a repair or replacement. If the repaired goods or replacement are still faulty, the consumer may demand a refund or price reduction (and part refund). In short, suppliers will need to ensure that any replacement or repair is carried out with particular care, otherwise they may well be liable to pay a refund or compensation.
Suppliers are also restricted from excluding or limiting their liability for any statutory obligations (and, for instance, must not limit financial liability to less than the price of the goods or services in question).
Unfair Terms Laws
The Bill replaces and consolidates the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999 where B2C contracts are concerned. A list of those circumstances is set out within the Regulations which a court may take into account in deciding whether a term is fair. In addition, there is a non-exhaustive list of unfair terms.
- Secondary legislation
Consumer Contracts Regulations
The regulations extend rights for consumers where contracts are concluded at a distance.
- Consumers may cancel a distance contract at any time in the cancellation period, which has been extended from 7 working to 14 calendar days after the day on which the contract is entered into. If the trader provides no information on the right to cancel, then the period is automatically extended to 12 months;
- Online traders are able to withhold refunds until goods are returned and can reduce the amount of money refunded if the goods have been used.
- Retailers must provide clear information to consumers before a sale takes place. The draft Consumer Contracts Regulations set out the detail of what needs to be provided for distance contracts – name, geographical address and contact number, the total price of the goods and services (including taxes), payment arrangements, delivery and significantly a complaints procedure;
- There are also specific requirements for when distance contracts are concluded by electronic means, particularly to make it clear where it is subject to payment obligations. If placing an order involves clicking on a button, this must be labelled in an easily legible manner. If this is not complied with the consumer may not be bound by the contract or order; and
- Confirmation must be provided within a reasonable time after conclusion of a distance contract, but in any event before delivery of the goods or before provision of any digital content begins.
Suppliers will need to obtain consumers’ consent for all payments so that there are no hidden costs. Pre-ticked boxes that add on costs, such as an extended warranty for goods, will no longer be permitted. Additionally, the Regulations states that consumers cannot be charged more than the cost of a basic rate phone call to call a customer helpline.
Consumer Protection Regulations
The Consumer Protection Regulations also amend the current regulations to allow for direct redress where consumers are the subject of misleading or aggressive commercial practices. The standard remedies being introduced are:
- The right for consumers to “unwind” a contract – if the goods or services have not been fully “consumed” and the consumer rejects the goods within 90 days, they can then unwind the contract and receive a full refund;
- If the consumer keeps the remainder of the goods, then they have a right to claim a discount from the trader. This discount is available even when the right to unwind has been lost. The level of discount is fixed in accordance with the bands set out in the Regulations; and
- Consumers have an entitlement to seek damages if they can prove that the practice has caused economic loss, distress or inconvenience. However, the Regulation specifically states that where there is a claim for damages in respect of alarm, distress, physical discomfort or inconvenience only “restrained and modest damages are to be paid”.
As with current legislation these proposed new provisions are not intended to apply to contracts for the supply of certain types of goods and services (e.g. banking services and gambling contracts).
What to do now?
BIS is currently seeking comments on both draft regulations until 11 October 2013. Beyond this date, there is no firm timetable for the process through Parliament or the ultimate date on which the new provisions will become effective. However, the UK must adopt any measures necessary to implement the CRD by 13 December 2013, and must apply those measures to consumer contracts within its scope by 13 June 2014.
In anticipation of the regulations coming info force, online businesses are advised to review their current processes, standard terms, returns policy and staff training to see how many changes will need to be made to comply with the new laws. Where processes or procedures will need to be changed, businesses should plan for this now and review sub-contracts to reflect the new changes. The online experience and terms and conditions will also need to be updated to ensure the consumer has the right information at the right time and your business is not exposed to claims or a longer cooling off period as information is not given at the correct time.