The report concludes that the current consumer protection system in the UK is ‘incoherent and fragmented’, and that many of the rogue traders fall between the gaps between local authority enforcement bodies. The recommendations include:

-      listing strict obligations and responsibilities for consumer protection bodies to ensure a clear framework of accountability;

-      ensure funding is spread appropriately between local authorities to avoid gaps in protection;

-      ensure that enforcement bodies have sufficient awareness of new forms of consumer harm; and

clear enforcement obligations and support for large scale investigations and court proceedings.

The Guidance, which should be referred to by all businesses engaged in the recovery of consumer credit debts (e.g. debt collectors, banks and law firms), sets out the standards that the OFT expects all parties engaging in the recovery of such debts to adhere to.

The Guidance is divided into the following chapters:

1. Introduction. This sets out how the ‘fitness test’ under section 25 of the Consumer Credit Act 1974 applies to debt recovery activities;

2. Overarching principles of fair business practice. This sets out the FSA’s overarching principles of consumer protection and fair business practice that apply to all debt recovery activities. This chapter explains that businesses should treat debtors fairly, be transparent, exercise forbearance and consideration, and act proportionately. They should also establish and implement clear, effective and appropriate policies and procedures (especially for dealing with vulnerable debtors);

3. Unfair or improper business practices. This sets out the behaviours that the OFT considers to be unfair or improper business practices for the purposes of section 25(2A)(2) of the Consumer Credit Act 1974 (e.g. using Facebook or Twitter to contact debtors.) If these are engaged in, they may call into question a person’s fitness to retain, or be granted, a consumer credit licence;

4. Regulatory compliance and enforcement. This outlines the OFT’s approach to securing compliance and provides information on the regulatory options available to the OFT.

The OFT has said that it will shortly update its Irresponsible Lending Guidance to reflect this revised version of Debt Collection Guidance.

One particular area of concern for some businesses is the requirement on businesses to seek the express consent of the consumer to any extra payment in addition to the main payment obligation. If there has not been express consent but it is inferred by using default options which the consumer is required to reject in order to avoid the extra payment obligations, the consumer may be refunded for the extra payment.

The UK Government will have two years to implement the Directive, but it may well do so before that, as it has already signalled its desire to amalgamate consumer laws into a single Consumer Bill of Rights, which the Government hopes will be less confusing for consumers and businesses than the plethora of laws that exist today.

The full text of the Directive can be found here: http://register.consilium.europa.eu/pdf/en/11/pe00/pe00026.en11.pdf.

The OFT’s response to the consultation can be found here: http://www.oft.gov.uk/shared_oft/consultations/consumer-landscape/Consumer_Landscape.pdf.

The OFT has also signalled its intention to change the law to abolish charges altogether for consumers paying by debit card. Some travel companies have signalled their intention to incorporate surcharges into the headline price that appears online – at present the OFT noted that some companies do not inform a consumer of the surcharge until the fifth or sixth webpage of a booking process.

• Failed to deliver the products within the timeframe required by the Distance Selling Regulations.
• Failed to respond or otherwise comply with consumers’ decisions to exercise their statutory rights to cancel their contracts under those Regulations.
• Failed to be available in a rapid and effective manner for consumers to contact him, as required by the Electronic Commerce Regulations.
• Misled as to the availability of the products and the timeframes, contrary to the Consumer Protection from Unfair Trading Regulations.

The OFT took action under the Enterprise Act and brought proceedings against the website operator after written undertakings previously given by it to offer refunds to customers were not complied with. The OFT has said that it will continue to monitor the website’s future practices.

The Directive would give consumers across the EU the right to change their mind about a purchase made within two weeks of receiving the goods or entering into a contract for services. It would also mean that traders must give consumers precise information relating to an order, including the total price, the particulars of the goods ordered and clear contact details of the trader. The Directive contains other rules covering the passing of risk and timeframes for delivery or performance. Express consent would be needed for premium charges for fast delivery. The Directive specifies further rules for digital downloads.

The European Parliament’s press release can be found here and the text of the Directive here. It is expected that the Directive will be finally approved by the European Council of Ministers in the next few months, and Member States will have two years following that approval to bring it into force in their countries.

The High Court has agreed with the OFT that such a minimum term was unfair and designed to take advantage of the naivety and inexperience of the average consumer and were weighted in favour of the gym or health club causing a significant imbalance in the parties’ rights and obligations. Gym members would not anticipate all the events which might render the use of the gym impractical and the agreements did not address the tendency of users to overestimate the amount that they would want to use the gym when signing up. Accordingly, those provisions were unfair contrary to the Unfair Terms in Consumer Contracts Regulations 1999 and were unenforceable.

