On 1 October 2015, the Consumer Rights Act 2015 (the Act) entered into force.

The Act sets out a framework that consolidates in one place key consumer rights covering contracts for goods, services, digital content and the law relating to unfair terms in consumer contracts. The Act also introduces easier routes for consumers and small and medium sized enterprises (SMEs) to challenge anti-competitive behaviour through the Competition Appeal Tribunal. The Act further clarifies the maximum penalties that the regulator of premium rate services can impose on non-compliant and rogue operators.

An important point to note is that the Act applies to contracts between a trader and a consumer, and not to business to business or consumer to consumer contracts.

Generally speaking the Act is consistent with the provisions of the Consumer Rights Directive (CRD). Key definitions like “trader”, “goods” and “digital content” that can be found in the CRD have been imported into the Act. However, the definition of “consumer” in the Act is wider than the CRD definition being “an individual acting for the purposes that are wholly or mainly outside that individual’s trade, business, craft or profession.”

Part 1 of the Act contains a number of noteworthy provisions. These include those that:

• set out the standards that goods must meet;
• consolidates and aligns the current remedies that are available to consumers for goods supplied under different contract types, such as sale, work and materials, conditional sale or hire purchase;
• set a time period of 30 days in which consumers can reject substandard goods and be entitled to a full refund;
• introduce a new category of digital content and tailored quality rights for digital content; and
• introduce a new statutory right that if a trader provides information in relation to a service, and the consumer takes this information into account, the service must comply with that information.

For the first time there are provisions which specifically govern the phenomenon of digital content. Paid for digital content that uses the CRD definition of “data which are produced and supplied in digital form”, must comply with standards that broadly reflect those for goods. A consumer will be treated as having paid where a virtual currency is used and where digital content is bundled with something else that is paid for.

Chapter 4 of the Act covers contracts for services. Unlike the CRD, there is no carve out for financial services contracts, and so such contracts will be covered by most of the provisions of this part of the Act. The main rights and remedies include:

• service contracts must be performed with reasonable care and skill;
• the time for performing the contract and price payable, where not agreed, must be reasonable which is a question of fact;
• where the trader has voluntarily provided information to the consumer, orally or in writing, the trader must abide by this information if the consumer has taken this information into account when making any decision about the service;
• if the service is not provided with reasonable care and skill or where the service does not comply with information given about the service, a consumer is entitled to a new remedy to require repeat performance of the service; and
• where it is impossible to rectify the breach through repeat performance, or this cannot be done without significant inconvenience or within a reasonable time frame, or where the service does not meet information given by the trader or is not provided in a reasonable time, the second tier remedy of an appropriate price reduction is available which may amount to 100 per cent of the price. At all times, the consumer retains common law remedies such as terminating the contract and claiming damages.

Part 2 of the Act contains the provisions relating to unfair terms. The provisions of the Unfair Contract Terms Act 1977 (UCTA) (so far as it relates to business to consumer contracts) and the Unfair Terms in Consumer Contracts Regulations (UTCCRs) (which are repealed entirely) are consolidated in this part. Like UCTA, the Act includes contracts that have been individually negotiated and therefore financial institutions that routinely negotiate high value contracts with high net worth individuals will need to ensure that such contracts are in plain English and fairness will also need to be considered.

In addition to consumer contracts, consumer notices are brought into the fairness regime. This will be particularly important in the context of transactions involving digital content.

Moreover, under s. 50 of the Act, anything said or written to the consumer, by or on behalf of the trader, about the trader or the service, constitutes a term of the contract if it is taken into account by the consumer when making decisions about the service, or about entering into the service contract. This could create a number of issues for investment firms and consumer credit lenders who use intermediaries.

Whilst the general rules relating to fairness have not changed under the Act the so-called Grey List (which is an indicative and non-exhaustive list of terms that may be regarded as unfair in Schedule 2 of the UTCCRs) is retained but with amendments to specifically accommodate developments in case law and Law Commission recommendations. The updated Grey List now includes: (i) early termination clauses; (ii) terms which permit the firm to determine the characteristics of the subject matter after the consumer has become bound; and (iii) terms which permit the firm to determine the price payable under the contract once the consumer has become bound.

Another important change brought by the Act is the requirement for prominence which applies not only to the contract, but to all of the information given to the consumer prior to the conclusion of the contract. A term will be prominent if it is brought to the attention of the consumer in such a way that an average customer would be aware of the term, and so be able to make an informed purchasing decision. There is also a new requirement of transparency, that terms and notices be in plain and intelligible language.

Firms will need to review their existing terms and conditions and their general processes around marketing and selling products. In addition the format and layout of terms and conditions and other contractual documents may also need to be reviewed given the new prominence and transparency requirements.