Consumer Law Update 28 th April 2008 Jason Freeman Barrister Office of Fair Trading
What am I covering? 8 Consumer Credit Act 2006 8 Unfair Commercial Practices Directive 8Consumer Protection from Unfair Trading Regs 2008
Consumer Credit Act 2006 8 Amends CCA 1974 8 Gives OFT further powers 8 Financial Ombudsman Scheme 8Coming into force over 2006-2008
Amendments to CCA 1974 8 Unfair relationships (April 07)s.140A-C 8Relates to terms, creditor s behaviour, anything done by and on behalf of creditor before and after making of agreement 8Court can order repayment by creditor, reduce repayments by debtor, set aside any duty imposed on debtor, alter terms of agreement, release any surety 8Now applies to all credit agreements 8Financial limit removed (April 08) 8Extends protection of CCA to all unsecured and second charge loans 8Previously 25,000 8Certain exemptions for rich people, business loans etc
Amendments to CCA 1974 (cont) 8Statements required on default (Oct 08) 8Where debtor in arrears 8Creditor must give notice in the prescribed form 8Aim is to ensure debtor knows how much is due 8If notice not given, creditor cannot enforce, and debtor not liable to pay interest or default sums which arise during period of non-compliance (s.86d) 8More information in Statements (Oct 08) 8Regular statements (s.77a & 78) 8Similar sanctions for non-compliance 8This is in addition to current rules allowing Debtor to request a statement and copy agreement under s.77 or 78 agreement unenforceable where statement not given
Powers of OFT -Licensing 8Can assess competence (April 08) 8In addition to usual issues of offences and compliance with CCA (s.25) 8 Requirements (April 08) s.33a-c 8Where dissatisfied with any matter relating to licence 8Require Information (April 08) s.36b 8To assist the OFT to carry out its functions under CCA 8Civil Penalties 8Where fail to comply with (information) Requirement 8Up to 50,000
Financial Ombudsman Scheme 8Financial Services and Markets Act 2000 s.225 to 234A and Sched 17 8In force now 8Enables Consumers to obtain easy and free redress 8Basically covers any act or omission by the trader in the course of his credit business 8FOS can make financial awards to compensate the consumer
So, how do these changes help me? 8You have options when advising a client 8Check whether CCA requirements kept by trader 8 eg. Form of agreement, notices/documents served properly 8 Is it enforceable? Not if certain notices not provided 8Consider if there is an unfair relationship 8Can you request documents under s.77/78? 8 Many Assignees (ie debt collectors) cannot provide copy agreements, since they don t have them. They argue that they are not creditors. 8 If it is alleged that no agreement was signed, challenge the creditor to produce the agreement by a without prejudice save as to costs letter. 8Does the issue suggest a wider problem for consumers fitness or competence?
Options 8Point out errors to trader 8Refer complaint to FOS: see website http://www.financial-ombudsman.org.uk/ 8If trader is enforcing, consider if there is an unfair relationship 8Refer complaint to OFT you can also get advice from Consumer Direct, and we may take up the complaint with the trader 8Bring Proceedings in Court?
