Implementing the Consumer Rights Directive

The Consumer Rights Directive

The Consumer Rights Directive aims to consolidate and update the law on distance and doorstep selling and is intended to be implemented in member states by 13 June 2014. The government has now published the draft Consumer Contracts (Information, Cancellation and Additional Payments) Regulations for consultation and accompanying FAQs, whose main areas of focus are:

• information which traders should provide to consumers;
• cancellation rights and responsibilities for distance and off-premises (doorstep) sales; and
• measures to prevent hidden costs such as surcharges for delivery etc.

What does the Consumer Rights Directive apply to?

The new regulations apply to contracts between traders and consumers. Consumer is defined in regulation 4 as 'an individual acting for purposes which are wholly or mainly outside that individual's trade, business, craft or profession' and a trader is defined as 'a person acting (personally or through an agent) for purposes relating to that person's trade, business, craft or profession'.

Another key definition is the definition of 'durable medium' which means paper or email, or any other medium (including a website) that allows information to be addressed personally to the recipient, enables the recipient to store the information in a way accessible for future reference for a period that is long enough for the purposes of the information, and allows the unchanged reproduction of the information stored.

A 'distance contract' means a contract concluded between a trader and a consumer under an organised distance sales or service-provision scheme without the simultaneous physical presence of the trader and the consumer, with the exclusive use of one or more means of distance communication up to and including the time at which the contract is concluded.

An 'off-premises contract' means a contract between a trader and a consumer which is any of these:

• a contract concluded in the simultaneous physical presence of the trader and the consumer, in a place which is not the business premises of the trader
• a contract for which an offer was made by the consumer in the simultaneous physical presence of the trader and the consumer, in a place which is not the business premises of the trader
• a contract concluded on the business premises of the trader or through any means of distance communication immediately after the consumer was personally and individually addressed in a place which is not the business premises of the trader in the simultaneous physical presence of the trader and the consumer;

An 'on-premises' contract is one between a trader and a consumer that is neither a distance nor an off-premises contract.

Exclusions from regulations

Under regulation 6, the regulations does not apply to various categories of contract, including:

• gambling;
• financial services;
• rights in real property;
• rental of residential accommodation;
• construction contract;
• supply of foodstuffs via regular rounds (such as a milk round);
• package holidays or timeshares.

In addition, they do not apply to contracts:

• concluded by means of vending machines;
• with a telecommunications operator through a public telephone for the use of the telephone;
• for the use of a single connection by telephone, internet or fax established by the consumer;
• goods sold by way of execution or otherwise by authority of law.

Information rights

Part 2 of the Regulations deals with information requirements, which apply to on-premises, off-premises (doorstep selling) and distance contracts, subject to certain exceptions. Note that the information requirements apply to on-premises contracts, albeit with fewer requirements, whereas the former distance and doorstep selling provisions did not apply to on-premises arrangements. There is a de minimis threshold for off-premises contracts of £42.

Regulations 9-12 set out the information that a trader must give or make available to the consumer before making an on-premises contract (set out in Schedule 1 to the regulations), regulation 10 sets out the information that must be provided for an off-premises contract (set out in Schedule 2 to the regulations) and regulations 13-16 set out the information that must be provided for distance contracts (also set out in Schedule 2) including for contracts made by telephone (regulation 15). Regulation 8 provides that something is made available to a consumer only if an average consumer would be aware of how to access it.

If the trader makes a telephone call to the consumer with a view to concluding a distance contract, the trader must, at the beginning of the conversation with the consumer, disclose: (a) the trader’s identity, (b) where applicable, the identity of the person on whose behalf the trader makes the call, and (c) the commercial purpose of the call. The required information is set out below.

There are certain exceptions for repair and maintenance contracts that are set out in regulation 11.

If a trader does not provide the requisite information under regulation 10 for off-premises contracts, they will be guilty of an offence under regulation 18 and liable on summary conviction to a fine not exceeding level 5 on the standard scale (currently £5000). Regulations 19-25 set out further provisions in relation to the defence of due diligence, enforcement and investigatory powers etc. The burden of proof is on the trader to show that they gave the requisite information.

Cancellation rights

Part 3 of the regulations deals with the right to cancel for distance and off-premises contracts. Under regulation 26, certain contracts are excluded, including medicinal products and passenger transport services and as mentioned above, off-premises contracts for less than £42. In addition, under regulation 27, contracts for the following are excluded:

• goods or services where price is dependent on fluctuations in financial market (except domestic water, gas and electricity);
• bespoke or personalised goods;
• alcoholic beverages under certain circumstances;
• contracts where the consumer has specifically requested a visit from the trader to carry out urgent repair or maintenance;
• newspapers, periodicals and magazines excluding subscriptions; or
• accommodation, transport of goods, vehicle rental services, catering or services related to leisure activities, if the contract provides for a specific date or period of performance.

