Title of presentation - Regensw
Consumer Finance Explained 10 June 2014 – Darts Farm Rebecca Moore, Solicitor Michelmores LLP
Woodwater House, Exeter
Summary • • • •
Green Deal Consumer Credit Act 1974 Consumer Rights Directive Sale of Goods and Services Act 1979 and the Supply of Goods and Services Act 1982 • Unfair Contract Terms • Practical Tips
More than just lawyers
Consumer Credit in the Context of the Green Deal The ‘Golden Rule' ‘Estimated savings to the consumer on energy bills will always equal or exceed the cost of the work.’ Aim: make energy saving home improvements more accessible and assist in reducing the UK's carbon emissions target of 80% by 2050.
More than just lawyers
Who is a consumer?
• Any natural person acting for purposes outside his trade, business or profession. • In the course of the Green Deal this can include small private landlords.
More than just lawyers
Initial Steps: Green Deal
• Property assessed under the Green Deal • Consumer receives tailored energy saving recommendations • Firm quotation may be offered by the Green Deal Provider
More than just lawyers
Green Deal Plans • New type of unsecured loan. • Interest is charged on the loan. • Many Green Deal plans are regulated consumer credit agreements. • The consumer should be allowed to repay early (either in full or in part) any outstanding credit. • If credit is repaid early the creditors are allowed to apply for compensation in certain circumstances.
More than just lawyers
Green Deal: Consumer Credit Licence • Green Deal Providers are most likely to require either category A (consumer credit) or category C (credit brokerage) licences. • Canvassing off trade premises – such as in the consumer’s home – requires specific authorisation under the terms of the consumer credit licence. • If Green Deal Providers advise consumers about the liquidation of debts under a consumer credit agreement this is like to require a category E (debtcounselling) licence. More than just lawyers
Green Deal: Consumer Credit Licence • All Green Deal Providers (other than local authorities) require a consumer credit licence if they are offering Green Deal Plans which are regulated consumer credit agreements. • A category A licence will be required irrespective of whether the Provider sources finance from a third party. • If a Green Deal Provider engages in additional licensable activities, such as credit brokerage, it will need to be licensed accordingly. More than just lawyers
Green Deal: Consumer Credit Licence • A credit licence may not be required where a: – Green Deal assessor does not engage in any licensable activity; – Green Deal participant, for example an assessor or an installer, is employed by a Green Deal Provider, and acting solely in the course of its employment (and is not engaged in any business on its own account or on behalf of a third party), it will be covered by the Provider’s licence. – Green Deal participant is an agent of a Green Deal Provider, whether it will need to be licensed will depend upon the individual facts and circumstances. More than just lawyers
Consumer Credit Act 1974 (CCA) • Regulates ‘consumer credit agreements’ being an agreement between an individual (debtor) and any other person (the creditor) by which the creditor provides the debtor with credit of any amount. • The CCA provides protection to consumers against the misselling of credit. • Some exemptions do apply but the provisions relating to exemptions are complex and specific advice should be sought if you think any exemptions would apply.
More than just lawyers
CCA • The regulated contract must be in a signed and legible document with the terms set out within it and not in another document. • Prior to entering into the agreement the consumer is entitled to receive a document setting out all the prescribed information. This information is known as the SECCI and is set out in standard form in the Regulations. • The consumer is entitled to receive at least one copy of the agreement, generally signed. More than just lawyers
CCA Cont/d ... • The CCA affords protection to consumers by imposing requirements on creditors to give notice, in a prescribed form, prior to them taking action for any default under a regulated agreement or in circumstances where a debtor or hirer falls into arrears.
More than just lawyers
Consumer Rights Directive • The Government must implement the Consumer Rights Directive into UK law.
• The latest phase of changes come into force through the Consumer Contracts Regulations which are effective from 13 June 2014 and apply to all relevant consumer contracts entered into on or after that date.
More than just lawyers
Key Changes to Consumer Law • Extends the list of pre-contract information that a trader must give to a consumer under a distance contract and an offpremises contract. • Introduces new pre-contract information that a trader must give to a consumer under an on-premises contract. • Requires the trader to seek the consumer's express prior consent before incurring additional payments. • Allows the trader to deduct an amount for the diminished value of the goods when they are returned.
