Changes to consumer contracts coming in June

On Monday 31 March I attended a seminar on the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 run jointly by Trading Standards and BIS.  The regulations implement the Consumer Rights Directive and update and harmonise the law on distance and doorstep selling as well as introducing some information requirements for sales in shops etc.  The seminar was aimed at enforcement authorities and advisers to businesses and consisted of an overview of the new regulations from BIS, and a more detailed presentation from Peterborough trading standards about the regulations and the challenges they present to businesses, followed by a Q&A session.

The regulations come into force on 13 June and set out the following key points:

  • The information the trader should provide to the consumer
  • Cancellation rights for consumers buying away from a trader’s premises and on the telephone/online
  • Measures to prohibit hidden costs

Some of these requirements are already familiar to organisations supplying goods and services to consumers but there are key changes:

  • The cancellation period extends to 14 calendar days
  • Consumers can cancel services started in the cancellation period as long as they pay for the work done so far (once the work has been completed they can no longer cancel)
  • If you are supplying goods at a distance and the consumer cancels you have to provide a refund within 14 days but not if the consumer has not yet returned the goods
  • You can deduct money from a refund where an item appears to have been used (but a customer can take it out of the packaging to try it – eg to try on a dress but not to wear it to a party)

One significant change relates to the provisions to prevent hidden costs.  One aspect has already been implemented in the UK via the Consumer Rights (Payment Surcharges) Regulations 2012: the prohibition on excessive surcharges for payment methods.  The two new provisions are:

  • Prohibition on phone charges in excess of basic rate for customer service lines but not for technical support (however, this distinction can be a fine one to draw) – you do not have to offer a telephone line, but if you do, you cannot use premium rate, 0870 or revenue sharing numbers and the like.  The idea behind this provision is to make sure that suppliers do not use high charges to deter customers from making complaints, cancelling contracts or asking questions.  If you have more than one number, and one is a basic rate, ensure that it is well communicated to customers.  A basic rate is a geographic (eg 0151) or mobile number.  Freephone numbers are clearly also acceptable.
  • Prohibition on any additional payments that the consumer has not actively consented to pay, eg pre-ticked boxes for premium delivery or insurance – if the customer is bound without their knowledge the trader must reimburse the payments made.

We’ve already blogged about the new “obligation to pay” button, which excited some debate at the seminar.  A key issue related to the fact that when a consumer submits an order, they are making an offer to enter into a contract – the trader usually structures the sales process so that they can choose not to accept the order, eg if they are out of stock.  A contract only comes into being when the trader accepts the order.  Do we really want a huge button taking up most of the screen saying “I submit my order and agree to pay if you accept my order”.  It seems unlikely that trading standards will spend too many resources enforcing this point.

Other issues which arise are the fact that all ancillary contracts are automatically cancelled when the sales contract is, not just the credit agreement, so extended warranties will be covered.

If the consumer cancels a contract, the trader must refund the cost of standard delivery but not the cost of any premium service the consumer requested.  The trader also does not have to refund the cost of returning the goods as long as they say in their terms that the consumer has to pay for returns.

One of the main issues for many organisations is likely to relate to changing their telephone number if they currently use a national rate or revenue-sharing arrangement.  Generally, organisations need to be reviewing their sales processes and terms of business now to ensure that they comply with the new rules from June 2014.

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