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08th March 2016

New requirements for businesses dealing with consumers

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Businesses trading or contracting with consumers should bear in mind the requirements of the new ADR Regulations and the Consumer Rights Act.

The ADR Regulations (1)

"ADR" is an acronym for 'Alternative Dispute Resolution', a range of procedures for resolving disputes out of Court. These procedures include 'mediation' (assisted negotiation) and 'neutral evaluation' amongst others. ADR is often quicker and cheaper than a court case and ultimately, if it is not successful, the parties can still resort to Court action for a decision.

The government’s objective for introducing the ADR Regulations is to promote ADR as a means of redress for consumers in relation to unsatisfactory good or services. Whilst it is not compulsory for traders to engage in ADR it is compulsory to provide information on ADR to consumers. The intention is that requiring traders to provide information will encourage businesses to engage in ADR procedures as it demonstrates a high quality customer service and shows the customer that the trader places a high value on customer satisfaction.

The government (2) is clear that a trader who ignores the information requirements could be liable to Trading Standards civil enforcement action which could result in an order from the court requiring the trader to comply with the ADR Regulations. Failure to comply with a court order could result in an unlimited fine, or up to two years imprisonment.

The introduction of the ADR Regulations does not mean that the trader should not apply its internal complaints procedure first. However, if the dispute is not resolved by use of the internal procedure, there is now a regime in place for the parties to submit their dispute to 'ADR' for resolution and it is information on that procedure which traders must provide to customers.

All traders selling to consumers are required to provide information in a durable medium on the ADR entity in its sector and confirm whether the trader is prepared to engage with that entity to resolve the dispute. This should be done by providing the name and website address of the ADR entity on the trader’s website (if it has a website) and in the terms and conditions of sale or service contracts between the trader and the consumer.

The ODR (3) platform was officially announced on 7 January 2016 (4). The ODR is designed to help consumers who have bought goods and services online and subsequently have a problem with the online purchase. All online traders and online market places must now display a link on its website to the ODR platform. The ODR platform will be available to consumers and traders after 15 February 2016.

As ADR becomes more widespread, trader participation in ADR will grow to be an increasing factor for customers when considering their buying choices. There are a number of ADR procedures that parties can submit to. In some situations such as adjudication the third party will make a binding decision which the parties must then follow. In other situations such as mediation or conciliation, the third party will bring the parties together to assist the parties in reaching a resolution.

Consumer Rights Act 2015 (5)

Traders dealing with consumers should not forget the requirements of the Consumer Rights Act (CRA) which came into force on 1 October 2015.

The CRA consolidates various existing legislation relating to the supply of goods or services to consumers but has also introduced many new provisions which give the consumer greater protection. In particular it gives the consumer additional rights to seek redress against a trader which supplies defective goods or services. It is also the first piece of legislation to regulate the supply to consumers of digital content, whether that is paid for or a supply which is free with other paid for goods or services.

The CRA also sets out new rules for determining whether terms in contracts with consumers are unfair or not. Unfair terms cannot be enforced by a trader against a consumer. The question of whether a term is unfair or not can be difficult one to answer, but the CRA helps by including an indicative list of terms which may be deemed unfair.

In circumstances where the trader has failed to comply with the CRA there is now wider discretion and a range of remedies which will allow the enforcement authority to consider issues on a case by case basis. There is guidance published by the Department of Business which makes clear that while the principal formal sanction for dealing with breaches of consumer law will remain criminal prosecutions, there are now a wider range of orders that can be sought in the civil courts aimed at achieving redress or compliance.

Given the number of changes that the CRA has introduced it will take some time for the system to develop and adapt. In the meantime, it is important in light of the changes that traders review their policies and procedures to ensure that they are compliant with the CRA.

For assistance on your business terms, contact Kevin Fletcher or for assistance on ADR, contact Dominic Hopkins

(1) The Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015

(2) Department for Business, Innovation and Skills’ Guidance for Business

(3) Online Dispute Resolution

(4) Announced by the European Commission

(5) Consumer Rights Act 2015