DEFINING “TRANSPARENT”, “PROMINENT” AND “PRICE”
NEED FOR GUIDANCE The Issues Paper proposal
4.67 In the Issues Paper we asked whether the court should have regard to statutory guidance when deciding whether a term is transparent and prominent.23
4.68 We noted that for distance and off-premises contracts, Member States cannot introduce specific requirements for how information is presented, as this would be
inconsistent with the Consumer Rights Directive (CRD).24 This does not,
however, prohibit the provision of guidance by bodies such as the OFT and the Financial Conduct Authority. Nor did we suggest that terms which do not comply with the guidance would be void or unfair – simply that they would be reviewable for fairness, like most terms in consumer contracts.
Consultees strongly supported guidance
4.69 Almost three-quarters of respondents agreed that guidance would be helpful. Businesses, business groups, consumer organisations, members of the judiciary, lawyers, and public bodies were all strongly in favour.
4.70 The Faculty of Advocates summarised the views of many by saying that “the key aims of clarity and certainty will be better served if such guidance is made available”.
4.71 Ofcom welcomed the proposal, stating: “Any steps that can be taken to help bring the legislative language to life and make it easier to understand would be welcome”.
4.72 The BBA agreed with the proposal, subject to the proviso that “guidance is not intentionally or inadvertently used to gold plate the Unfair Terms Directive or to make or allow retrospective application of the revised regulations”. The BBA further commented that:
there should be one set of statutory guidance for financial services. This should be produced by the FSA/FCA and should take account of all relevant existing financial services legislation and regulation. Guidance should be subject to appropriate public consultation and cost/benefit analysis before it is released and it should have a suitably long ‘shelf-life’ to give firms and consumers confidence in the standards which apply, whilst being future-proofed to apply to new practices.
4.73 Other business groups, such as the ABI, shared the BBA’s concern that guidance should not result in an additional layer of regulation.
23 Issues Paper, para 8.68(2).
24 Directive 2011/83/EU of 25 October 2011, OJ 2011 L 304/64. The CRD requires price
terms to be clear and comprehensible (arts 5(1) and 6(1)). As the CRD is a maximum harmonisation measure (art 4), the UK is not able to impose any additional formal
requirements about the way information is presented for distance or off-premises contracts (art 6). Financial services, however, are excluded from the provisions of the CRD (art 3(3)(d).
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Disagreement
4.74 The Association of Her Majesty’s District Judges considered that guidance was not necessary. Paul Davies was not convinced that statutory guidance would be helpful, adding “it should be very broad, and take into account the distinct possibility that the CJEU may issue its own guidance”.
4.75 HSBC objected more strongly to statutory guidance:
this would allow the enforcement authorities which produce the statutory guidance to gold-plate the Unfair Terms Directive. In our view, the courts are the proper agents to interpret the law.
Other comments
4.76 The Bar Council responded that it would prefer that terms were clearly defined in statute, rather than relying on statutory guidance. It added that if there is to be guidance, the status of such guidance needs to be made clear in the enabling provision to avoid uncertainty about the extent to which it is binding.
4.77 The OFT reserved judgement, on the basis that it required further information on, for example, the mechanism for preparing guidance and its enforceability. In principle, however, it favoured some flexibility in the legislation to avoid the need to use primary legislation to correct problems in achieving of the purposes of the Directive.
Discussion
4.78 There was strong support for guidance. We think that it would give businesses greater clarity over how to make terms transparent and prominent and how this ties with other sector-specific regulation. This will inform businesses about the regulators’ approach to enforcement and provide some reassurance on the question of compliance. Guidance should not, however, prevent other parties from bringing proceedings alleging unfairness of a term.
4.79 Unfair terms legislation is one-size-fits-all. It affects a wide range of consumer contracts. That includes contracts in complex sectors, many of which are highly regulated (such as banking, insurance, utilities or telecommunications). We believe that it would be helpful for businesses operating in these sectors to have sector-specific guidance on the meaning of transparent and prominent and how these tests overlap with other legislative requirements.
4.80 Any guidance produced by regulators would not be intended to supplement the law or constrain the courts in any way, but only to assist businesses in understanding the tests in the specific context in which they operate. The guidance we recommend would not be binding on the court or amount to a code of practice leading to specific outcomes. Thus, there would be no potential for gold plating the Directive. The courts should, however, be able to have regard to guidance as opinion evidence if they consider it helpful.
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4.81 Recommendation 10: The Department for Business, Innovation and Skills
should hold discussions with the Office of Fair Trading and other regulators about the mechanics of preparing guidance. Subject to these discussions, it should ensure that in deciding whether a term is transparent or prominent, the courts may have regard to guidance.
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