Consumer Contract Regulations - Retailers – are you ready for June 2014?

by Reed Smith
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Introduction

The Consumer Contracts (Information, Cancellation and Additional Payments) Regulations 2013 (the "CCRs") come into force in the UK on 13 June 2014.

The CCRs make some significant changes in the law relating to consumer protection and apply to consumer contracts made on-premises (through retail stores), made at a distance (including online sales) and off-premises (e.g. doorstep sales).

The CCRs introduce a number of important changes which potentially may be burdensome for businesses and will require retailers to review their processes, policies, terms and conditions and record keeping across all of their sales channels to ensure that they are compliant with the new law and they have taken steps to properly mitigate any new risks. In particular, the CCRs introduce specific rules for the first time in the UK relating to the supply of “digital content”. The CCRs will also apply to on-line auction sites.

If your business involves the sale of goods and services to consumers, it is highly likely that the CCRs will impact your business. If you haven’t already started to consider the implications of the CCRs, time is running out.

Background

The CCRs were adopted by the UK on 13 December 2013 and implement most of the provisions of the EU Consumer Rights Directive (Directive 2011/83/EU), with the aim of harmonising consumer protection rules across all Member States. The implementation of the CCRs has caused some confusion amongst businesses as originally the Directive was planned to be implemented through the broader changes being introduced to consumer protection law under the Consumer Rights Bill, which is still going through Parliament. However, to meet the deadline for the Directive, the Government has been forced to implement the provisions separately through the CCRs.

The CCRs will replace the current law on distance sales set out in the Consumer Protection (Distance Selling) Regulations 2000 and the current law on door step sales set out in the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008.

The CCRs will apply to all contracts between a consumer and trader concluded from 13 June 2014, except for certain types of excluded contracts (such as contracts for gambling, package travel and certain financial services).

Key Highlights

a. Cooling Off Period – the CCRs extend the period in which a consumer can cancel a contract at will (without having to give any reason) from seven working days (for distance contracts) and seven calendar days (for off-premises contracts) to 14 calendar days for both distance and off-premises contracts. For supply of goods, this period commences after the day on which the goods are delivered to the consumer or its nominee. For supply of services, the period commences after the day on which the consumer enters the contract. This period is extended if there is a breach of the information requirements (see below). The legislation also provides for circumstances in which the provision of services can commence before expiry of the cooling off period, subject to the express request of the consumer.

b. Model Form – the CCRs states that a trader must give or make available to the consumer a model cancellation form that is in a prescribed form to enable the consumer to exercise his/her cancellation rights. Although the trader is obliged to provide the form, the consumer does not have to use the form and can communicate his/her decision to cancel in any other way (this doesn’t even have to be in writing).

c. Right to Refund – where a consumer has exercised his/her right to cancel, the retailer must reimburse the total price paid for the goods or service, including the cost of delivery (but the trader does not have to reimburse the additional cost of any premium delivery option beyond the cheapest delivery service offered by the trader). The trader must process the refund within the timescales set out in the legislation. The trader may make an appropriate deduction if the value of the goods have been diminished by the consumer beyond that which is necessary to establish the nature and functioning of the goods received – i.e. if the consumer has used the goods beyond that which is reasonably necessary to inspect the goods as he/she could do if the goods were purchased on-premises. The consumer must bear the cost of returning the goods, unless the trader has failed to make this clear to the consumer pre-contract or if by its nature the goods cannot be returned by post.

d. Cancellation and Ancillary Contracts – cancellation of the main contract will automatically trigger the termination of any ancillary contracts, such as any insurance or maintenance contract for the goods. This will be the case even where the ancillary contract is not between the consumer and the trader, but is with a third party. The consumer need only exercise his/her right to cancel vis-a-vis the trader and it will be the trader’s responsibility to inform the third party of the cancellation.

e. New Information Requirements – the CCRs introduce a checklist of information which traders must make available to consumers pre-contract. The list of information varies depending on the channel of sale, with requirements for on-premises, off-premises and distance contracts. The CCRs imply a term into each consumer contract that the trader has complied with its information obligations. Although this requirement is not new for online sales, the information required to be provided is now more detailed and there are also certain changes to the form in which the information needs to be provided. The requirement to also provide this information in a “durable medium” remains. For on-premises sales, the requirements include providing details of a trader’s complaint handling policy and details of relevant guarantees and after-sales services.

f. Obligation to Pay – before consumers commit to an order online, traders must now make clear to consumers that they will be required to make payment once they commit to an order. If this involves the click of a button to complete the order, the button must carry the words “order with obligation to pay” or a “corresponding unambiguous formulation indicating that placing the order entails an obligation to pay”. The legislation is very prescriptive on this requirement and it is clear that many UK retailers currently do not comply with the required wording.

g. Additional Payments and Tick Boxes – the CCRs ban pre-ticked boxes for any supplementary goods and services (e.g. such as warranty support, insurance, express delivery etc.) Such additional services must be actively selected by the consumer if they wish to purchase the additional service rather than the consumer being forced to un-tick the selection.

h. Delivery of Goods – unless the trader and consumer agree otherwise, the trader must deliver the goods without undue delay and in any event within 30 days from the date the contract was entered into.

i. Telephone Helpline – where a trader offers a telephone helpline for consumers, including for after-sales support, the CCRs provide that the trader must offer a number that charges no more than the basic rate. The legislation does not prohibit premium or revenue sharing numbers but requires the trader to also provide a basic rate alternative which must be communicated as prominently as any other number. The Department for Business Innovation & Skills provides some useful guidance on this requirement.

Digital Content

The CCRs introduce a new category of service – “digital content”, for which a different set of rules apply in relation to the consumer’s right to cancel. This term is given a broad definition and covers software downloads as we well as downloads and streaming of online games, music, films, apps and in-app purchases across all platforms (including computers, tablets and smartphones). Accordingly, these new rules will have wide application and will impact on most media and gaming businesses. The new requirements include the following:

  • A trader cannot make the digital content available before expiry of the cooling off period unless the consumer has given its explicit acknowledgement prior to the download commencing, expressly waiving his/her right to cancel. Provided this is properly complied with, the consumer will lose his/her right to cancel as soon as the download starts.
  • Traders must provide consumers of digital content with information about the functionality of the content and details of compatibility with hardware and software and information on any technical restrictions.
  • A trader must provide the consumer with a copy of the contract on a durable medium, which must be done within a reasonable time after the contract is concluded.

Further changes are shortly to be introduced for digital content. For example, under the Consumer Rights Bill, digital content must satisfy a minimum standard similar to physical goods – it must be of satisfactory quality, fit for its purpose and meet its description.

Implications for Business

A failure to comply with the CCRs may result in a trader facing a criminal conviction and/or a fine. Depending on the type of breach, the contract with the consumer may also be invalid. Combined with the obvious reputational damage, the consequences of non-compliance may be severe. On the plus side, it is hoped that the new law will make cross-border trading easier by making the laws across the EU more consistent.

Given the way the CCRs have come about and short time given to businesses to prepare, retailers need to ensure they have understood the new requirements and made appropriate changes in advance of the deadline of 13 June 2014.

 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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