In addition, the practice of describing members who wanted to terminate their agreements as defaulters and registering or threatening to register that with credit reference agencies was an unfair commercial practice and harmed the collective interests of consumers, contrary to the Consumer Protection from Unfair Trading Regulations 2008.

The website is effectively a search engine which will list approved retailers for a particular brand. TSI have been keen to point out that the website is not a one-stop-shop, as some legitimate retailers may not be on the list. However, the website is likely to help divert consumers away from rogue retailers in an attempt to bring down the number of counterfeit goods on the market – 5 million counterfeit items were seized by the UK Border Agency in 2010.

The Law Commission is looking to enable consumers to cancel and claim a refund if they return or reject goods or services within three months. The Law Commission is looking for responses to the consultation by 12 July 2011, and it can be found here: http://www.justice.gov.uk/lawcommission/docs/cp199_consumer_redress.pdf.

The OFT said that the website had breached CPUTR by publishing misleading information about the product availability and falsely representing itself as a consumer. Groupola has promised not to repeat the infringements.

The OFT investigation centred on concerns that consumers were being unfairly pressured into selling their gold. Payments for gold were sent to consumers with the requirement that consumers had to reject and return the payment within a restrictively short time period if they wanted their gold returned, failing which their gold would be melted down.

There was also concern in relation to the clarity of the pricing methods for any gold sent in and insurance arrangements for the time when the gold was in transit. It was also noted that consumers were being denied their legitimate cancellation rights and legal redress rights for loss or damage to goods when in transit, and that the terms and conditions of the companies were not in plain and intelligible English.

Whilst the companies denied any wrongdoing, the OFT was of the opinion that the trading practices of those companies under investigation were a breach of the Consumer Protection from Unfair Trading Regulations 2008 and the Unfair Terms in Consumer Contracts Regulation 1999.

In lieu of court action, the OFT obtained written promises from the three remaining trading companies to change their trading practices to ensure compliance with the law. The promises included:

• The provision of an option for consumers to receive either a quote requiring acceptance or payment for their gold.
• The provision of clearer pricing information.
• Explaining the risks.
• Making clear that the ‘top’ price for gold they were receiving was based on the scrap value of the gold rather than the marketable commercial value.
• Not claim to be the number one buyer when this was not the case.
• Have clearer information about consumers’ legitimate rights.

The CPR prohibits unfair commercial practices that may adversely affect a consumer’s decision-making. Businesses cannot trade unfairly or mislead consumers, and the CPR lists 31 specific trading practices that are considered unfair.

The defendant in this case, Purely Creative Limited (PCL), had breached the CPR in a number of ways, as the scratch card that PCL promoted gave a consumer the impression that they won a prize when, in reality, they had not or they would have to pay to get that prize.

The High Court ruled that PCL had breached the CPR under the specific items 5 and 6 (which prohibit misleading consumers by action or omission) and 31 (which prohibits the creation of a false impression that the consumer has already won, will win, or will on doing a particular act win, a prize or other equivalent benefit, when in fact either (a) there is no prize or other equivalent benefit or (b) taking any action in relation to claiming the prize or other equivalent benefit is subject to the consumer paying money or incurring a cost).

The High Court did not agree with the OFT that item 31 would be infringed if the process involved the consumer having to spend any money at all. If there was a minimal cost such as a postage stamp or money that did not reach the promoter’s pocket, that would not be a misleading commercial practice. However, it would be a problem where the promoter receives a payment to offset the cost of the prize may create a misleading impression that the prize is won rather than paid for by the consumer. The OFT would only need prove that the recommended route to claim the prize involved a cost, and providing an alternative claims route with a de minimis cost would not be a valid defence for the promoter.

The High Court also clarified the standard that needed to be met. The Regulations prohibit misleading standards against average consumers. An average consumer is reasonably well informed, observant and circumspect. In other words, consumers who take good care of themselves should be protected, rather than ignorant, careless or hasty consumers. In dismissing PCL’s argument, the court ruled that the average consumer would not have read all the terms and conditions of the promotion.

As this is the first examination of the CPR in the High Court, the outcome is an interesting one, showing just the sort of unfair practice that the OFT is seeking to restrict, as well as showing how the CPR will be interpreted by the courts in future.

