BIS issues new guidance for enforcers of consumer law

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The Consumer Rights Act 2015 (the Act) brings an extensive overhaul to the consumer law regime in the UK. Of particular importance to businesses is the enforcement powers reform, which includes giving Enforcers the power to require businesses to implement enhanced consumer measures (ECMs). Given that the Act has not provided a list of potential measures that could fall under this category, businesses are understandably concerned about the extent of their potential liability under the Act.

In particular, it is important to note that the ECMs widen the orders that Trading Standards Officers and other enforcers of consumer law (together the Enforcers) can seek in the civil courts under Part 8 of the Enterprise Act 2002 (EA 2002) to stop a trader from breaching certain legislation, including consumer law, when the breach harms the collective interests of the consumers. Such orders, however, can only be sought after an Enforcer has engaged with the trader for a certain mandatory consultation period (14 or 28 days depending on the circumstances of the case) without reaching agreement on remedial actions.

On 3 June 2015, the Department of Business, Innovation & Skills (BIS) published much needed guidance on the applicability of ECMs (the BIS Guidance), albeit primarily aimed at Enforcers. Nevertheless, the BIS Guidance provides a good insight for trading businesses into how the enforcement powers will be used under the Act and what would be expected from them under the new regime.

What are ECMs?

ECMs are measures designed to give Enforcers greater flexibility to get the best outcomes for consumers. They will, in most cases, be used as an alternative to criminal prosecution or alongside it in more serious cases.

The ECMs aim to achieve one or more of the following:

  • redress for consumers who have suffered loss from breaches of consumer law (Redress Measures);
  • remedies from traders who have breached consumer law to improve their compliance and reduce the likelihood of future breaches (Compliance Measures); and
  • remedies to give consumers more information so they can exercise greater choice and help improve the functioning of the market for consumers and other businesses (Information Measures).

When can Enforcers use ECMs?

ECMs can only be used when there are breaches or potential breaches of consumer law and the consumers have consequently suffered loss.

What will Enforcers take into account in enforcing ECMs?

The BIS Guidance specifies that any measures the Enforcers seek to impose should always be just, reasonable and proportionate to the behaviour of the trader and the detriment caused to consumers. Enforcers and the court would also need to take into account the public interest and act in a way that is transparent, accountable, proportionate and consistent considering the likely benefit of the proposed ECMs to the consumers and the cost to the business to implement the measures.

What is the process for enforcing the ECMs?

It is important to note that Enforcers cannot impose ECMs on the businesses. Instead, they first need to consult with the offending business to determine the appropriate measures on a case-by-case basis. They will also take into consideration any alternative measures proposed by the business.

If an agreement is reached between the Enforcer and the business, the Enforcer will seek to obtain an undertaking from the business that it will put the measures in place. If, on the other hand, no agreement can be reached during the mandatory consultation period, the Enforcer will be able to present its case and its proposal to the civil court. The court will then decide if the proposed ECMs are just, reasonable and proportionate and make an appropriate enforcement order.

In both situations, the Enforcer will have the duty and the responsibility to monitor the business’s compliance with the undertaking or the enforcement order and bring the case back to the civil court if the business is not compliant.

What does the BIS Guidance recommend as ECMs?

The BIS Guidance notes that the Act is purposefully silent on what would constitute an ECM to allow greater flexibility to Enforcers to deal with a breach, although it does suggest some measures. Businesses should become familiar with these and seek advice on them from the onset:

  • Setting up a redress scheme such as a refund proposal and advertising or notifying it to customers.
  • Detailing their breach and what they are doing to put it right, for example on their website, in the press or in store.
  • Signing up to a Primary Authority scheme.
  • Appointing a compliance officer.
  • Providing better training and guidance to staff.
  • Undertaking internal spot checks (and maintaining records of these).
  • Improving record-keeping.
  • Collecting (and acting on) customer feedback.
  • Introducing a robust customer complaints-handling scheme.
  • Signing up to a certified ADR scheme and committing to be bound by its decisions.

BIS also encourages businesses to come up with their own innovative measures to redress breaches which can then be discussed with the Enforcer.

How will Enforcers approach ECMs?

First, BIS advises Enforcers to use Redress Measures in cases where consumers have suffered loss. There is no maximum or minimum loss that will trigger these measures, but Enforcers must be satisfied that the cost to the business of putting a redress scheme in place is not going to be greater than the losses to be suffered by the consumers.

It is important to note that in assessing the cost to businesses, Enforcers will not take into consideration the administrative cost of implementing the scheme and contacting the affected consumers. However, this cost will be relevant in determining the overall assessment of proportionality.

Traders should also note that Enforcers can seek measures that are in the ‘collective interest of consumers’. This means that if the trader has caused consumer loss, but it is impossible to identify some or all of the consumers who have been affected, an Enforcer will have the power to require the business to pay the equivalent of the loss suffered to a consumer charity such as the Citizens Advice Service.

Second, Enforcers are recommended to consider Compliance Measures to prevent or reduce the risk of further breaches of the law. However, they will need to tailor the Compliance Measures to the size of the business and the possible impact on it (ie not require a small business to employ a full-time compliance officer).

Finally, the BIS Guidance recommends to Enforcers to use Information Measures to help consumers make better informed purchasing decisions, and to incentivise businesses that might be in breach to change their practices. This could include the business being made to publicise their breach in forums such as their own website, social media or local publications, among others.

How can we help?

The Walker Morris Regulatory Team has a depth of experience in advising businesses on compliance with consumer law as a preventive measure and following regulatory intervention. Our team can advise you on implementing adequate systems and procedures to minimise the risk of being subject to an enforcement action and, if necessary, we can help you work with Enforcers to agree appropriate ECMs. If you are concerned about your compliance with the new consumer law regime and need to better understand the regulatory position, we would be delighted to hear from you.