Unfair contract terms guidance Guidance on the unfair terms provisions in the Consumer Rights Act 2015 31 July 2015 CMA37 © Crown copyright 2015 You may reuse this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit www.nationalarchives.gov.uk/doc/open-government- licence/ or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: [email protected]. Contents Part (of guidance) Page 1. The guidance: an overview ................................................................................... 5 Introduction ........................................................................................................... 5 Key concepts in the Act, referred to in this guidance ............................................ 7 How the Act works .............................................................................................. 11 Using the guidance ............................................................................................. 13 The relevance of earlier unfair terms law ............................................................ 14 Other legislation particularly relevant to unfair terms .......................................... 15 Unfair terms flowchart ......................................................................................... 17 2. Part 2 of the Guidance: Fairness and transparency ............................................ 19 Consumer notices ............................................................................................... 20 Relevance of earlier case law ............................................................................. 20 The fairness test – section 62 ............................................................................. 21 ‘Good faith’ .......................................................................................................... 23 The Transparency test – section 68 .................................................................... 30 3. Part 3 of the Guidance: the exemptions .............................................................. 37 Introduction ......................................................................................................... 37 ‘The core exemption’ ........................................................................................... 37 Mandatory terms and notices – the ‘mandatory statutory or regulatory’ exemption .......................................................................................................... 48 4. Blacklisted terms and notices ............................................................................. 50 Introduction ......................................................................................................... 50 Blacklisted terms and notices subject to fairness test ......................................... 52 Consumer rights and blacklisted terms in contracts for goods, digital content and services ....................................................................................................... 52 Goods ................................................................................................................. 53 Digital content ..................................................................................................... 54 Services .............................................................................................................. 56 5. The Grey List and other potentially unfair terms and notices .............................. 63 Introduction ......................................................................................................... 63 Examples of unfair terms – Annex A ................................................................... 64 Consumer notices in part 5 of the guidance ........................................................ 66 Analysis of unfair terms in Schedule 2: The Grey List ......................................... 67 Part 5A – Other terms considered potentially unfair .......................................... 116 Index of common types of terms ....................................................................... 127 6. Enforcement ..................................................................................................... 133 1 Enforcement powers ......................................................................................... 133 Investigatory powers ......................................................................................... 135 Publications ...................................................................................................... 136 Duty to give reasons ......................................................................................... 136 Coordination of enforcement action .................................................................. 136 Private action under the Act .............................................................................. 136 Other relevant law ............................................................................................. 137 List of regulators ............................................................................................... 141 Annexes Annex A: Historic Annex A to unfair contract terms guidance Annex B: Index to main references in the guidance to new elements of unfair terms law introduced by the Consumer Rights Act as of 1 October 2015 2 Advice and complaints about unfair terms Advice about unfair terms and other consumer issues can be sought from the Citizens Advice consumer service (see www.advice guide.org.uk or call 03454 04 05 06), or privately, for instance from a solicitor. If you wish to complain about a consumer contract term or notice, please contact Citizens Advice in the first instance. The Competition and Markets Authority (CMA) welcomes information but does not provide individual advice or respond in detail to complaints. The Consumer Rights Act 2015 A copy of the Act is available from the Office of Public Sector Information at www.legislation.gov.uk. Helpful links Consumer Rights Act: www.legislation.gov.uk/ukpga/2015/15/pdfs/ukpga_20150015_en.pdf CMA guidance page www.gov.uk/government/publications/unfair-contract-terms-cma37 CMA website: www.gov.uk/government/organisations/competition-and-markets- authority Financial Conduct Authority website: www.fca.org.uk/ Ofcom website: www.ofcom.org.uk/ Department for Business, Innovation and Skills website: www.gov.uk/government/organisations/department-for-business-innovation-skills 3 Abbreviations and technical terms used in this guidance A list of the main abbreviations used in this guidance is given below, with explanations for reference. The abbreviations are also defined when first used. See paragraph 1.10 below for definitions of certain legal terms used in the guidance, and paragraphs 1.29 and 1.34 for the meaning of ‘the Grey List’ and ‘blacklisted terms’. A ‘regulator’ is defined in part 6 below. The Act The Consumer Rights Act 2015 The Directive Council Directive 93/13/ECC on unfair terms in consumer contracts UTCCRs Unfair Terms in Consumer Contracts Regulations 1999 UCTA Unfair Contract Terms Act 1977 CCA Consumer Credit Act 1974, as amended CCRs Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 CJEU Court of Justice of the European Union CMA Competition and Markets Authority CPRs Consumer Protection from Unfair Trading Regulations 2008 ECRs Electronic Commerce (EC Directive) Regulations 2002 FCA Financial Conduct Authority Ofcom Office of Communications OFT Office of Fair Trading PSRs Provision of Services Regulations 2009 TSS Local weights and measures authorities in Great Britain and the Department of Enterprise, Trade and Investment in Northern Ireland – commonly known as Trading Standards Services 4 1. The guidance: an overview Introduction 1.1 This guidance sets out the CMA’s understanding of the provisions in the Consumer Rights Act 2015 (the Act) which deal with unfair contract terms and notices. Parts 1 and 2 of the Act consolidate and replace the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) and relevant provisions of the Unfair Contract Terms Act 1977 (UCTA). The guidance supersedes the general unfair contract terms guidance originally issued by the Office of Fair Trading (OFT).1 1.2 The Act deals with a range of matters not all directly relevant to contract terms. However, one of its principal purposes is to give effect in the UK to the Unfair Contract Terms Directive (the Directive).2 This is achieved particularly in Part 2 of the Act, which replaces the UTCCRs and is the main subject of this guidance. It applies to contracts entered into, and relevant notices issued, on or after 1 October 2015. 1.3 The Directive is a ‘minimum harmonisation’ measure, allowing EU member states to adopt or maintain more stringent provisions if they choose. The Act confers additional protections mainly in Part 1, where it gives consumers rights against traders where they enter a range of types of contract, and, similar to the relevant UCTA provisions, makes particular terms always unenforceable, without the need to subject them to the fairness test. 1.4 This guidance is issued by the CMA as the UK’s national competition and consumer authority. The CMA replaced the OFT and the Competition Commission under a legislative programme which implemented a number of major changes to the UK’s statutory consumer and competition landscape,