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27 May 2014

Consumer Contracts: New Developments

The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (“the Regulations”) will come into force and apply to all contracts entered into on or after 13 June 2014.

The Regulations will affect all those who sell goods or services to consumers, and in particular will affect those who do so at a distance, for example via a website.

The Regulations replace the Distance Selling Regulations (Consumer Protections (Distance Selling) Regulations 2000) and the Doorstep Selling Regulations (Cancellation of Contracts made in a  Consumer’s Home or Place of Work Regulations 2008) with a single set of regulations, but also go further and impose additional requirements on retailers.

The key changes centre on the information to be provided to the consumer and the rights of the consumer to cancel the contract, but also bring in some more specific provisions, as set out below.

Key changes

‘Pay now’ button

The vast majority of online retailers already have a button which makes it clear to the consumer that they are committing themselves to paying for the goods or service, but this is now a legal requirement.

According to the regulations, the button must be marked with the words ‘order with obligation to pay’, although the Government guidelines suggest that ‘pay now’ is a sufficient alternative, although ‘confirm’ on its own is possibly no longer sufficient.

Express consent before taking additional payments

Using a pre-ticked box for additional payments is no longer permitted. This will be relevant if, for example, a business offers a range of delivery options and the default ‘pre-ticked’ setting is to a delivery option for which the consumer pays extra. A pre-ticked box on a free delivery option is still permitted.

Cancellation period

The cancellation period, which under the Distance Selling Regulations gave the consumer 7 working days to cancel a distance contract without having to give a reason, has been extended to 14 calendar days.

Extended cancellation period

In the event that a retailer fails to provide the consumer with all the necessary pre-contract information (which includes details on the cancellation period) the cancellation period extends to 14 days after the correct information is provided, or in the event that it is not provided at all, to 12 months after the date the original cancellation period would have expired had the correct information had been given pre-contract.

Refunds

If a consumer cancels the contract the goods must be returned to the retailer within 14 days (or the consumer must show proof of return within 14 days). Once the goods are received (or the consumer has provided proof of return), the retailer must provide the refund within 14 calendar days.

Retailers have the right to deduct monies from the refund if the goods show signs of use. Such use must be actual wear and tear, not just that packaging has been opened by the consumer to check the product, if they would have been able to check the product in the shop in that manner.

Retailers must refund the price of outgoing delivery (unless the consumer has arranged delivery themselves) but need only refund the standard delivery cost even if the consumer has opted for a more expensive delivery option. Further, providing the consumer has been advised accordingly, the retailer need not refund the consumer for the return postage. It is particularly important that a consumer is advised in advance of the likely cost of a return when, for example, the goods cannot be returned by normal post.

Cancellation Form

All companies must provide a model cancellation form, this should be easily accessible by the consumer, usually by a link on the company’s website.

Schedule 3 of the Regulations sets out the model cancellation form which should be used, although a consumer may also choose to cancel by calling the consumer service line or equivalent (if such a telephone line is provided) or by emailing the retailer direct.

Digital content

The concept of ‘digital content’ is new and aimed at retailers who sell digital content downloads.

Many of the rules which apply to all other distance contracts will apply equally to digital content, but the rules on cancellations are different.

Consumers do not have the right to cancel a contract after the digital content starts downloading, provided that they have been advised of this before the contract was entered into and expressly consented to waive their cancellation rights. The best way to evidence such consent is to have a tick box which the consumer must tick before contracting (much in the same way as there is a tick box for accepting the terms and conditions).

Ancillary contracts

If a consumer exercises their right to cancel during the cancellation period, it is the retailer’s responsibility to ensure that any ancillary contract, for example insurance offered by a third party via the retailer, is cancelled. If a client has, for example, arranged their own separate insurance this is a matter for them and not the retailer.

Premium rate telephone lines

If the retailer chooses to provide a telephone number for a consumer to call to discuss a concluded contract, this must not be a premium rate number.

Premium rate numbers can still be used in other circumstances and there is no obligation for a telephone number to be provided at all as long as a different method of contact, such as email or post, is made available to the consumer.

Failure to comply

The consequences of failing to comply with the Regulations include fines, unenforceable contracts, refunds to consumers, damage to reputation and, for failure to advise a client of their right to cancel, could even mean a criminal conviction.

Next Steps

Retailers should take this opportunity to fully review their consumer contracts and in particular the way in which their website operates to avoid being caught out when the Regulations come into force on 13 June 2014.

If you require any advice on amending your consumer terms and conditions, or would like to take this opportunity to carry out a full review of your website and consumer terms and conditions, please contact us.