Unfair Commercial Practices Directive (2005/29/EC) 8Coming into force by 26 May 2008 by Consumer Protection from Unfair Trading Regulations 2008 8Maximum harmonisation in most areas 8 Minimum harmonisation in field of financial services (eg credit) 8 Does not apply to general contract law, health and safety, authorisation regimes (eg professional standards) 8Applies to commercial practices 8 Any act, omission, course of conduct pr representation, commercial communication including advertising and marketing 8 By a trader 8 Directly connected with the promotion, sale or supply of a product to consumers 8Duty on OFT and Trading Standards to enforce: you are our eyes and ears, and we need complaints and evidence to take action
What will it prohibit? 8 Unfair Commercial Practices -5 types 81. Contravenes requirements of professional diligence and likely to materially distort economic behaviour of average consumer 82. Misleading action and likely to cause average consumer to take a transactional decision he would not otherwise have taken 83. Misleading omission and likely to cause average consumer to take a transactional decision he would not otherwise have taken 84. Aggressive and likely to cause average consumer to take a transactional decision he would not otherwise have taken 85. Blacklisted practice included in the Annex
Who is the average consumer 8Man on Clapham Omnibus? 8The average member of a group which is particularly targeted 8 Eg immigrants who speak little or no English 8 People in debt? 8Average member of a group who are vulnerable due to infirmity, age or credulity and trader could reasonably foresee this 8 Eg the old or the young 8 Housebound invalids
1 st Practice -Professional Diligence 8Professional Diligence: 8Standard of care and skill expected in the trader s field 8Objective standard, but not nec. highest reasonable 8Must reflect honest market practice and good faith 8Eg. Requirements of law society for solicitors 8Eg. But if field has low standards, it will not be a defence 8Distorts economic behaviour: 8Impairs consumer s ability to make an informed decision 8And thereby causes him to take a transactional decision he would not otherwise have taken 8Need not actually do so a judge could think it likely
Transactional Decision 8Any decision taken by the consumer about 8 Whether, how & on what terms to purchase a product (even if sold by someone else) 8 Whether to pay in whole or in part 8 Whether to retain or dispose of a product 8 Whether to exercise a contractual right 8 Whether to act or refrain from acting 8An objective test also likely to take 8Eg. To take out an optional insurance, to buy now pay later, to refrain from returning goods, to buy a stamp
2 nd Practice Misleading Action 8Contains false information, and so is untruthful or 8Is likely to deceive the average consumer, even if the information is factually correct 8Information must be about: 8 Existence or nature of the product 8 Characteristics of the product 8 Nature of the sales process 8 Price 8 Need for service, parts or repair 8 Trader s and consumer s rights
3 rd Practice Misleading Omissions 8Bearing in mind limitations of communication medium 8Omits material information 8Or hides material information or makes it hard to understand 8Information required by other Directives is Material (see Annex 2 to UCPD) 8Also if trader fails to identify his commercial intent
Invitations to Purchase 8A type of Misleading Omission 8Essentially where the consumer is enabled actually to purchase the product 8There must also be an indication of the price (which could be an indication that the price is nothing) 8Must include clear information on: 8 Main characteristics of product 8 Geographical address and identity of the trader 8 Price inclusive of taxes, or how calculated, and all postal charges etc 8 Any unusual arrangements for payment, delivery or complaint handling 8 Existence of any cancellation right
4 th Practice -Aggressive 8Consider in factual context 8Use of harassment, coercion, undue influence or physical force consider 8 Timing, location, nature, persistence 8 Use of threatening/abusive language or behaviour 8 Exploitation of consumer s misfortune or personal circumstances 8 Onerous non-contractual barriers to exercising rights 8 Threats to take legal action which cannot be taken 8Which is likely to impair average consumer s freedom of choice or conduct 8Eg. Repeat visits by salesmen, after asked to stop, threats to sue for statute barred debt, highly emotive language, undue reference to illness or disability, clairvoyant scams
5 th Practice Blacklisted Practices 8Considered unfair in all circumstances 8Do not have to consider professional diligence, average consumer, transactional decisions etc 8These make clear that certain practices are simply forbidden, so traders have to make sure they don t infringe the blacklist
