It’s not realistic for consumers to seek redress in the courts for unfair contract terms, says Dr Olufemi Amao. We need an independent ombudsman scheme

Since the introduction of the Unfair Terms in Consumer Contracts Regulations (UTCCR) 1999 there have been very few cases taken to court on the basis of its provisions. Without an accessible and cost effective enforcement mechanism, the relevance of the UTCCR to the consumer which the regulation seeks to protect will be minimal.

Under the prevailing corporate culture, customers are routinely subjected to charges they did not bargain for in the course of day-to-day transactions, under contracts which they may not intend to enter into and which are not individually negotiated. Examples abound in the largely unregulated private parking sector. A good example is the scheme currently put in place by some businesses in respect of parking spaces made available to customers. A customer using such a car park will assume that it is provided by a business to facilitate its activities. However, some businesses have put in place schemes where a car park management company runs the park and imposes punitive penalties on customers who have stayed in the park for more than a specified time.

A typical term provides as follows: ‘Terms of parking without permission: You do so at your own risk to personal injury and property and agree to vehicle owner being issued with a Parking Charge Notice which will be issued by post.’ Usually a customer who stays more than two hours in the car park is issued with a penalty charge of £95.

It is suggested that such contractual terms contravene the Unfair Terms in Consumer Contracts Regulations 1999 for the following reasons:In the circumstances, it is credible to argue that the contractual terms underlying this scheme falls under regulation 5 of the UTCCR.

  • The terms of the contract leading to the penalty have not been individually negotiated as they were unilaterally drawn up and displayed at the discretion of the companies concerned;
  • The contract is in general use and the terms cause significant imbalance in the concerned parties rights and obligations and is detrimental to the consumer to the benefit of the companies (regulation 5(1)); (schedule 2, 1(f));
  • The terms were ‘drafted in advance and the consumer has …not been able to influence the substance of the term’ (reg. 5 (2));
  • Customers are not given adequate opportunity to decide whether or not they are interested in entering into a contract with an entity different from the main business (schedule 2, 1(i));
  • The terms of the contract are not communicated directly to people that may be affected by it;
  • The terms require the customer to ‘pay a disproportionately high' sum in compensation (Schedule 2, 1(e)); and
  • The terms harms the collective interests of consumers.

Enforcement of regulation 5The Office of Fair Trading (OFT) has jurisdiction, under the UTCCR, to consider the fairness of ‘a contractual term which has not been individually negotiated’. According to regulation 10 of the 1999 Regulations, the OFT is obliged to investigate complaints that a contractual provision is unfair under regulation 5 where that provision is in ‘general use’. While the OFT is the main enforcing body, it shares the power to enforce with certain qualifying bodies, including most national regulatory authorities in relation to their sector, local authorities providing trading standards and the consumer association Which?.

Therefore, where a consumer thinks that a term like the one under consideration is unfair he will either contact the relevant body to request an investigation or go to court. The latter option is not realistic – businesses that design these schemes know that an average consumer will probably not go to court with its attendant hassles and costs to challenge a £95 charge. In any event, this is only relevant where the consumer is only concerned about his particular circumstances.

Where the consumer is concerned with the fairness of the practice in general, under the prevailing laws he or she will need to contact the specified bodies.

In correspondence with the OFT on the term under consideration and its legality in view of the UTCCR, the OFT was of the opinion that it was a matter for the Local Authority Trading Standards Service to consider in the first instance. The Trading Standards Service, however, did not offer an opinion of the term in view of the UTCCR. It took the view that such a term is not an ‘offence’ for it to take further action on. It was therefore not interested in looking into the practice. With this interpretation of its powers, the Trading Standards Service would appear to have misinterpreted the Regulation or its powers or both.

As suggested earlier, if the court is not a viable option, what can consumers do? Regulation 5 of the UTCCR is of little direct value to the consumer unless there is an effective mechanism for seeking its application. In the example highlighted and similar cases, a suggested solution is the establishment of an ombudsman for the application of regulation 5 to specific contractual terms. Leaving such a task to the court is to constrain the ability of consumers to invoke regulation 5. The widespread use of terms not individually negotiated by businesses to generate income in circumstances which may appear suspect to the average consumer is a testimony to the ability of businesses to defeat the purpose of the regulation. An independent ombudsman charged with the application of regulation 5 will provide an inexpensive and accessible means of invoking regulation 5 directly by consumers. The ombudsman will be better placed to investigate and resolve disputes relating to regulation 5 and in so doing improve business-customer relations.

Dr Olufemi Amao is a lecturer at Brunel Law School