Three things that you need to know about the Consumer Protection (Amendment) Regulations

Four months and 24 days remain until more consumer regulations come into force; this time: the Consumer Protection (Amendment) Regulations 2014.

Why do these matter?

Well, if a business 'plays fast and loose' with the rules after 1 October 2014 and indulges in misleading or aggressive trading practices, not only could it have a PR disaster on its hands—witness how social media jumps on corporate wrong-doing nowadays—but it may also be handing a consumer the following new rights and remedies:

  • the right to unwind from a contract and get a full refund with 90 days of the contract being entered into or goods being delivered
  • the right to receive a discount (which will depend on the amount of harm and impact on the consumer), and
  • the right to claim damages for additional losses or harm they have suffered.

In other words, behave unfairly or in bad faith and a business could now find itself pursued in the civil courts by aggrieved consumers. Previously, a business only had to worry about being chased up by Trading Standards or the Office of Fair Trading (although see our blog post on what has happened since the OFT was abolished).

Want to know more? Then check out the interview below with Hannah Roberts and Craig Chaplin of DWF which was published recently in Lexis®PSL Commercial.

What was the government consulting on and why?

The government was consulting on draft Regulations which reform the existing law on misleading and aggressive selling. As a result of that consultation the Consumer Protection (Amendment) Regulations 2014 (the Regulations) will come into force on 1 October 2014 and will amend the existing Consumer Protection from Unfair Trading Regulations 2008 (CPUT).

The change has been brought about due to the government (and the public’s) concern that under existing laws, if a customer was the victim of misleading or aggressive selling it has been very difficult for them to get their money back or any form of compensation. This was due to a number of reasons.

One was that the existing CPUT (which currently covers these practices) can only be enforced by the Competition and Markets Authority (formerly the Office of Fair Trading) and Trading Standards and not by consumers directly.

The second reason was that if consumers wanted to take action themselves they would have to rely on private law on the basis of the law of misrepresentation, duress, undue influence and harassment. That is something that consumers find difficult to use and understand because they are technical areas of law that were initially evolved in the business to business context and so are not particularly suited to consumers.

What will the new legislation do?

The Regulations, which come into effect from 1 October 2014, provide more consumer protection and essentially more power for consumers to enforce their rights through the civil courts.

The main focus is to introduce private rights of redress for consumers who have been victims of misleading or aggressive practices, including standard remedies and an entitlement to damages.

The primary remedy is the right to unwind from the contract or payment and get a full refund and customers can do this within 90 days of the contract being entered into or the goods being delivered (whichever is the later).

Customers also have the right to a discount—although this remedy is not restricted to within the 90 day period. The amount of the discount will depend on the materiality of the harm and the impact on the customer.

The consumer can also claim damages for any additional losses or harm they have suffered as a result of the misleading or aggressive practice or for alarm, distress or physical inconvenience or discomfort. Although only damages that are reasonably foreseeable are recoverable.

Under the new Regulations there are certain conditions that must be met for the consumer to claim any redress:

  1. they must have entered into a contract (so adverts are not sufficient)
  2. they must show a misleading or aggressive practice has been carried out (as defined in the existing CPUT) and that it is likely to cause the average consumer to enter into the contract, and
  3. they must show that the prohibited practice was a ‘significant factor’ in the consumer’s decision to enter into the contract or make a payment

There are only very limited circumstances in which a deduction for use (from the refund) may be granted by the courts—ie only where services or goods are provided continuously for a month, such as a utility. In that case, the market price would be deducted from the price the customer paid for it.

Finally the Regulations make it clear that there is no right to double recovery—so if the consumer has already been compensated under another law or equity they cannot claim under the Regulations and vice versa.

To what extent is the legislation helpful in clarifying the law in this area?

It is helpful in clarifying the law in a number of ways.

Where remedies may previously have been unclear, these have become more standardised which can only provide more clarity to consumers and practitioners. I think the new rights make it clearer and simpler for consumers to take their own action in the civil courts, so the law should shift from public prosecutions to more consumers exercising their rights and taking action themselves.

