BRIEFING PAPER Number CBP6588, 6 March 2020 By Lorraine Conway Consumer Rights Act 2015 Inside: 1. Introduction 2. Background to the CRA 2015 3. Part 1: sale of goods, digital content and services 4. Part 2: unfair contract terms 5. Implementation, territorial extent & enforcement 6. Possible impact of Brexit on consumer rights Appendix www.parliament.uk/commons-library | intranet.parliament.uk/commons-library | [email protected] | @commonslibrary Number CBP6588, 6 March 2020 2 Contents Summary 3 1. Introduction 4 2. Background to the CRA 2015 5 2.1 Why was a new consumer Act needed? 5 2.2 Government consumer strategy 6 2.3 EU Consumer Rights Directive 7 2.4 Changes to the consumer landscape 7 3. Part 1: sale of goods, digital content and services 9 3.1 Overview of the main provisions 9 3.2 Application 10 3.3 Sale of goods 10 Implied rights 10 A right to reject a faulty good 11 Burden of proof 12 3.4 Sale of digital content 12 Implied terms 12 Statutory remedies 13 3.5 Delivery rights in respect of goods and digital content 13 3.6 Sale of services 14 Implied terms 14 Statutory remedies for non-conforming service 14 3.7 Treatment of mixed supply contracts 15 4. Part 2: unfair contract terms 16 4.1 Overview 16 4.2 Unfair terms? 16 Consumer notices 18 5. Implementation, territorial extent & enforcement 19 6. Possible impact of Brexit on consumer rights 20 Appendix 22 Cover page image copyright: Shopping mall by Stevepb / image cropped. Licensed under Pixabay License – no copyright required. 3 Consumer Rights Act 2015 Summary The Consumer Rights Act 2015 (the “CRA 2015”) came into force on 1 October 2015 and represents the biggest overhaul of consumer law for many decades. The CRA 2015 sets out a simple modern framework of consumer rights, with the aim of increasing consumer confidence and make enforcement easier. Specifically, the CRA 2015 is designed to: • establish a framework that consolidates in one place key consumer rights covering contracts for goods, services and digital content (Part 1); • reform and consolidate the law relating to unfair terms in consumer contracts (Part 2); • consolidate and simplify enforcers’ powers as listed in Schedule 5 to investigate potential breaches of consumer law and clarify that certain enforcers (trading standards) can operate across local authority boundaries (Part 3); • give the civil courts and public enforcement bodies greater flexibility to take the most appropriate action for consumers when dealing with breaches or potential breaches of consumer law (Part 3); and • introduce easier routes for consumers and small and medium enterprises (SMEs) to challenge anti-competitive behaviour through the Competition Appeal Tribunal (CAT) (Part 3). This Library briefing paper briefly outlines the background to the CRA 2015 and then considers its main consumer protection provisions (i.e. Parts 1 and 2). Specifically, it looks at new rules in respect of consumer contracts for goods, digital content and services and considers how the Act treats unfair terms in consumer contracts and notices. In the process, this paper outlines the main structural changes to consumer regulatory and enforcement bodies. Number CBP6588, 6 March 2020 4 1. Introduction Over the last few years, the UK’s consumer protection regime has been reviewed, dismantled and completely rebuilt. Legislative reforms have been made against a backdrop of structural changes to consumer enforcement bodies, creating a new consumer landscape. In terms of legislative changes, there have been two drivers of change: • first, the CRA 2015, which received Royal Assent on 26 March 2015; and • second, the adoption in October 2011 of the EU Consumer Rights Directive (2011/83/EC) (see section 2.3 below). The main aim of the CRA 2015 is to consolidate consumer rights into one place, whilst enhancing consumer protections for consumers and modernising the law to take into account digital advances. The Act is in three parts and contains 10 schedules; each part has a separate objective, namely: • Part 1 provides consumer rights and remedies in respect of contracts to purchase goods, services and digital content. • Part 2 replaces and expands on the current rules regarding unfair terms in consumer contracts and notices. In so doing, it draws on the recommendations of the Law Commission. • Part 3 contains miscellaneous and general provisions, including: investigatory powers; amendment of the Weights and Measures (Packaged Goods) Regulations 2006; enhanced consumer measures and other enforcement under the Enterprise Act 2002; a duty on letting agents to publicise fees and other information; and certain requirements relating to resale of tickets for recreational, sporting and cultural events. Significantly, Part 3 introduces significant changes to private actions in competition law, including: expanding the jurisdiction of the CAT, the introduction of opt-out collective actions and the establishment of voluntary redress schemes. This paper is concerned only with the consumer protection measures found in Parts 1 and 2 of the CRA 2015. 