UK consumer protection laws change again today (1 October). The Consumer Protection (Amendment) Regulations 2014 (the “Regulations”) come into force. They give consumers a new direct right of redress against traders who commit certain breaches of the Consumer Protection from Unfair Trading Regulations 2008 (CPUT). This development shifts the balance of power in favour of consumers. Traders need to be aware of, and prepared for, this new business risk.
Prior to the Regulations, the CPUTs were enforced exclusively by designated regulatory bodies. Where a trader breached the CPUTs, the only course of action available to an aggrieved consumer was to complain to one of these bodies, usually Trading Standards. A scarcity of funding meant that Trading Standards would tend to direct its resources to investigating only the most serious CPUT breaches, leaving consumers in the majority of cases without any redress. This position was criticised, leading to the introduction of the Regulations. Consumers affected by certain breaches of the CPUTs are no longer reliant on Trading Standards. They now have the right to seek direct redress against the trader themselves.
Availability of the right of redress
A consumer will have this right of redress where the trader has engaged in one of the following practices prohibited by the CPUTs:
- a misleading action (giving the consumer false information about a product the trader is selling or presenting the information in a way that deceives the consumer);
- an aggressive commercial practice (pressure selling by the trader, using harassment or coercion); or
- a misleading or aggressive demand for payment (all or some of which may not be due).
A court must be satisfied that the prohibited practice would impact the average consumer (not merely affect the real consumer actually on the receiving end). Also, the prohibited practice must be a significant factor in the real consumer’s decision to enter into the contract with the trader to buy the product (whether goods, services or digital content).
Consumers will be able to:
- ‘Unwind’ the contract – effectively treat the contract as terminated and obtain a full refund of the price from the trader; or
- Claim a discount on the price – where the price is less than £5000, the discount rates are 25%, 50%, 75% or 100% depending on the severity of the misleading or aggressive practice, taking into account the trader’s behaviour, its impact on the consumer and the time elapsed between the prohibited practice and the consumer seeking redress. Although the consumer receives back part or all of the price paid, the contract otherwise remains ‘live’. It is not terminated.
There are conditions attached to the right to unwind. For example, the consumer must complain within 90 days of the prohibited practice having occurred and the goods or service purchased must not have been fully consumed. Where these conditions are not met, the consumer will be able to seek a discount instead.
In addition, the consumer will be able to claim damages to compensate them for any additional (reasonably foreseeable) financial losses incurred as a result of the prohibited practice over and above the refund or discount received (for example, the cost of engaging third parties to remedy sub-standard building work). Consumers can also claim compensation for any (reasonably foreseeable) alarm, distress, physical inconvenience or discomfort suffered.
Why traders should take note
Prior to the Regulations, traders could afford to put compliance with the CPUTs at the bottom of their list of priorities. Enforcement action by Trading Standards was unlikely, except in the case of very serious CPUT breaches, and consumers themselves were largely powerless in the event of a breach. Not so now. Traders could find themselves on the wrong end of a civil action and hit directly in the pocket where a consumer seeks to terminate a contract already in place (and performed) and claim a refund of all or a significant proportion of the price.
Relatively few traders engage in aggressive selling tactics, and those that do are unlikely to take an interest in the introduction of the Regulations. But traders generally need to be aware of the ongoing risk of engaging in misleading actions, even where they did not actively set out to mislead. Arguably, there is a scale of misleading actions running from intentional deception through to inadvertent inaccuracy. Such inadvertence could result from long-standing use of (perhaps outdated and legally questionable) ‘sales puffs’ in advertising or over-optimistic statements about products to consumers by eager sales staff.
Given the now more significant legal and financial consequences of deliberate or unintentional deceit, traders should take immediate steps to review their sales processes, websites and marketing literature to ensure accuracy and transparency in consumer information and train their sales staff on how to stay on the right side of the honesty line when making a product sale. This is particularly important given the widespread use of social media. Empowered consumers may be more inclined to spread the news about a trader’s ‘deceit’ than before, leading to lasting reputational damage – arguably a more significant sanction than the unwinding, discount and damages available under the Regulation.