Changes to consumer law – is YOUR business prepared?

It’s just a few days until the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations come into force, which will apply to all contracts concluded after 13 June 2014. And if your company sells goods, services or digital content to consumers, it’s important to act now to make sure your business practices comply with the new rules.

If you’re already following the existing legislation, the changes won’t be dramatic. But if you’re not meeting the current regulations for information and cancellation, you’ll need to get your act together straightaway to avoid falling foul of the new laws!

Who’s affected by the new regulations?

The changes in the law are mostly aimed at traders who practise ‘distance selling’, such as selling online or over the phone, and ‘off-premise’ selling where sales are made away from your business premises, such as in the consumer’s home. (Business to business sales are not affected by these regulations).

The new regulations cover a number of key areas, which I’ve summarised below. Please note that off-premise contracts worth less than £42 are exempt from the information and cancellation provisions of these rules – but also that low value distance selling contracts are not exempt.

Extended information requirements

The new rules require you to provide much more information to consumers than before. You must provide this information clearly so that the customer can understand it and in a way that’s appropriate to your sales method.

A full list of the required information is set out in Schedule 2 of the regulations, which you can read here. Key points to note are:

  • Giving the customer access to the new, standard cancellation form (see below) if they have the right to cancel, before entering into the contract. For distance sales, the form can be provided online. For off-premise sales, it must be provided on paper or, if the customer agrees, on another durable medium. This might be a CD/DVD, email body copy or text message, but not a link to text on a website as this could change and is not, therefore, ‘durable’.
  • Providing clarity around all costs and charges. For example, if the customer has to pay to return an unwanted product, you must make this clear to them.
  • Making it clear when customers have an obligation to pay. For example, your website might have a button labelled ‘Order now’. If clicking on it will lead to the consumer making a payment (even at a later date) this might be relabelled ‘Order & Pay now’.
  • Making sure the consumer actively agrees to any and all future payments. This means that pre-ticked payment boxes on websites and order forms, for example, won’t be allowed.
  • Confirming to the consumer in good time i.e. before the service commences or the goods are delivered, that a contract’s been concluded and what its main terms are. Again, you’ll need to provide this information in different ways depending upon the nature of your sales process. Distance sellers can provide it in any durable medium.  Off-premise sellers, however, must provide it on paper unless the consumer has agreed to it being provided in another durable medium. Either way, you won’t have to repeat any information post-contract which was provided in an acceptable format before the contract was completed.

Consumer cancellation rights

The consumer’s right to cancel has been extended to 14 calendar days for both distance and off-premise sales, to give people more time to change their mind about a product or service they’ve ordered. The cancellation period starts from the day after the goods are received (or the last delivery date if several deliveries were made) or the day after a service contract begins.

A new, standard cancellation form has been introduced which, where consumer cancellation rights exist, must always be provided to the customer before the contract is concluded.

Note that consumers can’t waive their right to cancel (although they may choose not to exercise this right), but they can ask you to deliver the service or product before the 14 day cancellation period has expired. If this happens, you’ll need to gain their explicit consent and explain that if they later decide to cancel, they must still pay for any goods or services received up to the cancellation point. Off-premise traders must provide this information in a durable medium (see above).

As previously, some contract types aren’t subject to these cancellation rights. They include orders for bespoke or customised goods, products that arrive sealed for health and hygiene reasons, service contracts that have been fulfilled, and requests to traders to carry out emergency household repairs.

Product delivery rules

Under the new legislation, you should always deliver goods to the consumer within 30 days of the order being placed unless you’ve explicitly agreed something else with the customer – in which case, it’s important that you stick to this.

Another crucial change is that risk doesn’t transfer to the consumer until the products are physically delivered, so a transfer of risk can’t take place when you hand the goods over to a courier for despatch.

Refunding services and products

You should refund the consumer in full within 14 days of a service contract being cancelled under the statutory right to cancel. For products, provided the consumer returns the goods within 14 days of cancellation, all costs including outbound postage should be refunded within 14 days of return, or of you receiving evidence of return.

However, you can reduce the refund amount for goods that have been used or handled more than you would have expected. For example, if a customer sends back a product that has obvious signs of damage or wear and tear.

Regarding outbound postage costs, you only need to refund the standard cost quoted at the time of ordering. If the consumer chose a more expensive delivery method, such as courier delivery rather than Royal Mail, you don’t need to refund the difference.

If a customer returns an unwanted product, you can ask them to bear the cost of returning it themselves, where you’ve made this clear pre-contract. However, if the goods were faulty, of unsatisfactory quality or not in line with the description given, you’ll need to pay for the items to be returned and for a replacement to be sent out.

Consumer helplines

If you offer a helpline that the consumer can call for help after they’ve placed their order for a product or service, including reporting a problem with a product or to exercise their cancellation rights, the new regulations state that you can’t charge more than a basic call rate for this. Freephone, standard geographic (e.g. 0115) and mobile numbers are permitted; revenue-sharing numbers (e.g. 0871) and premium rate (09) numbers are not.

Note that these rules don’t apply to numbers offered as technical support lines, provided that it’s made clear that you’re offering this as a separate, chargeable, service.

Contract Clarity is here to help

I’ll shortly be writing to all my clients who are affected by the new regulations to explain the changes and what you need to do. I’ll also amend the relevant parts of your Terms and Conditions free to charge to make sure you comply with the legislation.

Of course, if you’re not already a client, I’ll also be happy to help. Please contact me today to discuss your contract requirements.