More than just lawyers
Key Changes to Consumer Law Cont/d ... • Extends the list of ancillary contracts which will be automatically terminated on termination of a distance contract or an off-premises contract. For example, where there is a separate contract for finance and the supply and installation. • Prohibits the trader from making the consumer use a premium rate telephone line to contact the trader about an existing contract. • Unless the trader and consumer agree otherwise, require that any goods be delivered within 30 calendar days. More than just lawyers
Ban on excessive payment surcharges • Already in force (since 6 April 2013). • Covers charges imposed on consumers when they pay with a particular method of payment. • The ban prevents excessive payment surcharges which exceed the cost to the business of using such payment methods.
More than just lawyers
Cancellation Under the Consumer Contract Regulations 2013 the selling of goods and/or services (including by a Green Deal Provider) in the following circumstances will entitle the consumer to a ‘coolingoff’ period of 14 days in which they can cancel the contract: – on the doorstep or in the home; or – in someone else’s home; or – at the consumer’s place of work; or – when the consumer buys from a trader on an excursion they have arranged away from their business premises.
More than just lawyers
Cancellation Cont/d ...
This provision covers both solicited (invited) and unsolicited (uninvited/'cold calling') visits as well as a follow-up meeting prearranged at the home following an initial cold call or letter sent to the consumer.
More than just lawyers
Cancellation Cont/d… • A trader must advise the consumer in writing that the consumer can cancel the contract. • This information must usually be set out in the contract and should be legible and have equal prominence to any other part of the agreement. • Failure to provide the consumer with the required precontractual information will extend the cancellation period to, broadly, one year. • A consumer is required to return goods under a distance contract or an off-premises contract within 14 calendar days of cancelling the contract. More than just lawyers
Cancellation Cont/d ... • It is necessary to refund the consumer within 14 days of cancellation subject to the points below. • The trader may withhold a refund until the goods are returned (or evidence of their return is provided). • The trader may deduct an amount for the diminished value of the goods when they are returned
More than just lawyers
Cancellation Cont/d… • If the consumer wishes the services to commence, or receive the goods, within the 14-day cancellation period then their explicit consent should be given. This must be in writing, signed by the individual consumer and provided to the trader. • The consumer must be advised that if they later cancel the contract they will need to pay for any services and/or goods delivered until the point at which they cancel.
More than just lawyers
Sale of Goods and Services Act 1979 (SOGA) and the Supply of Goods and Services Act 1982 (SOGSA) • SOGA and SOGSA imply identical provisions which apply to goods sold to consumers and services sold at the same time meaning that products provided to consumers must comply with the following: – – – –
Any descriptions provided; Must be fit for purpose; Must be of satisfactory quality; and Services must be carried out with reasonable care and skill.
More than just lawyers
Sale of Goods and Services Act 1979 (SOGA) and the Supply of Goods and Services Act 1982 (SOGSA) Cont/d ... • The four requirements above are known as ‘Implied Warranties’ and there is a prohibition under the Unfair Contract Terms Act 1977 on a business attempting to exclude or limit the Implied Warranties in its contracts with consumers.
More than just lawyers
Implied Warranties • Any limits or exclusions of Implied Warranties will be unenforceable • In addition they may constitute a criminal offence of misleading a consumer as to his or her rights. • Businesses must take care that their terms and conditions of sale used with consumers, as well as sales materials, comply with the law and do not attempt to limit or exclude the implied terms.
More than just lawyers
Manufacturer Warranties Businesses must carefully consider their purchase agreements with their own suppliers. If there is a limited warranty contained in a purchase agreement it will mean that the business is exposed. Example: – A manufacturer gives a limited 12 month warranty to the business in relation to a product. – The business must ensure that they back-to-back this provision with the consumer.
More than just lawyers
Unfair Contract Terms and the impact of the new ‘Golden Rule’ • The Unfair Terms in Consumer Contract Regulations 1999 (the ‘1999 Regulations’) apply to the sale of goods and /or services to consumers in the UK when standard terms of business are used. • The 1999 Regulations provide that an unfair term is not enforceable by a business against a consumer.
