Teaching them a Lesson:

Teaching them a Lesson:

Self-help and the new consumer rights

Presented by Joe Spicer and Kevin Barry

London WC1R 4JH

T +44 (0)20 7421 8000 F +44 (0)20 7421 8035

CONSUMER REMEDIES

• Previously CPR’s provided no private right

of redress

• Consumers had to rely on complex civil

law claims of misrepresentation etc.

• That has (finally) changed…

CONSUMER REMEDIES

Now four routes to redress:

1. Criminal enforcement, leading to a compensation

order under S. 130 Powers of Criminal Courts

(Sentencing) Act 2000

2. Civil enforcement under the Enterprise Act 2000, [with

enhanced consumer measures including redress

under Sched.7 the Consumer Rights Act 2015]

3. Negotiated settlement with trader

In what circumstances may a consumer seek

private redress?

• Only consumers who took a relevant “transactional decision”

following a misleading practice or aggressive commercial practice can get private redress under the Regs.

• Reg 5: Misleading Action by the trader - provision of false

information, or information likely to mislead the average consumer

– ‘Pure omissions’ do not trigger redress, however omitting

material information which creates a misleading overall presentation….amounts to a misleading action!

• Reg 7: Aggressive commercial practices

• Whether trader has behaved aggressively is a question of

fact

• Will depend on whether average consumer’s freedom of

choice has been significantly impaired

• The Regs set out Banned Practices leading to criminal liability

(Sched 1) - not directly enforceable by consumers – however behaviour falling into those categories will very often amount to either a Misleading Action or an Aggressive Practice

Transactional Decision

• The misleading or aggressive action by the trader must be at least a “significant factor” in the consumer’s decision – need not be main cause.

• Definition of “Transactional Decision” is extended to cover

demands for payments from consumer in full or partial settlement of liabilities to the trader

• Regs now cover demands for payment to avoid prosecution e.g.:

car clamping, and alleged illegal downloading of digital content

• Excluded sectors include: real estate, financial services, most

What types of transactions are covered?

• Three types of transactions can qualify:

1. Business to Consumer contract: consumer enters into a

contract with a trader to buy goods or services from

trader

2. Consumer to Business contract: consumer enters into a

contract with a trader to sell goods to the trader

CONSUMER REMEDIES

Effect on other law:

• No right to damages under

Misrepresentation Act 1967 if right to

redress under Part 4A CPR’s. (r.5 CPAR

2014)

Right to bring civil claims

CPUT r.27K

(1) A consumer with a right to redress under this Part [4A] may bring a civil claim to enforce that right;

(2) [Scotland]

(3) Paragraph 4 applies if in proceedings under this regulation the consumer establishes that the consumer has:

a) The right to rewind

b) The right to a discount, or c) The right to damages

(4) The court must give an order that gives effect to –

a) That right, and

STANDARD REMEDIES AND DAMAGES

Standard Remedies

• Consumer Right to unwind contract and get their money back • Regs 27F, 27G, 27H CPUT

• Consumer right to discount on the price paid

• Regs 27H, 27I

Damages

• Damages for detriment caused

STANDARD REMEDIES

• Allow consumer to recover the full price paid for the

goods or services, or a percentage thereof

• Remedies apply on a strict liability basis

• If traders actions were misleading or aggressive, then the

remedies apply

• No need to demonstrate loss

• No need to demonstrate that trader acted recklessly,

STANDARD REMEDIES

• If exercising the right to unwind and return goods or reject

service, they can also terminate the contract (Reg 27F(1)(a)

• Or can choose to keep goods or service, but request a

discount

• The right to a discount does not release the consumer from

other obligations under a contract, but the discount can apply to previous payments and to future ones

DAMAGES

• Damages remedy applies where consumer loss / detriment

exceeds the price paid

• Cover damages for distress and inconvenience, and consequent

financial loss

• However: need to show evidence of loss

• Trader has a due diligence defence in respect of damages

where it can be shown that the trader took reasonable care to avoid committing misleading or aggressive practice

Right to unwind

Reg 27E

Business to consumer contracts

When does the consumer have the right to unwind a B to C contract?

