Consumer law proposals may fail to adequately protect consumers

23 December 2013

The Government’s draft Consumer Rights Bill has the potential to consolidate, simplify and modernise consumer law, says the Business, Innovation and Skills Committee in a Report published today.  Issues and inconsistencies in the draft Bill must be resolved if this potential is to be realised, however. 

The Committees conclusions and recommendations include:
(Quotes from Adrian Bailey MP, Chair of the Committee follow the recommendations). 

Enhanced protection for consumers of services

The current proposals would apply a statutory right that services under a contract must be provided with reasonable care and skill [a fault-based standard].  This does not provide sufficient consumer protection.  The Draft Bill should require that services must achieve the stated result, or one which could be reasonably expected [an outcomes-based standard] [paragraphs 161-164 & 107-109]. 

"The risk of creating a right that services must be performed with reasonable care and skill is that traders see it as the standard to meet rather than a minimum requirement.  It is also extremely difficult for consumers to prove that a service was not provided with reasonable care and skill. 

The Government’s proposals do not offer sufficient protection for the consumer.  Ultimately, consumers are less interested in whether a service was conducted with reasonable care and skill than whether it achieved the stated result.  The law should reflect this."

When the right to cancel a contract fails to protect consumers (Bank of Ireland)

The Bank of Ireland case demonstrated that the right to terminate a contract does not necessarily protect consumers from detriment.  The Report recommends an addition to the grey list – the indicative list of contract terms which may be regarded as unfair – to protect consumers in such circumstances [paragraphs 186-194]. 

"When the Bank of Ireland triggered a little-known contract clause and increased the interest rate of its tracker mortgage, serious consumer detriment resulted.  In this scenario, the consumers’ right to cancel the contract did not protect them as they could not get a similar deal elsewhere. 

Consumers need to be protected in situations where their right to cancel a contract does not provide an adequate defence against detriment."

Enhanced consumer measures & collective actions

The Government’s proposals for enhanced consumer measures, which would require traders that have breached consumer law to compensate consumers, are welcome.  However, public enforcers may not have the resources to use them widely enough.  To increase the likelihood of their use, private enforcers should also be able to use the enhanced consumer measures [paragraphs 224-244].

The collective proceedings regime has the potential to improve access to redress for victims of competition law breaches.  However, the proposals are at risk of becoming tied up in the realities of litigation.  The Government must clarify the certification requirements for collective proceedings in order to avoid this [paragraphs 276-277]. 

"Currently, victims of consumer law breaches only rarely gain redress.  Criminal prosecution of the offender may discourage illegal practice but it does little to help the consumer who has lost out.

The enhanced consumer measures have the potential to fill this void and are to be welcomed.  However, they will only do so if they are used.  Given that public enforcers may not have the resources to do so, the measures should be extended to private enforcers too, with appropriate safeguards.

The collective proceedings regime is at risk of becoming bogged down in the swamp of procedural litigation.  Clarifying the certification criteria collective proceedings is crucial to avoid this and to ensure the effectiveness of the collective proceedings regime."

Protecting the consumer of digital content

The creation of rights and remedies for digital content is welcome, but the Government must do more to communicate how the proposals will work in practice.  In particular, the draft Bill’s treatment of the services that surround digital content is inconsistent and risks creation of a two tiered approach to the rights and remedies that apply to digital content [paragraphs 80-119].

Under the draft Bill, the remedies available to consumers of digital content would depend on whether the content is intangible (such as a music download) or tangible (such as a CD).  This would embed inconsistency in the law.  In appropriate circumstances, consumers should have the right to reject and obtain a refund irrespective of whether they purchase intangible or tangible digital content [paragraphs 120-130].

"Under the current proposals, somebody who buys a faulty CD would be able to return it and get a refund.  If they purchase a faulty download of the same music, however, they won’t.  This is a clear inconsistency in the draft Bill that should be sorted out. 

The consumer’s concern is getting a refund for their faulty product, not whether it counts as tangible or intangible content under consumer legislation."

Further information

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