5 Consumer Rights Act 2015 2. Background to the CRA 2015 2.1 Why was a new consumer Act needed? Prior to the coming into force of the new CRA 2015, there were 12 separate pieces of legislation covering consumer rights, and around 60 pieces of legislation setting out the investigatory powers of consumer law enforcers. This was the result of UK consumer law having developed piecemeal over a period of 30 years. Whilst offering a high degree of consumer protection, this old regime was criticised for being unnecessarily complex, fragmented and, in places, unclear. The law had also failed to keep up with technological change. In addition, there were overlaps and inconsistencies between EU and pre-existing UK legislation. When introducing the new CRA 2015 in October 2015, the Department for Business, Innovation and Skills (BIS, now replaced by the BEIS), said that despite spending an estimated £90 billion a month, UK consumers found it difficult to understand their legal rights and obligations.1 This is turn, undermined competitiveness and growth in the economy. It was argued that new transparent rights embodied in a single Act would help consumers to make better choices when they buy and save them time and money. (see Box 1 below). Box 1: Policy rationale for introducing the new CRA 2015 “There is general agreement across business and consumer groups that the existing UK consumer law is unnecessarily complex. It is fragmented and, in places, unclear, for example where the law has not kept up with technological change or lacks precision or where it is couched in legalistic language. There are also overlaps and inconsistencies between changes made by virtue of implementing European Union (EU) legislation alongside unamended pre-existing UK legislation.” [Explanatory Notes to the Consumer Rights Act 2015 (paragraph 5) – Department for Business, Innovation and Skills (BIS)] As already mentioned, Part 2 of the new CRA 2015 deals with unfair contract terms in consumer contracts and notices. Prior to the coming into force of the Act, the law on unfair terms was contained in two separate pieces of legislation namely, the Unfair contract terms Act 1977 (UCTA 1977) and the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs)2. Under the UCTA 1977, some contractual terms were automatically non-binding whilst others were subject to a test of reasonableness. The UTCCRs enabled consumers to challenge most non-negotiated terms of a contract on the basis they were unfair. The difficulty was that the UCTA 1977 and the UTCCRs had inconsistent 1 “New rights for consumers when buying digital content”, Department for Business, Innovation and Skills press notice, 1 October 2015, GOV.UK, [online] (accessed 6 March 2020) 2 The Unfair Terms in Consumer Contracts Regulations 1999 implement the Unfair Terms in Consumer Contracts Directive (Council Directive 93/13/EEC) Number CBP6588, 6 March 2020 6 and overlapping provisions, creating uncertainty for consumers and businesses. The Law Commission, in its report on “Unfair terms in consumer contracts”, described the legislation as difficult to interpret, with regulators and business expressing different views.3 In particular, there was uncertainty attached to the construction of Regulation 6(2) of the UTCCR, by which a term in plain, intelligible language would not be subject to assessment for fairness if it relates to the definition of the main subject matter of the contract or the adequacy of the price (the so called “core terms exemption”). In the 2009 case of Office of Fair Trading v Abbey National Plc,4 the Supreme Court held that bank charges for unauthorised overdrafts were not subject to assessment. This led to calls to reform the unfair contract terms legislation and the core terms exemption. 2.2 Government consumer strategy The Coalition Government published its consumer strategy in April 2011, “Better Choices: Better Deals – Consumers Powering Growth”. Its stated aim was to create a simple, modern framework of consumer law across all sectors. To this end, a series of consultation documents were published between March and November 2012 proposing measures to overhaul and reform UK consumer law. According to the government, the responses received highlighted areas of uncertainty and inconsistency in consumer law and enforcement and provided evidence of consumer detriment. Consumer reform was subsequently included in the Queen’s Speech in May 2013 and a draft Consumer Rights Bill was published