In one month, two significant developments on the largely unknown and uncomplied-with Consumer Protection (Distance Selling) Regulations 2000. One was courtesy of the DTI, the other from the OFT.
Topic: Distance selling
Who: The Office of Fair Trading and the DTI
When: January/February 2004
In two parallel, but largely unrelated developments, the DTI has launched a public consultation into proposed changes to the Consumer Protection (Distance Selling) Regulations 2000 ("2000 Regulations") and the OFT has published draft Guidance on compliance with the 2000 Regulations for those selling cars and other vehicles by distance means. The DTI proposals require responses by 21 April 2004, whilst the OFT proposals require them by 26 April 2004. Respondents should ensure they don't muddle the two.
The DTI proposal puts forward three changes to the seven day cooling off period during which consumers have an unconditional right to cancel. These changes would:
make traders responsible for telling consumers at the time of sale if goods or services are exempt from the cooling off period;
look at cutting business costs for those informing consumers of their rights; and
give consumers the right to cancel a distance contract by phone as well as in writing or by email.
The current 2000 Regulations give consumers the right to cancel an order for services up to seven days after it was placed. If the service starts before the end of the seven days, the cooling off period ends when the service starts. For example, when hiring a car the right to cancel ends when the car is driven away.
Currently, the trader must inform the customer of this in writing before the contract is agreed. The proposal now is to change this to reduce pressure on business, enabling the trader to tell the consumer in writing while the service is being used, in other words after the point at which the consumer signs the hire contract.
Cancellation right notification
The second proposal is to change the 2000 Regulations so that traders must clearly inform the consumer whether or not there is a right to cancel and that the period within which this right can be exercised is reduced if a service begins within seven days.
The third suggestion is that consumers will no longer have to cancel a distance contract either in writing or by email, but will also be able to do it over the telephone.
Turning to the OFT consultation on compliance Guidance for car dealers, there is no plan here to change the 2000 Regulations, which, not so as you would notice, have had the full force of law in the UK since 31 October 2000. The OFT makes it clear that the proposed Guidance should not be regarded as a substitute for legal advice, but it is more intended to complement the 2000 Regulations. The format is user-friendly, with much of the Guidance set out in Q and A format.
Limits to exemptions
Although the 2000 Regulations do not extend to the selling at a distance of financial services (separate Regulations covering these follow later in 2004), the consultation paper makes it clear that ads for car sales on credit will still be caught by the 2000 Regulations. The consultation also makes it clear that the exempted "contracts for the provision of transport services on a specific date or within a specified period", would not include, for example, the selling of an airline ticket.
Separately, in a scenario where the consumer purchaser calls at the showroom to collect the car, the Guidance clarifies that this will not prevent what is otherwise a distance sale from falling within the 2000 Regulations. This is because, by the time of the visit of the consumer to pick up the car, the purchase contract will long since have been concluded.
As for the required disclosures as to the identity of the seller, the product, the cancellation right etc, there must be prominently placed so that consumers will see them before entering into a contract. If a seller is dealing with customers using email or fax, the required information about the seller should be included in the body of the communication. In a telesales context, the disclosures should be given to individuals verbally or there should be a verbal check that they have accessed the information through another means, for example by accessing the seller's website. The Guidance also reminds us that in the case of telephone conversations, marketers must at the start of the conversation identify the company name and the commercial purpose of the call.
Information about the car
Where cars are offered for sale and consumers are allowed to select additional optional extras, the basic specification of all vehicles should be provided and separately, full details of any optional extras supplied, so that the consumer can make an informed choice. If the car's features vary from the standard UK specification for the equivalent model, this should also be made clear.
On cancellation right, the Guidance makes it clear that if the seller has made it a term of the contract that the consumer will be expected to return the vehicle on cancellation, the seller must tell the consumer this explicitly. The seller must also say who will bear the cost of returning the vehicle (or it being recovered) on cancellation.
As regards the requirement to provide certain disclosures and information in "durable form", the Guidance indicates that information on a website will not be considered to be "durable", whilst consumers must be told explicitly if it is a term of the contract that the consumer will be expected to return the goods on cancellation. The consumer must also be told who will bear the cost of returning the vehicle or it being recovered on cancellation.
