Following a review of EU consumer law, the European Commission has published a draft directive entitled the Consumer Rights Directive, which could become law in the UK as early as 2011, writes Winston Green, senior associate of law firm Denton Wilde Sapte LLP.
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By levelling the regulatory playing field across the EU, the Consumer Rights Directive (CRD) could have the effect of increasing cross-border consumer spending by increasing consumer confidence and decreasing compliance costs for businesses.
One area in which the changes will be most noticeably felt in consumer contracts of goods and services concluded is in using the internet. Once the new rules come into effect, such online traders will be able to trade throughout the EU on the same terms without the need to tailor them for local law requirements. This is to be achieved by making the CRD a "maximum harmonisation" directive, meaning member states will not be permitted to pass laws over and above those set out in the CRD.
The following are a very brief summary of some of the key changes:
• Pre-contractual information: Clear information requirements for all consumer contracts including information in relation to the product/service, address and identity of the seller, price, additional charges, payment mechanism, delivery details, complaints policy, cooling-off period (where applicable) and after-sales services.
• Transparency of terms: Contract terms must be in plain, intelligible and legible language. Moreover, pricing must be transparent and express consent to ancillary charges must be sought (that is, any online tick boxes must be opt-in, not opt-out).
• Passing of risk: Delivery of goods within a minimum of 30 days from execution of sale contract; seller bears risk of loss/damage until goods are received by consumer; automatic right of refund within 7 days of non-delivery.
• Unfair terms: New black list of universally banned contract terms plus a grey list of terms deemed to be unfair unless the seller can demonstrate to the contrary.
• The black list currently contains the following:
- excluding or limiting the liability of a trader for death or personal injury caused to the consumer through an act or admission of that trader;
- limiting the trader's obligation to respect commitments undertaken by his agents or making his commitments subject to compliance with the particular condition which depends exclusively on the trader;
- excluding or hindering the consumer's right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions;
- restricting the evidence available to the consumer or imposing on him a burden of proof which, according to the applicable law, should lie with the trader;
- giving the trader the right to determine whether the goods or services supplied are in conformity with the contract or giving the trader the exclusive right to interpret any term of the contract.
• Terms to be included on the grey list include provisions for automatic renewal of the contract term and for automatic price increase.
• Remedies: Standardisation of the remedies available to consumers for damaged or faulty goods. Consumers will be entitled to replacement or repair in the first instance and a refund or discount only where specific circumstances apply.
• Cooling-off period: Applicable only to distance selling and pressure sales (i.e. sales concluded away from the sellers premises such as doorstop sales). EU-wide standard cooling-off period of 14 days or 3 months where the seller fails to set out the contractual right to withdraw within 14 days.
While the effect of any unfair terms provisions are clear that the relevant contract term will be deemed unenforceable and not binding on the consumer, the likely penalties for breach of the national law transposing the directive is less clear. The CRD states that member states shall lay down rules on penalties which are effective, proportionate and dissuasive. The Unfair Commercial Practices Directive containing similar terms, resulted in the institution of criminal sanctions in most EU member states, including the United Kingdom.
It remains to be seen whether the CRD will achieve its aim of providing a level playing field for consumer transactions in the EU, increasing confidence and decreasing costs. The trend for consolidation and full harmonisation is encouraging, as it helps to eliminate inconsistencies and gaps between laws within member states and across the EU.
Other reviews are planned by the Commission and businesses should watch the progress of the CRD and any other new directives carefully to ensure they take advantage of the changes.