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OFT guidance on ongoing contracts with consumers

Print publication

08/10/2013

‘Ongoing contracts’ for the purposes of the guide are continuing contractual and other arrangements (often long-term) between consumer and supplier which involve repeat or regular supplies of goods or services. Examples given include club/scheme membership subscriptions; insurance contracts; banking services and savings products; and supply of utilities.

The guide identifies a number of issues which tend to be regular problem areas in ongoing consumer contracts:

Provision of information

The provision of incorrect or misleading information or information that is insufficiently clearly or prominently displayed, will make it harder for consumers to make informed choices.

Cancellation

Terms that create tie-ins or restrictions on cancellation or switching, including terms that may provide for a minimum duration, high exit fees or long notice periods, may be particularly problematic. This will be especially true where the consumer has not been made sufficiently aware of the terms and conditions or insufficient information is provided to enable them to form an accurate assessment of whether or not they want to switch.

Rollover/renewal

The OFT state in the guide that automatic renewal – where a consumer signs up for a minimum contract term that is then automatically renewed unless the consumer expressly states that he or she does not want to renew – is potentially detrimental to consumers who may be prevented from switching. The problem is exacerbated by a failure to disclose automatic renewal terms; where it is combined with burdensome cancellation charges or terms; where the supplier fails to highlight that the subsequent tie-in period is on less favourable terms than the first or where the provision is used in the context of a free trial.

Variation

The OFT state that terms permitting variation, for example of price, may be a problem where the consumer has not adequately been made aware of the term or does not have a straightforward right to cancel. The use of such terms is particularly problematic where a variation to less favourable terms is permitted after a limited period or where the variation is not within the supplier’s control.

Toolkit

The guide also contains a summary of the applicable legislation governing consumer contracts and summarises key cases, both national and EU. Very usefully, it also looks at problems encountered in a wide range of specific sectors.

The guide can be accessed here. The OFT has been busy. After publication of the guide it launched its Unfair Terms Hub, which we have described in an earlier briefing.

Contacts