Update: consumer

As grim predictions circulate of vastly reduced spends on Christmas shopping, rocketing prices as manufacturers fold, and plummeting consumer confidence, the government and Office of Fair Trading remain determined to strengthen, streamline and better organise the UK consumer protection regime.

The government is in the process of reviewing existing consumer legislation with a view to simplifying where possible the existing pieces of legislation '“ which now run in number to over 100. Regulations being brought into force in recent years have been instigated to implement European Directives, which look to harmonise consumer rights across the union. As the EU reviews its own directives in the consumer field, the UK government has decided that this is an appropriate time to review the domestic consumer protection regime, in a drive to render it easier for consumers and businesses to understand, and for authorities to enforce.

While individual consumers may struggle to know where to turn among the steady accumulation of regulations, amendments and revocations, the current position also creates an administrative challenge for businesses, particularly smaller organisations and owner-managed businesses, for whom compliance exercises can be costly and time consuming.

Streamlining the regime

In recent years the government has recognised that the proliferation of consumer regulation had the potential to lead to confusion and over-regulation. As a result, it has already sought to streamline the existing provisions relating to unfair contract terms, recommending the merger of the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999.

The Law Commission has also been looking into the various remedies available to consumers under the Sale of Goods Act 1979, and the more recent Sale and Supply of Goods to Consumers Regulations 2002.

The Consumer Credit Act 1974 was amended in 2006, scrapping the £25,000 maximum value threshold imposed by the older act and enhancing consumer rights and redress.

Below is a round-up of some of the more recent legislative action, which seeks to extend consumer protection in line with modern commercial practice, and features the first case brought under new regulations designed to offer better protection for consumers from unfair trade practices.

Consumer Protection from Unfair Trading Regulations 2008: the first outing

A local authority has successfully brought the first enforcement action under the new Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277). Wiltshire County Council Trading Standards

Department brought an enforcement claim against Jimmy Stockwell and his son Shane Stockwell, with support from the OFT (Wiltshire County Council Trading Standards Department v Stockwell, unreported, 31 July 2008). The Stockwells had been the subject of several complaints to the local trading standards department over aggressive behaviour and poor standards of work in the course of supplying various 'handy man' services. His Honour Judge Cutler sitting at the Salisbury County Court made an order requiring them not to breach a raft of provisions in the course of providing those services. They included:

- not acting in a way that was misleading to potential customers, by giving false information or presenting it in a manner likely to deceive customers;

- not concluding contracts away from business premises without first advising the customer of their rights to cancel;

- not acting in an aggressive manner either in attempting to persuade customers to enter into a contract or to obtain payment; and

- not acting without professional diligence.

The new regulations also allowed the court to order the defendants not to breach the general law of negligence when providing their services. If the order is breached, the defendants face being found in contempt of court and could be handed a fine, imprisonment, or both.

The case has certainly raised the stakes for that small minority of rogue traders who have been known to target the elderly or otherwise vulnerable. The regulations set out a number of practices which will generally be found to be unfair '“ including actions and omissions '“ if they tend to lead a consumer to make a different decision in relation to the promotion, sale or supply of a product.

There are a further 31 specific banned practices, which will be always and automatically unfair. Banned practices include claiming to be a signatory to a code of conduct when the trader is not, displaying a trust mark, quality mark or equivalent without having obtained the necessary authorisation, and claiming that a code of conduct has an endorsement from a public or other body that it does not in fact have.

The regulations apply to conduct by businesses towards consumers. Such practices as giving consumers the impression that they have won a valuable prize, letters from debt collectors to debtors suggesting that the consumer will be subject to a criminal conviction if they do not pay, and offering debt consolidation as an alternative (usually subject to very high rates of interest) might all come under the scrutiny of the new regulations.

The regulations came into force on 26 May 2008 and will be regarded as a welcome addition to the expanding raft of powers available to the courts and authorities to crack down on rogue traders.

Doorstep selling

New regulations designed to afford greater protection to consumers buying goods or services at home or work came into force on 1 October 2008 (Cancellation of Contracts made in a Consumer's Home or Place of Work etc Regulations 2008 (SI 2008/1816)). Previous 1987 regulations provided that consumers of goods purchased as a result of unsolicited visits to their homes or places of work, had a seven-day cooling-off period during which they could cancel the contract by giving written notice to the seller. In practice, many consumers tried to cancel contracts and were told that they were not entitled to do so.

During an impact assessment of the proposed new regulations, the Department of Business Enterprise and Regulatory Reform (BERR) reported that OFT research had found consumers were not sufficiently aware of their rights to cancel under the old regulations. Only 6 per cent correctly identified that they had greater rights when purchasing goods at home. Of those, only 7 per cent were able to identify what those rights were.

With an estimated 15,000 complaints each year relating to door step selling, many arising out of the sale of services to construct patios, driveways and conservatories, the new regulations will uphold the cooling-off period of seven days starting on the day the consumer is given notice of the right to cancel, which must be displayed prominently in the contract document. The new regulations will also bring in a consistency of application previously lacking '“ the right to cancel will apply to consumers who purchased as a result of solicited, as well and unsolicited, visits.

Salespersons will now have to advise consumers of their right to cancel within the seven-day period. While they can seek payment for goods or services delivered before the end of the cooling-off period, they must inform the consumer of that fact.

The regulations apply to sales with a value of £35 or more, and failure to provide notice of the right to cancel could attract a fine of up to £5,000.

Comparison sites receive their own treatment

A Which? review of price comparison sites has found that the increasing number of such websites are misleading consumers in claiming that they can save them valuable time '“ and thousands of pounds '“ by identifying the cheapest insurance policies and other financial products on the market.

In May this year the Financial Services Authority, in response to the growing number of entrants to the market which includes The Motley Fool, Money Supermarket.com and Confused.com, as well as research identifying issues with the market raised by the British Insurance Broker's Association, undertook a limited review of the sites and as a result outlined their expectations that all site providers in the comparison market should review their product and make the necessary changes to ensure that they are clear, fair and not misleading.

An in-depth follow up to that review is expected to be published this month.The Which? report found that, by following a number of 'customer journeys' through the sites where exactly the same criteria was entered, the results varied by several hundreds of pounds.

Which? advised customers that in order to be certain that they had found the best price for a particular product, they needed to compare the information available across a number of sites. Certain policy providers' details are not available on some sites, and on others, the searcher is asked to contact the provider direct. It has even been alleged that some providers offer better deals to sites that pay the best commission for sales through that site.

As well as home and motor insurance, the sites are also used to compare deals on private medical insurance, personal loans and credit cards. One criticism has been that in seeking to simplify the process, the sites do not in fact provide enough information on the terms, and in particular interest rates, meaning consumers might end up unwittingly paying a higher interest rate than one they might get elsewhere. By simplifying the selection process, so the criticism goes, these sites give the impression that an important decision in which a range of factors and comparables should be carefully weighed can be made quickly and easily.

Some of the sites have hit back at the Which? report, suggesting that it is not far reaching or comprehensive enough, and pointing out that where a provider's policy is not available, they will explain why.

The FSA has made clear that it will be following up the review of the websites and the issuing of guidelines for the sector with a series of visits to the various firms, designed to check that they are responding to the FSA's guidance and expectations.