Friday the 13th: Unlucky for consumer businesses?

by DLA Piper
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Another piece of the consumer rights jigsaw is completed today as the new Consumer Contract (Information, Cancellation and Additional Charges) Regulations 2013 ("the Regulations") come into force.

This is just one of a raft of legislative changes driven both from EU and UK led initiatives designed to overhaul consumer rights protection. Rules relating to payment surcharges have already taken effect following the commencement of the Consumer Rights (Payment Surcharges) Regulations 2012 on 6 April 2013, and the Consumer Rights Bill, which seeks to codify consumer law, clarify existing concepts and add further digital content provisions, is progressing through the UK Parliament and will continue to be debated in the next parliamentary session.

WHAT BUSINESSES DO THE REGULATIONS AFFECT?

Unless certain exemptions set out in the Regulations apply, any businesses entering into contracts for sale, for services, or for supply of digital content through downloading or streaming, will need to be compliant with the new Regulations. It will be a particular challenge for traders who contract with consumers online or at places other than their own "shop" floor, and for those who supply digital content for streaming or downloading.

WHEN DO BUSINESSES HAVE TO BE COMPLIANT?

The Regulations will apply for all contracts concluded on or after today. Unfortunately there is no grace period to allow businesses to evaluate their current arrangements.

WHY DOES IT MATTER?

For contracts falling within the scope of the Regulations, if a business fails to:

  • inform consumers of their right to cancel off-premises contracts (contracts concluded at places other than the trader's business premises), this is an offence and the trader is liable on summary conviction to a fine not exceeding level 5 on the standard scale.
  • provide all of the pre-contractual information set out in the Regulations to the consumer in a clear and comprehensive manner, including provision of the statutory cancellation form, the business will not have entered into a validly binding contract leading to uncertainty for both parties.
  • in respect of a distance contract, gain the explicit consent of a consumer to commence providing services within the new 14 day cancellation period and advise them that they will have to pay for any services provided up until the point of cancellation, the business will not be able to recover the costs of such provision of services from the consumer.
  • in respect of distance and off-premises contracts, advise the consumer of their cancellation rights, if applicable, before the consumer enters into the contract, and does not subsequently provide that information to the consumer within 12 months of the commencement of the 14 day cancellation period, the consumer will have 12 months and 14 days to cancel. Businesses will then end up having to refund the consumer for the returned goods and will be left with used goods and possibly little chance of recouping their costs in the second hand goods market.

These are just a few implications of the Regulations. Businesses need to carefully review their terms and conditions, all communications with consumers and online processes to ensure they are compliant with the new Regulations.

IS IT ALL BAD NEWS FOR BUSINESSES?

Whilst it may appear that the Regulations clearly favour the consumer, there is some positive news for businesses, for example:

  • businesses are now able to make deductions from refunds where the goods returned show signs of unreasonable use leading to diminished value;
  • unless businesses have offered to collect the goods from the consumer, they can now require the consumer to return the goods or provide proof of return within 14 days; and
  • there is now increased harmonisation across the EEA as different territories will no longer have different withdrawal periods.

WHAT ACTIONS SHOULD BUSINESSES TAKE?

  • Engage with your website platform providers to update your website.
  • For businesses using different contracting methods (on-premises, off-premises, and distance selling), consider how the Regulations apply to each mechanism and how to adapt practices to comply with the Regulations.
  • If a business combines their product with an ancillary product (such as company providing consumer credit for a sofa, or insurance for an item of jewellery) start engaging with the ancillary service or goods provider to ensure both business are aware of the impact of the Regulations on their businesses.
  • Review current processes to ensure the business concludes binding contracts with consumers under the Regulations.
  • Ensure that businesses provide consumers with details of the functionality of downloaded or streamed content and its compatibility with other hardware and systems.
  • Keep an eye out for developments on the Consumer Rights Bill, particularly businesses supplying digital content for downloading or streaming.

Businesses need to take action now to align their current practices with the Regulations, not only to ensure compliance, but to ensure certainty when contracting with consumers.

 

 

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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