More than just lawyers
When is a term unfair? • If contrary to the requirement of good faith it causes a significant imbalance in the parties’ rights and obligations under the contract, to the detriment of consumers. • Contract terms should be plain and clear . If there is doubt as to what a term means, the meaning most favourable to the consumer will apply. • Pricing needs to be in plain and intelligible language with clear prominence.
More than just lawyers
Green Deal • In respect of the Green Deal the cost of the goods and services provided cannot exceed the projected energy bill savings. • The charge attaches to the home/utility bill and not to the individual consumer that entered into the original plan. This means that a person who is not party to the original Green Deal plan may have rights in the future.
More than just lawyers
How the Green Deal offers new protection to Consumers Accreditation – Assessors and installers need to be members of a Green Deal accredited certification body which applied appropriate standards. These standards are independently accredited by the United Kingdom Accreditation Scheme (UKAS). The Green Deal Code of Practice – The licensing and accreditation required for companies to trade as Green Deal Providers requires companies to meet a the Green Deal Code of Practice.
More than just lawyers
Green Deal Code of Practice: • This governs all aspects of Green Deal plans and requires businesses to: • provide a statement of expected energy bill savings, based on the assessment, showing how these should be sufficient for the customer to meet the plan instalments; • only offer a Green Deal plan to pay for energy saving measures recommended by an accredited Assessor, using an objective method; • only use Green Deal certified Assessors and Installers, certified by Green Deal accredited trade bodies; and • guarantee the quality of assessment and installation, as well as their performance. More than just lawyers
Practical tips Green Deal Providers should consider if they are dealing directly with consumers at any time. If they are, then: • Consider the need to obtain a CCA licence from FCA and comply with the CCA; • Consider the application of the Consumer Contract Regulations 2013; • Be aware of the implied consumer warranties when negotiating contracts under which goods/services are supplied to the business; • Use terms and conditions which are suited to your business model and which take into account the relevant UK and EU consumer legislation; and • Follow the Green Deal Code of Practice.
More than just lawyers
Awards
www.michelmores.com
Woodwater House, Exeter
Summary • • • •
Green Deal Consumer Credit Act 1974 Consumer Rights Directive Sale of Goods and Services Act 1979 and the Supply of Goods and Services Act 1982 • Unfair Contract Terms • Practical Tips
More than just lawyers
Consumer Credit in the Context of the Green Deal The ‘Golden Rule' ‘Estimated savings to the consumer on energy bills will always equal or exceed the cost of the work.’ Aim: make energy saving home improvements more accessible and assist in reducing the UK's carbon emissions target of 80% by 2050.
More than just lawyers
Who is a consumer?
• Any natural person acting for purposes outside his trade, business or profession. • In the course of the Green Deal this can include small private landlords.
More than just lawyers
Initial Steps: Green Deal
• Property assessed under the Green Deal • Consumer receives tailored energy saving recommendations • Firm quotation may be offered by the Green Deal Provider
More than just lawyers
Green Deal Plans • New type of unsecured loan. • Interest is charged on the loan. • Many Green Deal plans are regulated consumer credit agreements. • The consumer should be allowed to repay early (either in full or in part) any outstanding credit. • If credit is repaid early the creditors are allowed to apply for compensation in certain circumstances.
