Consumer Rights Bill – all change?

The Consumer Rights Bill has been described by the government as ‘the biggest overhaul of consumer law for a generation’ and notwithstanding the current bout of parliamentary ping-pong between the two houses of parliament, the government’s target is that the bill will come into force on 1 October 2015. It will affect consumers and all businesses selling to consumers, including law firms.

The aims of the bill are to consolidate and clarify existing consumer rights legislation into one comprehensive source, and to implement certain aspects of the EU Consumer Rights Directive; not a small task. A number of significant changes are proposed, including:

Rights and remedies for the supply of goods

The bill sets out the relevant standards applicable to goods in business to consumer contracts. Alongside satisfactory quality, description, fitness for purpose and other standards under the Sale of Goods Act 1979 (SGA), the bill introduces implied terms regarding the pre-contract information required under the Consumer Contracts Regulations and a requirement that goods must match a model seen/examined by a consumer, other than where differences have been brought to the consumer’s attention pre-contract. 

Regarding remedies, there are two express rights to reject – a short-term right to reject of 30 days (shorter in the case of perishable goods) and a final right to reject. The former can be extended by the business, but not shortened, and the consumer loses this right if the time limit passes (unless the parties have agreed otherwise). The short-term right to reject extends by at least seven days if the business has to repair or replace the goods during that time.

Once the short-term right to reject is lost, the consumer has the right to a repair or replacement. The business has one opportunity to repair or offer one replacement, but if repair or replacement are impossible, or the business’s one attempt at repair fails, or the first replacement is also defective, the consumer has the right to a price reduction or a final right to reject.

Rights and remedies for digital content

The bill seeks to introduce consistency between a consumer’s protection for digital content sold on a disk and that which is downloaded. Broadly, the applicable standards mirror those for goods, but one important distinction is that a consumer has no right to reject digital content (because it cannot be returned and the lack of a requirement that the consumer delete the content from his device).

Further, a consumer has a right to a refund if the trader is in breach of the right to provide digital content. In respect of other breaches, a consumer has a right to a repair or replacement, but if that is not possible or the fault goes unresolved, the right to a price reduction (up to the full amount of the price). A consumer is also entitled to compensation for damage caused to the device or to other digital content.

Rights and remedies for the supply of services

In addition to requiring businesses to perform services with reasonable care and skill (reflecting the current standard under section 13 of the Supply of Goods and Services Act 1982 (SGSA)), the bill proposes to introduce terms that the consumer must pay a reasonable price for the services and that the business must perform the services within a reasonable time. Pre-contract statements (oral or written) taken into account by the consumer when deciding to enter the contract will also be treated as contractual terms. 

New statutory remedies contained in the bill in cases of non-conformity with a contract will give consumers the right to require repeat performance, or, if that is ‘impossible’ or not done in a reasonable time, the right to a reduction in price.

Unfair terms in consumer contracts/transparency

The bill has the effect of merging the rules in the Unfair Contract Terms Act 1977 (UCTA) with the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR), which were considered to be inconsistent, complex and difficult to apply. The parts of UCTA relating to issues other than business to consumer contracts remain in force, but the UTCCR will be fully revoked.

Importantly, the fairness test is extended to consumer notices.

The framework for these provisions is as follows:

1. The terms applicable to goods and services in the SGA and SGSA are restated;
2. Suppliers remain unable to restrict liability to consumers for breach of the statutory ‘implied’ terms;
3. The UTCCR fairness test replaces the UCTA reasonableness test;
4. UCTA will be amended so that it no longer applies to consumers.

The aim of the reforms is to improve transparency for consumers and all written terms offered to a consumer must be ‘transparent’.

Consumer collective actions for anti-competitive behaviour

One particularly radical reform will introduce enhanced rights for consumers seeking redress for UK or EU competition law infringements. At present, private, representative actions for such infringements can be brought by a specified body in the Competition Appeal Tribunal (CAT), but these can only be brought on an ‘opt-in’ basis – a claimant has to choose to be involved in the action. However, only one such collective action has been brought since the relevant provisions were introduced.

The bill seeks to improve the efficacy of the existing ‘opt-in’ provisions, and also proposes a new ‘opt-out’ regime more akin to the US class action system, where a claim is pursued on behalf of a specified class of unnamed claimants, who are deemed included in the action unless they have specifically chosen not to be involved.

This proposal seems to swim against the tide of current governmental opinion on ‘compensation culture’, and some have expressed fears that a system of ‘opt-out’ collective actions might increase the number of weak claims being brought.

However, the bill contains a series of hurdles which seek to strike a balance between improving access to justice and avoiding the perceived excesses of the US system. These include a proposed action having to pass an early certification test by the CAT – broadly equivalent to seeking permission in a judicial review claim – before it can proceed. It will therefore be interesting to see whether, and if so to what extent, the number of collective actions increases.

Given the extent of the changes proposed by the bill, the government has promised that guidance will be available from April 2015 and there are plans to update the Citizens Advice Bureau website from 1 October 2015.

What does all this mean for law firms and businesses? Certainly all terms of engagement and engagement letters will need to reviewed to comply with the obligations of transparency and to accord with the new regime. The government also anticipates that during the initial transitional period, businesses are likely to ask law firms for training on the bill and that there will therefore be a temporary increase in business expenditure on legal fees.

However, after that transitional period, the government predicts a decrease in legal spending as the law will be clearer and fewer cases will go to court. Whether this is offset by an increase in claims for anti-competitive behaviour remains to be seen.

Steven Wignall is a senior associate and Moya Clifford is a professional support lawyer at Hill Dickinson LLP