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This article was first published on LexisPSL Commercial on 15 April 2014. Clickherefor a free trial ofLexisPSL.

What to expect from the new Consumer Protection Regulations

15/04/2014

Commercial analysis: Following on from the government's consultation on consumer rights last yearthe new Consumer Protection (Amendment) Regulations 2014 have been finalised and take effect

later this year. Hannah Roberts, commercial and IP lawyer and Craig Chaplin, national head ofcommercial and IP, both at DWF, discuss the details and implications of these regulations.

What was the government consulting on and why?

The government was consulting on draft Regulations which reform the existing law on misleading andaggressive selling.

As a result of that consultation the Consumer Protection (Amendment) Regulations 2014, SI 2014/870 (theRegulations) will come into force on 1 October 2014 and will amend the existing Consumer Protection fromUnfair Trading Regulations 2008, SI 2008/1277 (CPUT).

The change has been brought about due to the government (and the public's) concern that under existinglaws, if a customer was the victim of misleading or aggressive selling it has been very difficult for them to gettheir money back or any form of compensation.

This was due to a number of reasons. One was that the existing CPUT (which currently covers thesepractices) can only be enforced by the Competition and Markets Authority (formerly the Office of FairTrading) and Trading Standards and not by consumers directly.

The second reason was that if consumers wanted to take action themselves they would have to rely onprivate law on the basis of the law of misrepresentation, duress, undue influence and harassment. That issomething that consumers find difficult to use and understand because they are technical areas of law thatwere initially evolved in the business to business context and so are not particularly suited to consumers.

What will the new legislation do?

The Regulations, which come into effect from 1 October 2014, provide more consumer protection andessentially more power for consumers to enforce their rights through the civil courts.

The main focus is to introduce private rights of redress for consumers who have been victims of misleadingor aggressive practices, including standard remedies and an entitlement to damages.

The primary remedy is the right to unwind from the contract or payment and get a full refund and customerscan do this within 90 days of the contract being entered into or the goods being delivered (whichever is thelater).

Customers also have the right to a discount--although this remedy is not restricted to within the 90 dayperiod. The amount of the discount will depend on the materiality of the harm and the impact on thecustomer.

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The consumer can also claim damages for any additional losses or harm they have suffered as a result ofthe misleading or aggressive practice or for alarm, distress or physical inconvenience or discomfort. Althoughonly damages that are reasonably foreseeable are recoverable.

Under the new Regulations there are certain conditions that must be met for the consumer to claim anyredress:

o they must have entered into a contract (so adverts are not sufficient)o they must show a misdealing or aggressive practice has been carried out (as defined in the

existing CPUT) and that it is likely to cause the average consumer to enter into the contracto they must show that the prohibited practice was a 'significant factor' in the consumer's decision

to enter into the contract or make a payment

There are only very limited circumstances in which a deduction for use (from the refund) may be granted bythe courts--ie only where services or goods are provided continuously for a month, such as a utility. In thatcase, the market price would be deducted from the price the customer paid for it.

Finally the Regulations make it clear that there is no right to double recovery--so if the consumer has alreadybeen compensated under another law or equity they cannot claim under the Regulations and vice versa.

To what extent is the legislation helpful in clarifying the law in this area?

It is helpful in clarifying the law in a number of ways.

Where remedies may previously have been unclear, these have become more standardised which can onlyprovide more clarity to consumers and practitioners.

I think the new rights make it clearer and simpler for consumers to take their own action in the civil courts, sothe law should shift from public prosecutions to more consumers exercising their rights and taking actionthemselves.

Also, at the moment, businesses (and practitioners) have to grapple with two different systems--both publicregulation under the existing Consumer Protection Regulations and private rights of redress undermisrepresentation and undue influence etc which use different terminology and concepts. The amendmentswill help to align the public and private systems more. Obviously, consumers can still bring claims under the

existing doctrines of duress etc so the Regulations will not completely eradicate this but hopefully if moreconsumers use this right of redress it would reduce the need to refer to those existing laws.

However, the effects of these amendments will depend on how well these new rights are publicised andmade known to consumers. Changing the law is one thing, but I think the greater issue is the existingproblem of a lack of consumer awareness--most people simply do not know what their rights are and so donot pursue them. Unless this changes, the Regulations may have little impact in practice despite the greaterclarity and rights for consumers.

What will lawyers need to be mindful of when advising clients?

The Regulations only apply to business-consumer contracts. Practitioners should already be familiar with theconcepts behind the CPUT Regulations and these largely remain unchanged. If businesses are alreadycompliant with the new Regulations, then there shouldn't be any great concern.

Practitioners should certainly be advising their clients of the potential increases in claims that may arise andthe additional remedies given to consumers and therefore the greater need to ensure that their client hasproper practices and measures in place to avoid any risk of a claim.

Traders should be made aware that there is no express time limit on when customers can claim discounts ordamages so the normal limitation period of six years in England applies.

Furthermore, defences are available but only relating to damages, so for example if the trader can show theprohibited practice was due to a mistake or an accident and the trader took all reasonable precautions andexercised all due diligence to avoid the prohibited practice. This comes back to ensuring proper proceduresare in place.

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It's also important to note that the burden is on the consumer to establish their claim.

Ultimately though, these measures are part of a whole host of reforms that the government is making toconsumer legislation. The Consumer Contracts (Information, Cancellation and Additional Charges)Regulations 2013, SI 2013/3134 come into force on 13 June 2014 which (among other things) requirebusinesses to be very clear about any and all charges payable by the customer, require express consent to

such additional charges and remove the use of default/pre-ticked options.

The Consumer Rights Bill will add even greater protection and clarity. Practitioners should already be awareof these changes and the even greater importance of ensuring that businesses are transparent and fair whendealing with customers.

Do you envisage any practical or technical difficulties or unintended consequencesarising from the legislation?

I don't believe there are any significant unintended consequences although there are a few minortechnicalities about the new legislation that may cause some confusion when first implemented.

The Law Commission initially suggested that the legislation be drafted as stand-alone legislation. However,the government has chosen to implement it as part of the existing consumer protection Regulations and this

adds a layer of complexity.

For example the new rights refer back to existing CPUT provisions when defining aggressive and misleadingpractices and it isn't clear in the new section itself that the test for determining such practices will be anaverage consumer test. Also some of the definitions that have been introduced are slightly different in thenew section to those that apply to the rest of the CPUT. The scope of the new section is also slightly differentto that under the existing CPUT, eg it does not cover misleading 'omissions' (which the rest of the CPUTdoes)

Another area that may give rise to confusion is that there are two different types of test.:

o when establishing whether something was a 'prohibited practice'--the test is an objectiveaverage consumer test, but

o when deciding whether it was a 'significant factor' in the customer's decision--the test is

subjectiveAnd lastly, the level of discount that may be awarded depends on whether the practice was deemed to be'more than minor, significant, serious or very serious'. The Regulations do not define these terms (althoughthe government has stated that they will provide guidance on this point).

I expect that there will be concerns from a business perspective too. For example that spurious claims mayincrease, which will take time to manage, and also regarding the 90 day right to unwind which allows thecustomer to reject a product even if it has been used (often with no allowance for usage).

I think it will be interesting to see how the courts will enforce the new rights. It is one thing to protectconsumers against these misleading or aggressive practices. It is another thing to step in where a customerhas simply made a bad deal and the line between the two may be difficult to establish.

Interview by Fran Benson.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.