The Consumer Rights Act 2015: are you ready?
9th July, 2015
Amy Tindall, Senior Commercial Solicitor
In the second in our series of updates about the Consumer Rights Act, which comes into force on 1st October 2015, Amy Tindall summarises the new enforcement powers available to public enforcers, such as Trading Standards. If you’re a consumer facing businesses, this will give you a useful “heads up” on the possible penalties for breaches of the new laws.
Enhancing consumer rights
The Government believes that there is a lack of flexibility in the ways that public enforcers, such as Trading Standards, can achieve the best outcomes for consumers. Currently enforcers can prosecute traders in the criminal courts, possibly leading to a fine or even imprisonment, or bring an action in the civil courts under the Enterprise Act 2002, to stop the infringing conduct. However, neither option tends to lead to positive outcomes for consumers. Many do not get their money back and law breaking businesses do not have to take positive steps to rectify the damage caused.
Enhanced Consumer Measures (ECMs) are therefore being introduced to allow enforcers to seek a wider range of innovative and positive measures in the civil courts. The intention is that the enforcer should work in consultation with the law breaking business, to identify suitable measures to deal with the breach. If the trader refuses to co-operate or disagrees with the measures suggested by the enforcer, the enforcer will have to present their case to the court. It will be for the court to decide if the measures being proposed by the enforcer, are just, reasonable and proportionate.
When will they be used?
The Department for Business Innovation Skills has recently published much awaited guidance on the new ECMs. They must be based around achieving one or more of the following:
• Redress – giving consumers who have suffered loss their money back
• Compliance – reducing the likelihood of future breaches
• Information – enabling consumers to exercise greater choice in the market.
ECMs can only be used where the consumer has suffered loss. In extreme cases, they can also be used in addition to a criminal prosecution.
What could they be?
The new law specifically leaves out a list of possible measures. This enables the enforcer to choose the most appropriate measure to deal with a breach. It also gives the business flexibility to suggest their own measures to put right the damage they have caused. Examples of ECMs are:
• ordering a defaulting business to reimburse customers for any financial loss they have suffered as a result of the breach
• where individual customers cannot be identified, ordering a defaulting business to pay an appropriate sum to a consumer charity
• ordering a defaulting business to advertise their breach in the press, on their websites, and in their stores
• publicising a defaulting business’ breach on Trading Standards’ website
• ordering a defaulting business to overhaul its internal practices to ensure there is no repeat of the breach. For instance, appointing a compliance officer, updating internal processes and giving training to employees
Any ECMs must be just, reasonable and proportionate to the behaviour of the lawbreaking business. Enforcers are also under an obligation to act transparently, proportionately and consistently in dealing with a breach.
What should you do next?
We would advise that any consumer facing business takes time to understand the new consumer laws and the impact they will have on your business.
Pre-empt breaking the law and enforcers applying ECMs against you by reviewing and if necessary amending your:
• terms and conditions (including standard website and app terms);
• dispute resolution procedures;
• any pre-contractual information you give to consumers; and
• cancellation and returns policies
You should also ensure your employees are aware of the changes and know what their legal obligations are.
For more information please contact Amy Tindall, Senior Commercial Solicitor at Genus Law or call 0113 320 4540 and watch this space for our next update on this topic.