More than just lawyers
Green Deal: Consumer Credit Licence • Green Deal Providers are most likely to require either category A (consumer credit) or category C (credit brokerage) licences. • Canvassing off trade premises – such as in the consumer’s home – requires specific authorisation under the terms of the consumer credit licence. • If Green Deal Providers advise consumers about the liquidation of debts under a consumer credit agreement this is like to require a category E (debtcounselling) licence. More than just lawyers
Green Deal: Consumer Credit Licence • All Green Deal Providers (other than local authorities) require a consumer credit licence if they are offering Green Deal Plans which are regulated consumer credit agreements. • A category A licence will be required irrespective of whether the Provider sources finance from a third party. • If a Green Deal Provider engages in additional licensable activities, such as credit brokerage, it will need to be licensed accordingly. More than just lawyers
Green Deal: Consumer Credit Licence • A credit licence may not be required where a: – Green Deal assessor does not engage in any licensable activity; – Green Deal participant, for example an assessor or an installer, is employed by a Green Deal Provider, and acting solely in the course of its employment (and is not engaged in any business on its own account or on behalf of a third party), it will be covered by the Provider’s licence. – Green Deal participant is an agent of a Green Deal Provider, whether it will need to be licensed will depend upon the individual facts and circumstances. More than just lawyers
Consumer Credit Act 1974 (CCA) • Regulates ‘consumer credit agreements’ being an agreement between an individual (debtor) and any other person (the creditor) by which the creditor provides the debtor with credit of any amount. • The CCA provides protection to consumers against the misselling of credit. • Some exemptions do apply but the provisions relating to exemptions are complex and specific advice should be sought if you think any exemptions would apply.
More than just lawyers
CCA • The regulated contract must be in a signed and legible document with the terms set out within it and not in another document. • Prior to entering into the agreement the consumer is entitled to receive a document setting out all the prescribed information. This information is known as the SECCI and is set out in standard form in the Regulations. • The consumer is entitled to receive at least one copy of the agreement, generally signed. More than just lawyers
CCA Cont/d ... • The CCA affords protection to consumers by imposing requirements on creditors to give notice, in a prescribed form, prior to them taking action for any default under a regulated agreement or in circumstances where a debtor or hirer falls into arrears.
More than just lawyers
Consumer Rights Directive • The Government must implement the Consumer Rights Directive into UK law.
• The latest phase of changes come into force through the Consumer Contracts Regulations which are effective from 13 June 2014 and apply to all relevant consumer contracts entered into on or after that date.
More than just lawyers
Key Changes to Consumer Law • Extends the list of pre-contract information that a trader must give to a consumer under a distance contract and an offpremises contract. • Introduces new pre-contract information that a trader must give to a consumer under an on-premises contract. • Requires the trader to seek the consumer's express prior consent before incurring additional payments. • Allows the trader to deduct an amount for the diminished value of the goods when they are returned.
More than just lawyers
Key Changes to Consumer Law Cont/d ... • Extends the list of ancillary contracts which will be automatically terminated on termination of a distance contract or an off-premises contract. For example, where there is a separate contract for finance and the supply and installation. • Prohibits the trader from making the consumer use a premium rate telephone line to contact the trader about an existing contract. • Unless the trader and consumer agree otherwise, require that any goods be delivered within 30 calendar days. More than just lawyers
Ban on excessive payment surcharges • Already in force (since 6 April 2013). • Covers charges imposed on consumers when they pay with a particular method of payment. • The ban prevents excessive payment surcharges which exceed the cost to the business of using such payment methods.
More than just lawyers
Cancellation Under the Consumer Contract Regulations 2013 the selling of goods and/or services (including by a Green Deal Provider) in the following circumstances will entitle the consumer to a ‘coolingoff’ period of 14 days in which they can cancel the contract: – on the doorstep or in the home; or – in someone else’s home; or – at the consumer’s place of work; or – when the consumer buys from a trader on an excursion they have arranged away from their business premises.
More than just lawyers
Cancellation Cont/d ...
This provision covers both solicited (invited) and unsolicited (uninvited/'cold calling') visits as well as a follow-up meeting prearranged at the home following an initial cold call or letter sent to the consumer.
More than just lawyers
Cancellation Cont/d… • A trader must advise the consumer in writing that the consumer can cancel the contract. • This information must usually be set out in the contract and should be legible and have equal prominence to any other part of the agreement. • Failure to provide the consumer with the required precontractual information will extend the cancellation period to, broadly, one year. • A consumer is required to return goods under a distance contract or an off-premises contract within 14 calendar days of cancelling the contract. More than just lawyers
Cancellation Cont/d ... • It is necessary to refund the consumer within 14 days of cancellation subject to the points below. • The trader may withhold a refund until the goods are returned (or evidence of their return is provided). • The trader may deduct an amount for the diminished value of the goods when they are returned
More than just lawyers
Cancellation Cont/d… • If the consumer wishes the services to commence, or receive the goods, within the 14-day cancellation period then their explicit consent should be given. This must be in writing, signed by the individual consumer and provided to the trader. • The consumer must be advised that if they later cancel the contract they will need to pay for any services and/or goods delivered until the point at which they cancel.