In addition, the following will be excluded from the right to cancel: sealed goods which are unsealed and are not suitable for return due to health protection or hygiene reasons, sealed audio or video recordings or computer software that are unsealed, or if goods are inseparably mixed with other items after delivery. Previously the Office of Fair Trading had advised that the distance selling regulations did not link the right to cancel with a right to resell (eg if a consumer removed the hygiene strip from a swimsuit and sent it back) so it appears that this concern has now been resolved in the new legislation.

The consumer can exercise the right to cancel at any time within the cancellation period without giving a reason. The cancellation period is generally 14 days after the day on which the contract is entered into for services or digital content not supplied on a tangible medium. For goods the cancellation period ends 14 days after the day on which the goods came into the physical possession of the consumer (regulation 29). The cancellation period is extended if the trader does not give the required information in part 2 (regulation 30).

The consumer can exercise their right to cancel by informing the trader. The burden of proof is on the consumer to show that they cancelled the contract if there is a dispute (regulation 31). If the consumer cancels the contract the parties' obligation to perform the contract ends.

The trader must reimburse all payments made by the consumer, although if the consumer paid for premium delivery, the trader only has to reimburse the amount the consumer would have paid for standard delivery. Reimbursement must be made without delay and in any event within 14 days of the trader receiving the goods back, or if earlier, the day on which the consumer provides evidence of having sent the goods back. Otherwise it is within 14 days after the day on which the trader is informed of the consumer's decision to cancel the contract. The trader must use the same method of payment as the consumer used to pay for the goods unless the consumer expressly agrees otherwise. if the consumer handles the goods in a way beyond that which is necessary to establish the nature, characteristics and functioning of the goods which leads to the goods losing value, the trader can recover that amount from the consumer up to the contract price but not if the trader did not provide the Part 2 information to the consumer. Regulation 34 deals with the return of goods after cancellation.

Regulations 35 and 36 deal with the provision of services or digital content during the cancellation period and state that the trader should not provide the service or digital content during the cancellation period unless the consumer has expressly agreed to it. If the service is fully performed, the consumer loses the right to cancel. If the consumer does cancel a service contract under which services have already been provided, the consumer must pay for the services that have been provided.

Hidden costs

Part 4 deals with hidden costs (additional payments). Regulation 38 provides that no payment is payable in addition to the remuneration agreed for the trader's main obligation unless the consumer gave their express consent before they became bound by the contract. There is no express consent via pre-ticked boxes or other default options.

Regulation 39 deals with charges for telephone calls and provides that if a trader provides a telephone number for the consumer to contact, it must be one of the following unless the contract is for passenger transport services:

• a geographic number;
• a mobile number; or
• a non-geographic number to which calls must be free of charge.

Part 5 of the regulations deals with enforcement, including the consumer's right of redress under regulations 38 and 39. If a trader receives an additional payment under regulation 38, the contract will be treated as providing for the trader to repay the payment to the consumer, and if a consumer has to make a call to a premium rate number, the trader must reimburse the cost of that call.

Schedule 1—on-premises contracts

Schedule 1 sets out the information which has to be provided under regulation 9(1) in relation to on-premises contracts:

• the main characteristics of the goods or services, to the extent appropriate to the medium of communication and to the goods or services
• the identity of the trader (such as the trader’s trading name), the geographical address at which the trader is established and the trader’s telephone number
• the total price of the goods or services inclusive of taxes, or where the nature of the goods or services is such that the price cannot reasonably be calculated in advance, the manner in which the price is to be calculated
• where applicable, all additional delivery charges or, where those charges cannot reasonably be calculated in advance, the fact that such additional charges may be payable
• where applicable, the arrangements for payment, delivery, performance, and the time by which the trader undertakes to deliver the goods or to perform the service
• where applicable, the trader’s complaint handling policy
• in the case of a sales contract, a reminder that the trader is under a legal duty to supply goods that are in conformity with the contract
• where applicable, the existence and the conditions of after-sales services and commercial guarantees
• the duration of the contract, where applicable, or, if the contract is of indeterminate duration or is to be extended automatically, the conditions for terminating the contract
• where applicable, the functionality, including applicable technical protection measures, of digital content
• where applicable, any relevant compatibility of digital content with hardware and software that the trader is aware of or can reasonably be expected to have been aware of

Schedule 2—doorstep and distance selling

Schedule 2 sets out the information to be provided under regulations 10(1) and 12(1) in relation to off-premises and distance contracts.

