We are the voice of insurance and long-term savings | Contact us

BIS Committee report on the draft Consumer Rights Bill

On December 23, 2013 the Business, Innovation and Skills (BIS) Select Committee published a report on the draft Consumer Rights Bill.

The Committee stated its support for the aims of the reform but considered that parts of the draft Bill still raised many issues that must be resolved before a final Bill is introduced into Parliament. In the report BIS made the following recommendations of interest to ABI members:

Part 1: Consumer contracts for goods, digital content and services

  • Definition of a consumer: the Committee recommends that government considers the case for small businesses to be treated as consumers representing a departure from the current definition of a consumer.
  • Specific application to digital content: While the Committee supports the proposals to apply satisfactory quality rights to digital content, based on the evidence they received they do not believe the government clearly communicated their intention to create a bespoke set of rights and remedies for digital content. As a result, they are concerned that industry remains confused about the intended flexibility of the proposed digital content regime and asks that the government address this as a priority if it is to convince the industry of the merits of its proposals.
  • Services to be performed with reasonable care and skill: the Committee remains unconvinced that a different standard should be applied to the sale of services than that applied to the sale of goods.  They have recommend that the draft Bill should apply an additional outcomes-based liability standard to services that requires service provision to achieve the stated result, or one which could reasonably be expected, as well as to any product resulting from the service. They argue this would simplify and align UK consumer law, and increase certainty and confidence among consumers and businesses. This is not a position the ABI has supported and we have argued that while a single standard for all goods and services may seem attractive in theory, the practicalities are a very different matter and we have urged BIS to retain the reasonable care and skill standard that is currently used. To date BIS remains convinced that a different standard for goods and services is appropriate.

Part 2: Unfair contract terms

  • Exemption from unfairness clause if contract terms are “transparent” and “prominent”: In order to take into account the practical realities of consumer behaviour, the Committee recommended this was qualified by reference to what an average consumer would be aware of and appreciate the significance of, to ensure fairness for consumers and businesses. This particular requirement has concerned the ABI as financial services are an industry that is heavily criticised for confusing and overwhelming consumers with high volumes of information and insurers are subject to increasing regulatory requirements to simplify pre-contractual disclosure and only provide key information to help avoid information overload and consumer disengagement. Adding an obligation to make terms ‘prominent’ significantly increases the need for additional consumer information and so creates contradictory requirements from different regulators with no certainty for traders as to how to balance these requirements. We understand from conversations with the FCA that they also share concerns as to the difficulties of implementing this point in a manner that would lead to consumer protections and not cause significant problems for providers and we will continue to monitor this requirement closely.
  • Onerous or unusual terms must be drawn to the consumer’s attention: the Committee recommends that this clause is removed as it confuses rather than clarifies the concept of prominence which is dealt with earlier in the text. The ABI has continued to argue that this clause appears both unnecessary and problematic as it is uncertain as to what non-compliance would mean, and it is unclear as to what might be considered an “onerous” condition, and to whom.

Part 3: Courts and legal services

  • Private actions in competition law: The Committee acknowledged concerns from some stakeholders that opt-out collective actions would risk creation of a US style litigation culture. However, they considered that the current safeguards in the Bill are robust, appropriate and proportionate. While the ABI understands the rationale for including the provisions in the draft Bill to allow for collective actions for competition breaches, we have made it clear that we do not believe the government has made the case that the use of opt-out collective actions will empower consumers and make it easier for them to take action. We continue to argue that there is a lack of safeguards in the Bill to prevent abuse of the opt-out system.

BIS is now considering the Committee’s recommendations and whether or not to take them into account. Once this has been done they will publish a new draft of the Bill, expected during Q1, 2014. The Parliamentary schedule will then be published. As the Bill progresses through Parliament, the ABI will prepare comments for MP’s.

Read the full report on the Parliament website.

Last updated 01/07/2016