Annex Practices (Adverts) Bait advertising (5) Bait and switch(6) Falsely claiming a product is available for a short time to elicit an immediate response(7) False closing down/relocation sales(15) Claiming product helps winning games of chance(16) False claims product cures illness etc (17) Claiming to offer a competition without awarding the prizes described (19) Offering a prize promotion, without awarding prizes described, (31a) Offering a prize promotion, and charging winner any money(31b) Calling product free when consumer has to pay more than cost of response and delivery of item (20)
Annex Practices (selling techniques) Persistent and unwanted solicitations by remote media (26) Pestering consumer at home (25) Keeping consumer on premises until he contracts (24) Direct exhortation to children to buy products (28) Advertorials where not clear trader has paid for promotion (11) Including an invoice when consumer has not ordered anything (21) Inertia selling (29) Pyramid selling scheme (14) Promoting a product in a way which misleads as to true manufacturer (13)
Annex Practices (sales) Suggesting a product can be sold legally when it can t (9) Presenting legal rights as a distinctive feature of product (10) Telling consumer that if he does not buy, trader s job/livelihood will be in jeopardy (30) Posing as a consumer or not as a trader (22) Inaccurate claims about risk to personal security of consumer/family if he doesn t buy a product (12) False claims about membership/approval of a professional or public body or a code (1-4)
Annex Practices (after sales) Insurance claims failing to respond and requesting irrelevant documents (27) Saying there is an aftersales service in a member state when there is not (23) Promising to provide after sales service in one language, then not providing it in that language (8)
CPRs Offences Almost all practices are criminalised (regs 8-12). All triable either way; max 2 years prison (reg 13). Time limit is 3 years from date of offence (1 year in Mags) or 1 year from date of discovery (whichever is earlier) (reg 14). Officers of body corporate, partners and officers of unincorporated associations are guilty if consented, connived or negligent in offence of the body (regs 15-16).
CPRs Offences (cont) Professional Diligence (reg.8): Offence if knowingly or recklessly contravenes requirements of professional diligence AND this is likely to impair the consumer s ability to make an informed decision, so that he takes a transactional decision he would otherwise not have taken. Misleading Action (reg.9): Offence in all cases except where merely failure to comply with a code of conduct
CPRs Offences (Cont) Misleading Omissions (reg.10): Offence if Considering factual context And features of the practice, limitations of the medium, and other measures the trader takes to make information available, trader omits, hides or obfuscates information, or fails to identify commercial intent AND this causes or is likely to cause average consumer to take a transactional decision he would not otherwise have taken.
CPRs Offences (Cont) Aggressive Practices (reg.11): Offence in all circumstances Annex Practices (reg.12): All are offences except Advertorials (11) and Direct exhortations to children to buy (28)
CPRs Defences Due diligence (reg.17) Innocent publication did not know and had no reason to suspect publication would be an offence(reg.18) Publication probably includes dissemination by a non-print medium eg hand delivery, webpage creation, posting etc
Enforcement CPRs Entry without warrant (reg. 21) Entry with a warrant where permission to enter may be refused or impossible to obtain (reg.22) Offence to obstruct including failing to assist, failing to comply with requirement under reg.21 and making false statement (reg.23)
Enforcement EA Part 8 Breach of UCPD is a Community Infringement under Part 8 of the Enterprise Act 2002 Enforced by OFT and TSDs Traders may be required to substantiate factual claims, and if can t the court may find it to be inaccurate (s.218 EA 2002) Enforcement Order is forward looking: breach is contempt of court
Enforcement Powers Part 8 Entry without warrant (s.227a) Observe business, seize and remove goods (s.227b) Entry with warrant (s.227c) Offence to obstruct (summary only) (s.227e)
Further Reading OFT Guidance on Consumer Protection from Unfair Trading Regulations 2007 OFT931 DTI Consultation Implementation of the Unfair Commercial Practices Directive URN 07/1047 (see BERR website - http://www.berr.gov.uk/consultations/page39674.ht ml)
To be implemented 8In order to enforce the law, we need you to gather evidence and complain to us about bad behaviour 8Trading Standards are likely to take criminal enforcement very seriously 8Will these augment consumer s contractual remedies? eg misrepresentation, breach of contract or right to reject where insufficient information given compare J&H Ritchie v Lloyd Ltd [2007] UKHL 9
Questions? OFT Guidance on Consumer Protection from Unfair Trading Regulations 2007 OFT931 DTI Consultation Implementation of the Unfair Commercial Practices Directive URN 07/1047 (see BERR website - http://www.berr.gov.uk/consultations/page3967 4.html) For Further reading on OFT powers see handout.