• the main characteristics of the goods or services, to the extent appropriate to the medium of communication and to the goods or services
• the identity of the trader (such as the trader’s trading name)
• the geographical address at which the trader is established and the trader’s telephone number, fax number and e-mail address, where available, to enable the consumer to contact the trader quickly and communicate efficiently
• where the trader is acting on behalf of another trader, the geographical address and identity of that other trader
• if different from the address provided in accordance with paragraph (c), the geographical address of the place of business of the trader, and, where the trader acts on behalf of another trader, the geographical address of the place of business of that other trader, where the consumer can address any complaints
• the total price of the goods or services inclusive of taxes, or where the nature of the goods or services is such that the price cannot reasonably be calculated in advance, the manner in which the price is to be calculated
• where applicable, all additional delivery charges and any other costs or, where those charges cannot reasonably be calculated in advance, the fact that such additional charges may be payable
• in the case of a contract of indeterminate duration or a contract containing a subscription, the total costs per billing period or (where such contracts are charged at a fixed rate) the total monthly costs
• the cost of using the means of distance communication for the conclusion of the contract where that cost is calculated other than at the basic rate
• the arrangements for payment, delivery, performance, and the time by which the trader undertakes to deliver the goods or to perform the services
• where applicable, the trader’s complaint handling policy
• where a right to cancel exists, the conditions, time limit and procedures for exercising that right in accordance with regulations 28 to 31;
• where applicable, that the consumer will have to bear the cost of returning the goods in case of cancellation and, for distance contracts, if the goods, by their nature, cannot normally be returned by post, the cost of returning the goods
• that, if the consumer exercises the right to cancel after having made a request in accordance with regulation 35(1), the consumer is to be liable to pay the trader reasonable costs in accordance with regulation 35(4)
• where a right to cancel is not provided for in accordance with regulation 27, the information that the consumer will not benefit from a right to cancel or, where applicable, the circumstances under which the consumer loses the right to cancel
• in the case of a sales contract, a reminder that the trader is under a legal duty to supply goods that are in conformity with the contract
• where applicable, the existence and the conditions of after-sale customer assistance, after-sales services and commercial guarantees;
• the existence of relevant codes of conduct, as defined in regulation 5(3)(b) of the Consumer Protection from Unfair Trading Regulations 2008 SI 2008/1277, and how copies of them can be obtained, where applicable
• the duration of the contract, where applicable, or, if the contract is of indeterminate duration or is to be extended automatically, the conditions for terminating the contract
• where applicable, the minimum duration of the consumer’s obligations under the contract
• where applicable, the existence and the conditions of deposits or other financial guarantees to be paid or provided by the consumer at the request of the trader
• where applicable, the functionality, including applicable technical protection measures, of digital content
• where applicable, any relevant compatibility of digital content with hardware and software that the trader is aware of or can reasonably be expected to have been aware of;
• where applicable, the possibility of having recourse to an out-of-court complaint and redress mechanism, to which the trader is subject, and the methods for having access to it.

Schedule 3 provides model information for traders to provide about the right to cancel and a model cancellation form for the consumer to use, although it is not obligatory.

Consumer Protection from Unfair Trading (Amendment) Regulations

The Consumer Protection from Unfair Trading (Amendment) Regulations are the government's response to a report by the Law Commission and the Scottish Law Commission in which they concluded that it is currently difficult for consumers to obtain redress when they have experienced misleading or aggressive practices in their dealings with traders, even though such practices are outlawed by the Consumer Protection from Unfair Trading Regulations 2008 SI 2008/1277 (CPUTs). The government accepted the key points of the Law Commissions' report and has now issued the draft regulations, which amend the CPUTs and introduce:

• a private right of redress for consumers who have been victims of misleading or aggressive practices;
• standard remedies for those victims which include the right to unwind, the right to a discount and the right to damages; and
• entitlement to seek damages.

Next step

The consultation on both sets of regulations ends on 11 October 2013. The government is particularly interested in comments on whether to extend to the travel and timeshare sectors the measures which prevent hidden costs.

Click here to read the full note, including more information on other consumer law reform.

Practice Note: Overview of the Consumer Rights Directive

Consultation on Consumer Rights Directive

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