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Ally Tow
Ally Tow,
SENIOR ASSOCIATE - CHARTERED LEGAL EXECUTIVE
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Consumers' Rights to claim damages for misleading or aggressive trading
15 September 2014

They made it a criminal offence for traders to act in such a way but did not give any specific rights to the consumer to seek redress from the trader. This meant consumers had to rely on separate complex civil law and in some cases left the consumers with no recourse at all. The Consumer Protection (Amendment) Regulations 2014 (“the 2014 Regulations”), which will apply to all contracts and/or payments made on or after 1 October 2014, attempts to remedy the position, at least in part.

What triggers the new rights?

Misleading actions

Misleading practices may include:

  • false claims made by traders as regards – e.g. associations to which the trader allegedly belongs; and

  • misleading production descriptions – for example, the incorrect mileage on a motor vehicle; and

  • vague information regarding the actual price of the goods or services or hiding additional costs or charges.

Misleading omissions are not covered by the 2014 Regulations. However, the guidance confirms that this is likely to be narrow in practice and suggests that omitting material information may well create a misleading presentation in most situations which would fall within the scope of misleading actions.

Aggressive practices

A trader will be guilty of aggressive practice if their behaviour is such that it significantly impairs the average consumer’s freedom of choice or conduct.

Banned practices

The 2008 Regulations set out a list of 31 commercial practices which are considered to be unfair but the 2014 Regulations do not provide automatic remedies to consumers affected by all the unfair practices listed. However, in many cases the practices can be said to be misleading actions or aggressive practices and if so, the new rights set out under the 2014 Regulations will apply.

What transactions are covered?

Consumers are only entitled to seek redress under the 2014 Regulations if they took a relevant “transactional decision” following an aggressive or misleading practice. There are three types of transaction which will qualify:

  • The consumer enters into a contract with a trader to buy goods/services from the trader; or
  • The consumer enters into a contract with a trader to sell goods to the trader; or
  • Consumer payments, being any demands for payment made by the trader for full or partial settlement of the consumer’s liabilities or purported liabilities.

The average consumer test

The 2014 Regulations make specific provisions for any consumers who may be vulnerable as a result of their mental or physical infirmity but in other cases, a consumer must show that they made the decision to enter the contract or make the payment to the trader because of the misleading or aggressive practice. It is not necessary to show that the prohibited behaviour was the only, or even the main cause, to enter into the contract but it must at least be a “significant factor” in the consumer’s decision. Although this will be a question of fact in each case the Court will also give consideration as to whether an “average consumer” would have entered into the contract or made the payment. The “average consumer” is defined as “reasonably well informed, reasonably observant and circumspent."

What are the new rights?

If the trader is found to have acted in an aggressive or misleading manner, the consumer has three types of remedies available, depending on the nature of the contract and any loss suffered by the consumer.

Standard Remedies

There are two standard remedies available to the consumer. The first is the right to unwind the contract. The consumer’s ability to be able to choose this option depends firstly, on the consumer having returned the goods or rejected the services within a 90 day deadline (as laid down in the 2014 Regulations) and secondly, it being possible to restore the parties to the positions they were in before the alleged banned practice.

If the right to unwind has been lost, then the consumer may seek a discount on the price paid. Where the cost of the goods or services is £5,000.00 or less then the 2014 Regulations set out various fixed percentage discounts to be applied, depending upon the seriousness of the banned practice. In all other cases, the discount will be calculated using the difference between the market price of the product or service at the time of the contract and the price paid. In very serious cases, the discount can be 100%.

In claims where the consumer seeks standard remedies, there is no obligation on the consumer to show that they have suffered loss or that the trader has acted dishonestly, recklessly or even negligently. If the trader’s actions were aggressive or misleading, then the remedies will apply.

Damages

Any remedy for damages only applies where the consumer’s losses exceed the price paid for the goods or services in question. Consumers are entitled to claim damages for distress and inconvenience as well as consequential financial loss. It will be necessary for the consumer to show actual loss and show that the loss was reasonably foreseeable. It may be possible for traders to avoid paying damages if they can show they took reasonable care to avoid committing a misleading or aggressive practice.

Exceptions

The 2014 Regulations do not apply to certain industry sectors including real estate, financial services and credit agreements.

For further information, please contact our Dispute Resolution Team on 0118 959 7711 or submit an enquiry.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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