More than just lawyers
Sale of Goods and Services Act 1979 (SOGA) and the Supply of Goods and Services Act 1982 (SOGSA) • SOGA and SOGSA imply identical provisions which apply to goods sold to consumers and services sold at the same time meaning that products provided to consumers must comply with the following: – – – –
Any descriptions provided; Must be fit for purpose; Must be of satisfactory quality; and Services must be carried out with reasonable care and skill.
More than just lawyers
Sale of Goods and Services Act 1979 (SOGA) and the Supply of Goods and Services Act 1982 (SOGSA) Cont/d ... • The four requirements above are known as ‘Implied Warranties’ and there is a prohibition under the Unfair Contract Terms Act 1977 on a business attempting to exclude or limit the Implied Warranties in its contracts with consumers.
More than just lawyers
Implied Warranties • Any limits or exclusions of Implied Warranties will be unenforceable • In addition they may constitute a criminal offence of misleading a consumer as to his or her rights. • Businesses must take care that their terms and conditions of sale used with consumers, as well as sales materials, comply with the law and do not attempt to limit or exclude the implied terms.
More than just lawyers
Manufacturer Warranties Businesses must carefully consider their purchase agreements with their own suppliers. If there is a limited warranty contained in a purchase agreement it will mean that the business is exposed. Example: – A manufacturer gives a limited 12 month warranty to the business in relation to a product. – The business must ensure that they back-to-back this provision with the consumer.
More than just lawyers
Unfair Contract Terms and the impact of the new ‘Golden Rule’ • The Unfair Terms in Consumer Contract Regulations 1999 (the ‘1999 Regulations’) apply to the sale of goods and /or services to consumers in the UK when standard terms of business are used. • The 1999 Regulations provide that an unfair term is not enforceable by a business against a consumer.
More than just lawyers
When is a term unfair? • If contrary to the requirement of good faith it causes a significant imbalance in the parties’ rights and obligations under the contract, to the detriment of consumers. • Contract terms should be plain and clear . If there is doubt as to what a term means, the meaning most favourable to the consumer will apply. • Pricing needs to be in plain and intelligible language with clear prominence.
More than just lawyers
Green Deal • In respect of the Green Deal the cost of the goods and services provided cannot exceed the projected energy bill savings. • The charge attaches to the home/utility bill and not to the individual consumer that entered into the original plan. This means that a person who is not party to the original Green Deal plan may have rights in the future.
More than just lawyers
How the Green Deal offers new protection to Consumers Accreditation – Assessors and installers need to be members of a Green Deal accredited certification body which applied appropriate standards. These standards are independently accredited by the United Kingdom Accreditation Scheme (UKAS). The Green Deal Code of Practice – The licensing and accreditation required for companies to trade as Green Deal Providers requires companies to meet a the Green Deal Code of Practice.
More than just lawyers
Green Deal Code of Practice: • This governs all aspects of Green Deal plans and requires businesses to: • provide a statement of expected energy bill savings, based on the assessment, showing how these should be sufficient for the customer to meet the plan instalments; • only offer a Green Deal plan to pay for energy saving measures recommended by an accredited Assessor, using an objective method; • only use Green Deal certified Assessors and Installers, certified by Green Deal accredited trade bodies; and • guarantee the quality of assessment and installation, as well as their performance. More than just lawyers
Practical tips Green Deal Providers should consider if they are dealing directly with consumers at any time. If they are, then: • Consider the need to obtain a CCA licence from FCA and comply with the CCA; • Consider the application of the Consumer Contract Regulations 2013; • Be aware of the implied consumer warranties when negotiating contracts under which goods/services are supplied to the business; • Use terms and conditions which are suited to your business model and which take into account the relevant UK and EU consumer legislation; and • Follow the Green Deal Code of Practice.
More than just lawyers
Awards
www.michelmores.com