Unfair trading is prohibited by the Consumer Protection from Unfair Contract Trading Regulations. However, consumers are generally not able to take action in the event of unfair trading. Instead, action under those Regulations is taken by the Office of Fair Trading or the local Trading Standards office.

A new report by the Law Commission is aimed at reviewing the current law in due course, and states that whilst consumers have no direct course of action in many instances, in those instances where direct action is available, for example under the law of undue influence and duress, the law is largely redundant as consumers cannot understand it sufficiently to make use of it.

It is expected that a consultation paper will be issued by the Law Commission in early 2011, highlighting how the law should be reformed. The Law Commission’s initial report can be found here: http://www.lawcom.gov.uk/docs/misrep_summary_evidence_web.pdf.

The European Commission is considering a new Directive on Consumer Rights. The Government asked businesses and consumers whether they agreed with an extension of laws concerning unfair contract terms to cover other elements of a particular transaction that may not be its core focus, such as holiday surcharges and luggage frees. The question posed by the Government was whether such charges needed to be justified as not being ‘unfair’ to the consumer.

It was not surprising that business responded negatively, arguing that market forces and competition already kept prices fair, and that additional regulation was not needed. Consumers argued that such ‘side-show’ charges were not necessarily paid attention to be consumers, and therefore they required protection in this area as well as the core charges.

The Government anticipates having the discretion to implement such regulations domestically if it chooses, rather than the issue being dealt with at EU level.

The Intellectual Property Minister says that the consequences of fake goods are more significant than damage to brands – goods can be dangerous. This month, a teenager was badly burnt after he was electrocuted from hair straighteners that had seemed genuine.

The Independent Commission on Banking will consider the structure of the UK banking sector, and look at structural and non-structural measures to reform the banking system and promote competition.

It will formulate policy recommendations with a view to:

• Reducing systemic risk in the banking sector, exploring the risk posed by banks of different size, scale and function;
• Mitigating moral hazard in the banking system;
• Reducing both the likelihood and impact of firm failure; and
• Promoting competition in both retail and investment banking with a view to ensuring that the needs of banks’ customers and clients are efficiently served, and in particular considering the extent to which large banks gain competitive advantage from being perceived as too big to fail.

It aims to produce a final report by the end of September.

The claimants alleged that the APR stated in the agreement should be regarded as the primary figure and the monthly interest rate should be calculated from and should correspond (as closely as possible) to the APR.  They produced an expert report from a mathematician and computer expert who concluded that the APR rates on the monthly cash advance balance rate were incorrectly stated.

A regulated agreement is not properly executed unless the agreement contains all the prescribed terms.  If improperly executed, it is only enforceable by an order of the court.  The court cannot grant such an order in respect of agreements signed before 6 April 2007 and so those agreements which did not contain all of the prescribed terms are irredeemably unenforceable.  The claimants alleged that the APR was misstated and as a consequence the agreements were unenforceable.

The Judge explained that there is a very clear difference between the nature and function of the stated monthly (or annual) rate and the APR. The stated monthly or annual rate is (on its face) a contractual term.  The APR is designed to provide information to consumers and is arrived at by a complex formula designed to include not only interest rates but also other charges.  The APR is not a prescribed term.  Merely because the APR is included does not make it a prescribed term of the agreement.  The APR is not the driver of the figures and in any event,  if it were,  it would be unworkable as the APR figure only needs to be stated at the inception of the agreement.

Accordingly the claims that the agreements were irredeemably unenforceable because of an alleged mismatch between the APR and the stated rate of interest were struck out.

This case involved calculating the interest rates retrospectively, which as the Judge pointed out had “a surreal quality to it”. In the light of the series of cases which have resulted in a positive outcome for lenders, this is yet another nail in the coffin for those who seek to use the courts to bring consumer credit related claims on a very tentative and speculative basis.

Sternlight v Barclays Bank Plc and others [2010] EWHC 1865

• How consumers enter into credit commitments, including the way in which credit is sold and the extent to which consumers understand what they are committing to;
• What issues arise during the lifetime of a loan from both the consumer and the lender perspectives; and
• What happens if things go wrong: are the current insolvency solutions fit for purpose?

A consultation on specific proposals is anticipated later this year or early 2011.

Trading Standards has issued a stark warning to users of auction sites like eBay: ‘If they shill bid or encourage family and friends to place fake bids to push up prices artificially, they too face prosecution.’