The Government has announced a new set of wide-ranging consumer protection rules, which will require Christmas savings clubs to safeguard customers’ money, firms to make it easier to cancel subscriptions and regulators to stamp out “dodgy tactics” used to lure online shoppers, plus much more. But the new rules won’t come into effect for a while yet.
The plans were initially revealed by the Government on 19 July before it today (20 July) launched a full consultation on them entitled ‘Reforming Competition and Consumer Policy’. The consultation runs until 1 October. Key proposals outlined include:
- Changing the law so that Christmas savings clubs have to safeguard customers’ money. This will seek to protect savers in the event a scheme collapses (as happened in 2006 when approximately 120,000 customers lost a combined total of £40 million in the Farepak collapse).
- Strengthening the legal requirements for subscription contracts. Firms will be required to provide clearer information at sign-up including around auto-renewals.
- Making it illegal to pay someone to write, or host, a fake review. The Government says it’ll target “bogus online ratings”.
- Helping regulators curb “dodgy tactics” used to dupe online shoppers. The Government says websites are increasing the collection and use of consumer data, and some are using this insight unfairly to exploit consumers’ behavioural biases, forcing them into purchases they would not have otherwise made.
- Making arbitration or mediation mandatory for firms in the used car and home improvement sectors. Where disputes between consumers and firms arise, this should mean avoiding lengthy court proceedings and so lead to speedier resolutions.
- Halving the eight-week wait to refer complaints to ombudsmen and alternative dispute resolution (ADR) schemes. This is something MoneySavingExpert.com has been calling for since 2017.
- Giving new and beefed-up powers to the competition watchdog. For example, the CMA will be able to impose fixed penalties of up to 10%.
We run through the proposals in more detail below. For more info on the current protections you get as a consumer, see our Consumer Rights guide.
Christmas savings clubs will have to safeguard customers’ money
In the consultation, the Government proposes to increase consumer protection by amending the Consumer Rights Act 2015. This means legislation would be added that will ensure any prepayments made by customers to schemes, such as Christmas savings clubs, will need to be safeguarded through insurance or trust accounts.
We are checking whether these schemes will also come under Financial Conduct Authority (FCA) regulation and whether payments will be protected by the Financial Services Compensation Scheme (FSCS) too and we will update this story when we know more. See our Are my savings safe? guide for more on this.
Firms will need to make info on subscriptions and auto-renewals clearer
Firms will need to make it explicitly clear in the early stages of the subscription process and immediately after the person places their order, that they are signing up for a subscription service; explaining the contract terms and price per billing period, whether the contract will auto-renew and the minimum notice period for cancellation.
Firms will also need to offer customers a clear choice, making sure they are actively choosing the subscription service. They’ll also have to introduce reminders for customers when the contract is set to renew and make it easier to cancel, for example, by only requiring a consumer to put in essential information and making the process easy and straightforward. This will also need to include providing:
- The date on which the contract will auto-renew or roll-over, and for how long.
- The current price of the contract and the price following renewal or roll-over.
- Any notice period for cancelling the auto-renewal or roll-over and details on how to cancel.
But the Government proposes to exclude any contracts for goods, services, and digital content from the proposals, where an interruption in supply could result in serious harm to consumer welfare. For example, this would likely involve excluding contracts for the supply of medicine or for certain financial services, such as insurance. From 1 January 2022, car and home insurers will be banned from charging renewing customers more than newbies under separate FCA action.
It’ll be illegal to pay someone to post a fake review
The Government says it is considering whether to amend its list of unfair practices to include:
- Commissioning a person to write and/ or submit fake consumer reviews of goods, services, or digital content. Or;
- Commissioning or incentivising a person to write and/ or submit a fake consumer review of goods or services.
But there are exclusions – within the consultation, the Government said it would not consider a review fake if it reflects the expert’s, influencer’s or consumer’s genuine experience or impartial opinion of the good or service.
‘Dodgy tactics’ used to dupe online shoppers will be stopped
The Government says it will crackdown on “dodgy” practices online including:
- “Dark patterns”, which manipulate consumers into spending more than they wanted to;
- “Sludges”, where businesses pay to have their product feature highly on a retailer’s website while hiding the fact they paid for it;
- And “drip pricing”, where traders use an appealing headline price to entice customers, then load on additional, unavoidable charges before you reach check-out.
Mediation will be mandatory for firms in the used car and home improvement sectors and there will be speedier resolutions
Arbitration or mediation will be made mandatory for firms in the used car and home improvement sectors. This means consumers can use ADR schemes to resolve issues directly, rather than going through court.
The consultation also proposes halving the eight-week wait that consumers currently experience before they can approach an ADR, such as an ombudsman. The Government says this is so businesses are incentivised to resolve customer disputes more quickly and consumers are faced with less stress and financial pressure.
MoneySavingExpert has been campaigning for over four years for this change – read our full story on the proposal for further information.
The CMA will be given new beefed-up powers to impose penalties
The consultation proposes that the CMA should be able to impose fixed penalties of up to 1% of a business’ annual turnover, as well as being given the power to impose an additional daily penalty of up to 5% of daily turnover while non-compliance continues.
Penalties for individuals would remain capped at £30,000 along with the possibility of a daily penalty of up to £15,000 while noncompliance continues. It will also be able to fine unscrupulous traders that breach consumer law up to 10% of turnover.
In addition, the watchdog will be able to enforce consumer law directly rather than going through a court process, block a wider range of harmful company mergers, and disqualify company directors if they lie to it.
The idea behind this shake-up is to make it quicker and easier for the CMA to secure refunds from companies for consumers. The CMA has received around 100,000 complaints relating to refunds since the start of the pandemic, for example.