Legislation alerter: Consumer Rights Act 2015 now in forcePrint publication
The main elements of the Consumer Rights Act 2015 (the Act) came into force on 1 October. The Department for Business, Innovation and Skills (BIS) has published a summary of the key elements.
The BIS guidance provides a general overview of the key aspects of the Act, which changes the law relating to business-to-consumer transactions, and which will therefore affect every business that sells directly to consumers.
The guidance can be accessed here.
Key issues for financial institutions include:
- Pre-contract information. Financial institutions already have significant regulatory obligations to provide certain information about products and services to consumers. In addition, marketing campaigns, promotional offers, websites and all forms of communication between institutions and consumers form part of the pre-contract process, during which myriad representations are made. Under the Act, any such information and representations could become a binding contractual term, if it is taken into account by the consumer.
- The Act also introduces a new statutory right that if an institution provides pre-contract information in relation to a service and the consumer takes this information into account, the service must comply with that information.
- Institutions may wish to undertake a critical review of their marketing materials, websites, posters, notices and any other forms of communication with or to customers, as well as providing training to staff, to address the extent to which pre-contract information may amount to contractual terms and to ensure that standards and services offered pre-contract are ultimately delivered.
- The new transparency test. The Act largely reproduces, from the now-revoked Unfair Terms in Consumer Contracts Regulations 1999, the essential “fairness test”, which means that a contractual term is unfair (and therefore unenforceable) if it causes a significant imbalance in the positions of the parties to the detriment of the consumer in a way which is contrary to the requirement of good faith. However, the Act also introduces a new “transparency and prominence test”. This requires a seller, such as a financial institution, to use plain and intelligible language in its written terms, and to bring terms to the consumer’s attention in such a way that the average consumer would be aware of them. Terms which may otherwise escape the fairness test (for example, price or the core subject matter of the contract) will not do so if they are not expressed in plain and intelligible language and prominent.
- Institutions should ensure that key contractual information, including pricing and any conditions, obligations or potentially onerous terms, is presented to consumers in a sufficiently clear and prominent manner.
- BIS has also published guidance which explains the new requirement, under the Consumer ADR Regulations 2015, for traders to provide certain information about Alternative Dispute Resolution to consumers: Alternative Dispute Resolution Regulations 2015: Guidance for business.
Please contact Louise Power if you would like any further information or assistance.