Also, at the moment, businesses (and practitioners) have to grapple with two different systems—both public regulation under the existing Consumer Protection Regulations and private rights of redress under misrepresentation and undue influence etc which use different terminology and concepts. The amendments will help to align the public and private systems more. Obviously, consumers can still bring claims under the existing doctrines of duress etc so the Regulations will not completely eradicate this but hopefully if more consumers use this right of redress it would reduce the need to refer to those existing laws. However, the effects of these amendments will depend on how well these new rights are publicised and made known to consumers.

Changing the law is one thing, but I think the greater issue is the existing problem of a lack of consumer awareness—most people simply do not know what their rights are and so do not pursue them. Unless this changes, the Regulations may have little impact in practice despite the greater clarity and rights for consumers.

What will lawyers need to be mindful of when advising clients?

The Regulations only apply to business-consumer contracts. Practitioners should already be familiar with the concepts behind the CPUT Regulations and these largely remain unchanged. If businesses are already compliant with the new Regulations, then there shouldn’t be any great concern.

Practitioners should certainly be advising their clients of the potential increases in claims that may arise and the additional remedies given to consumers and therefore the greater need to ensure that their client has proper practices and measures in place to avoid any risk of a claim.

Traders should be made aware that there is no express time limit on when customers can claim discounts or damages so the normal limitation period of six years in England applies.

Furthermore, defences are available but only relating to damages, so for example if the trader can show the prohibited practice was due to a mistake or an accident and the trader took all reasonable precautions and exercised all due diligence to avoid the prohibited practice. This comes back to ensuring proper procedures are in place.It’s also important to note that the burden is on the consumer to establish their claim.

Ultimately though, these measures are part of a whole host of reforms that the government is making to consumer legislation. The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, come into force on 13 June 2014 which (among other things) require businesses to be very clear about any and all charges payable by the customer, require express consent to such additional charges and remove the use of default/pre-ticked options.

The Consumer Rights Bill will add even greater protection and clarity. Practitioners should already be aware of these changes and the even greater importance of ensuring that businesses are transparent and fair when dealing with customers.

Do you envisage any practical or technical difficulties or unintended consequences arising from the legislation?

I don’t believe there are any significant unintended consequences although there are a few minor technicalities about the new legislation that may cause some confusion when first implemented. The Law Commission initially suggested that the legislation be drafted as stand-alone legislation.

However, the government has chosen to implement it as part of the existing consumer protection Regulations and this adds a layer of complexity.For example the new rights refer back to existing CPUT provisions when defining aggressive and misleading practices and it isn’t clear in the new section itself that the test for determining such practices will be an average consumer test.

Also some of the definitions that have been introduced are slightly different in the new section to those that apply to the rest of the CPUT. The scope of the new section is also slightly different to that under the existing CPUT, eg it does not cover misleading ‘omissions’ (which the rest of the CPUT does).

Another area that may give rise to confusion is that there are two different types of test:

  1. when establishing whether something was a ‘prohibited practice’—the test is an objective average consumer test, but
  2. when deciding whether it was a ‘significant factor’ in the customer’s decision—the test is subjective

And lastly, the level of discount that may be awarded depends on whether the practice was deemed to be ‘more than minor, significant, serious or very serious’. The Regulations do not define these terms (although the government has stated that they will provide guidance on this point).

I expect that there will be concerns from a business perspective too. For example that spurious claims may increase, which will take time to manage, and also regarding the 90 day right to unwind which allows the customer to reject a product even if it has been used (often with no allowance for usage).

I think it will be interesting to see how the courts will enforce the new rights. It is one thing to protect consumers against these misleading or aggressive practices. It is another thing to step in where a customer has simply made a bad deal and the line between the two may be difficult to establish.

So what do you think? Do let us have your thoughts, as always. The comment box is below and is just screaming out to be used...

Interview by Fran Benson. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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