Exemptions from cancellation rights
Turning to the various exceptions, the Guidance focuses on the exemption from the cancellation right of "goods made to the customer's specification."
It makes it clear that purely because there are optional extras and additional fittings does not bring a car being purchased within that exemption. This means that unless the car is truly bespoke, in other words specifically designed for a particular customer, cancellation rights must be provided.
Also on exemptions, the Guidance makes it clear that purely because cars lose their value quickly, this does not mean that they are exempt from cancellation rights as being "liable to deteriorate or expire rapidly." This is just a feature of the market, the OFT says. Also, cars will not be regarded as goods that by their nature cannot be returned" and therefore exempt on that basis.
So far as exercising the cancellation right is concerned, the Guidance confirms that under current law, unless the contract expressly allows for cancellation by phone, a phone call is not enough. The consumer must either leave the notice of cancellation at the address of the seller's business or send it by post, fax or email.
Does "reasonable care" = driving the rejected car?
Also on the cancellation right, there is the question of what could be done with the car between exercising the right to cancel the contract to purchase it and the car getting back into the possession of the seller. Under the 2000 Regulations, the consumer has an obligation to take "reasonable care" of the vehicle during this period.
Does this entail not driving it? The OFT answers that the consumer must be allowed to at least test drive a car, and sellers might be inclined to indicate to consumers what mileage the car can knock up before the consumer's treatment of it can cease to be regarded as "reasonable care." However, if a consumer disagreed with the mileage cap allowed by the seller, it would be for the Court to decide in the final analysis.
Cancellation: costs of returning cars
On the question of the cost of returning a car to the seller if the cancellation right is exercised, the Guidance has helpful notes. It makes it clear that a seller can have a term in the sale contract which requires consumers to return cars at their own expense. If consumers then fail to do this, the seller can deduct the cost of recovering the vehicle from the purchase price refund which is given to the consumer. This must be a realistic figure and the seller may not charge the consumer more than the direct cost of collecting the car from the consumer's home address. Also, the seller may not make the right to cancel conditional upon the return of the car.
On time for delivery, the 2000 Regulations stipulate that unless agreed otherwise, the delivery period should be 30 days. The Guidance points out that there is no exemption for the sale of cars and if the 30 day deadline is not going to be met, then different delivery dates must be specified in the contract. If the seller subsequently has problems getting hold of the car specified by the consumer and wishes to revise the delivery date, the seller can propose this, but the consumer cannot be obliged to agree to the revised date. Sellers are therefore advised to ensure that the consumer is aware of how the business operates and the potential for any delays and to provide a realistically long delivery date at the outset.
The sourcing Guidance also contains a useful section on sourcing services. It focuses on situations where companies operate as an agency for consumers, getting details of the consumer's requirements and sourcing a specific model from a third party supplier, who may be based overseas.
Here, the proposed Guidance explains, there are two distinct contracts in operation. There is an agency contract for the supply of the service of sourcing the appropriate car. There is separately a supply contract with the third party suppler which is a contract for the supply of goods. If there is no face to face contact between buyer and seller involved in either, then the 2000 Regulations will apply to both.
So far as the agency agreement is concerned, all the disclosure obligations in the 2000 Regulations will apply here if it is a distance sale. For instance the obligation to give a description of the service that is offered means that the agent must explain precisely what he or she is going to be doing for the money they are earning in sourcing the car for the consumer.
Numerous other practical points are dealt with in clear, reasonably understandable Q and A format.
Why this matters:
The 2000 Regulations remain terra incognita to many distance sellers in the UK and non-compliance is rife. Clearly, the publication of the Guidance aimed at the motor industry will help render the Regulations more accessible to that sector and indirectly assist consumers in an area of distance sales where significant sums of money are at stake. As regards the DTI proposals for changes to the 2000 Regulations, these are in part driven by a recent dispute with Easy-Car as to whether car hire agreements are indeed exempt from the regulations, and the three suggestions for reform seem eminently practical.