Consumer Protection Strengthened Against Misleading or Aggressive Trading Practices
On 06 August 2013 the Department for Business, Innovation and Skills (BIS) published the Draft Consumer Protection from Unfair Trading (Amendment) Regulations 2013 (the “Draft Regulations”) for scrutiny.
According to BIS, unfair consumer practices incur a cost to the economy of around £3.3 billion a year and 60% of the population has fallen victim to unscrupulous traders. Elderly and vulnerable consumers are particularly susceptible to misleading or aggressive trading practices which take place, for example, through door-step selling.
The Draft Regulations represent an attempt by BIS to provide greater protection for consumers against these practices and are intended to address shortcomings in the current regime, which was created by the Consumer Protection from Unfair Trading Regulations 2008 (“CPUT”).
The Draft Regulations will provide consumers with a new direct right of redress against traders for misleading or aggressive practices, as well as extending the protection provided by CPUT to cover misleading and aggressive demands for payment.
Direct right of redress for consumers
Under the existing consumer protection regime, consumers have no right to take direct action against traders for misleading or aggressive practices. Consequently, consumers’ rights can only be enforced by public bodies such as the Office of Fair Trading or Trading Standards Services taking action on their behalf. This represents a key shortfall in UK consumer protection when compared to many other European countries, such as Ireland, where consumers are permitted to take action in their own right.
The Draft Regulations will remedy this shortcoming by providing consumers with a new right to take direct action against traders. The new right will be available in respect of all transactions, including transactions involving digital content (more on this below). However, financial services (except consumer credit and debt collection) and land transactions (except residential leases) will be excluded.
For the right to redress to be available, consumers must satisfy a series of conditions:
- Contract or payment – The consumer must enter into a contract with the trader or make a payment to the trader.
- Prohibited practice – The trader must have engaged in a misleading action or aggressive practice which causes or is likely to cause the “average consumer” to take a transactional decision which he would not have done otherwise. This does not extend to misleading omissions. The “average consumer” is considered to be reasonably well-informed, observant and circumspect, although this test is relaxed in respect of consumers who are considered to be vulnerable.
- Significant factor – The prohibited practice must have been a significant factor in the consumer’s decision to enter into the contract or make the payment. This will be judged by reference to the consumer in question rather than the average consumer.
What remedies are available?
Where a consumer satisfies the conditions for the right to redress, several remedies will be available to him:
- Right to unwind – Both parties will be released from their obligations under the contract and the consumer may receive a full refund. The consumer must exercise the right to unwind within 90 days of the date the contract is entered into or the date the goods are delivered, whichever is the later. If the consumer has used some of the product and can only return part of it, or if a service has been partly performed, the right to unwind will still be available provided that the product in question is capable of rejection in the sense that it has not been fully consumed or performed. Consumers are required to make any goods available for collection by the trader.
- Right to a discount – The consumer may receive a discount on the price paid. The amount of discount depends on the level of seriousness of the prohibited practice, ranging from a 25% discount for minor consumer detriment to 100% for very serious detriment. The 90-day limit does not apply to this right and there is no requirement that the goods are capable of rejection. Where a consumer has the right to a discount either the consumer or the trader may also choose to terminate the contract.
- Right to damages – Consumers may claim damages for financial loss or for distress, physical discomfort and inconvenience caused by the prohibited practice if the purpose of the contract was to provide pleasure, relaxation or peace of mind. This right is also not subject to the 90-day limit and there is no requirement that the goods are capable of rejection. However, the right to damages will be limited to the amount (if any) the consumer was unable to recover by exercising the other rights.
A consumer may claim either the right to unwind or the right to a discount but not both, although the right to damages is always available.
Misleading or aggressive demands for payment
The Draft Regulations also extend the scope of the current regime by protecting consumers from misleading or aggressive demands for payment which may not involve the supply of goods or services. For example, demands from debt collection agencies or demands from utility companies made to consumers who are not customers.
Where consumers make payments to traders in response to misleading or aggressive demands, they will have a direct right to unwind the payment if they were “not required” to make all or part of it. The consumer will receive back any amount he was not required to pay. There is no requirement for a contract, no 90-day limit applies and it is not necessary for there to be a product which is capable of rejection.
The Draft Regulations will apply to transactions where digital content has been supplied in return for money or virtual currency, meaning that consumers will enjoy significantly greater protection in transactions concerning games, music and other forms of content or downloads. For the purposes of the right to unwind, digital content will only be considered to have been fully consumed if it has been available to the consumer for a fixed period and that period has expired.
The Government has yet to announce a date when the draft Regulations will come into force. However, it is clear that the regulations will apply to commercial practices which began before the coming into force date and continue after that date (though consumers will only be able to exercise their direct right to redress where a contract has been entered into or a payment made after the coming into force date) as well as any commercial practices which begin on or after the coming into force.
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 020 7404 0606 and ask for your usual Goodman Derrick contact.