• Consumer has right to unwind where consumer indicates to

trader that consumer rejects the product within the relevant period and at time when product is capable of being rejected

Relevant period is 90 days from the day of:

• first delivery of goods

• performance of service begins

• digital content is supplied

• the lease begins

• right is first exercisable (as case may be)

Cannot reject where goods fully consumed, service fully performed, digital content fully consumed, lease has expired, right has been fully exercised

No right to unwind where consumer has already exercised right to discount in respect of that contract and the same prohibited

Right to unwind B to C contracts

Reg 27F

How it works…

Where right to unwind applies:

• contract comes to an end both parties released from

obligations

• trader has duty to give consumer a refund

• where goods have been supplied, consumer must make

Reg 27F

(cont…)

Refund:

• money paid / anything transferred under the contract is entitled

to be refunded – NO REFUND if no payment or transfer under contract

• where contract for sale or supply on a continuous basis AND

period on rejection is greater than a month then refund is the market price of product at point of rejection deducted from the amount paid

• UNLESS not appropriate to apply deduction having regard to

traders behaviour and the impact of the practice on the consumer

Right to unwind – How it works

Reg 27G

Consumer to business contracts

Where right to unwind applies:

• Contract comes to an end both parties released from

obligations

• Consumer entitled to either goods back or money

• Consumer must indicate to trader that contract at an end

Reg 27G

(cont…)

• If goods still available in same condition then consumer

has right of return of them and consumer repays any

money received from trader (Reg 27F(5))

• If 27F(5) does not apply then consumer entitled to

difference in market price of goods and the amount paid

by trader

Right to unwind – How it works

Reg 27H

Where payments demanded that are not due

• This applies in respect of consumer payments falling within

new Regulations 2 (1A) and 2 (1B) of CPUT, if consumer not

required to make all or part of payment

• Consumer has right to receive back the same amount as

money paid to trader or where part payment has been

made, an amount equal to that part payment which was

not required to be made

Right to Discount – How it works

Reg 27I

• Right to discount applies whether money has been paid under contract or not BUT not where right to unwind has been exercised

• Where payments have been made, consumer entitled to receive

back from trader relevant percentage of the payments made

• Where payments not made, consumer has right to reduce by

relevant percentage as many of the payments as is appropriate to the seriousness of prohibited practice OR where paragraph 6 applies all payments by relevant percentage

What is the relevant percentage of discount?

• If prohibited practice more than minor 25%;

• If prohibited practice is significant, 50%

• If prohibited practice is serious, 75%

Right to Discount – How it works (2)

Reg 27I

Determining seriousness (27I (5))

assessed by reference to:

• behaviour of the person engaged in the practice

• impact of the practice on the consumer

• the time that has elapsed since the prohibited practice

(6) BUT para (5) does not apply where:

• amount payable under contract exceeds £5000,

• the market price of product at time the consumer entered

into the contract is lower than the amount payable under

the contract

• there is clear evidence of the difference between the

market price and the amount payable for it under the

contract

In such cases: amount payable is percentage difference

between market price and amount payable under the

contract

Right to Damages

Reg 27J

Right to damages (from the trader) accrues where

consumer:

• has incurred financial loss which would not have been

incurred if the prohibited practice had not taken place OR

• has suffered alarm, distress or physical inconvenience or

discomfort which consumer would not have suffered if

prohibited practice in question had not taken place

Right to Damages (cont…)

• Damages for financial loss do not include difference

between market price of product and amount paid under

contract

• Damages only payable in respect of loss reasonably

Right to Damages (cont…)

Reg 27J

No right to damages where the trader proves that: (a) occurrence of prohibited practice was due to: -i. a mistake

ii. Reliance on information supplied to the trader by another person iii. The act or default of another person other than the trader

iv. An accident, or

v. Another cause beyond the traders control

(b) The trader took all reasonable precautions and exercised all due diligence to avoid the occurrence of the prohibited practice

36 Bedford Row London WC1R 4JH

T +44 (0)20 7421 8000 F +44 (0)20 7421 8035