Part 2 of the CRA 2015 mainly consolidates the provisions of the UCTA and the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCR”) into one place, “removing anomalies and overlapping provisions in relation to consumer contracts”. Above all, these provisions apply a ‘fairness test’ to consumer contracts and notices, clarifying the circumstances when the price of subject matter of the contract is excluded from fairness considerations and highlighting the need for terms to be transparent and prominent with a view to avoid being considered unfair.
Some significant reforms can be noted: all business to consumer contracts are covered by the Act, whether those contracts were negotiated individually with the consumer (the preexistent unfair terms regime was directed at the trader’s standard terms of business only), albeit this should not have a major impact considering how infrequent it is that consumer contracts are individually negotiated; consumer notices (widely described as a notice that “relates to rights or obligations between the trader and the consumer, or purports to exclude or restrict a trader’s liability to a consumer”) are subject to the fairness test; courts are now under an obligation to examine contractual terms for fairness, even if the issue of fairness is not raised by neither party to the proceedings (this is in fact merely a recognition of existing European case law), but the court must be convinced that it has sufficient legal and factual material to do so). While it is hard to anticipate/envision what impact this will have on future judgments, it certainly does express an intention to increase scrutiny of fairness to consumers; the requirement for terms to be made “transparent and prominent” with consumers and not hidden away in the small print.
The Act also stipulates an indicative but non-exhausting list of terms which may be regarded as unfair, imported in its entirety from the UTCCRs (the so-called ‘grey-list’), from which three new terms are added. In a consumer contract, a term will be unfair if it “causes a significant imbalance in the parties’ rights and obligations under the contract, to the detriment of the consumer”. While such terms are not binding on consumers, they may be binding on traders.
Be that as it may, several changes to the law that have been inserted have greatly increased the court’s ability to intervene in consumer contracts. One crucial change is that the new Act is applicable to all business to consumer contracts, whether or not those contracts were individually negotiated with the consumer, different from the UTCCRs.
A further change has been made in relation to the so-called ‘core terms’ exclusion. There has been much controversy since the judgment of the Supreme Court in Office of Fair Trading v Abbey National plc about ‘ancillary charges’ that are often incorporated in businesses’ terms and conditions. It was held in this case that charges for unauthorised overdrafts were exempt from assessment for fairness since they were price terms (in accordance with regulation 6 of the UTCCRs). Law Commissions have since then expressed their dissatisfaction and discontentment with this decision. They called particular attention to the price comparison websites that incite traders to advertise unrealistically low prices in order to draw the attention of consumers and later make a profit from ancillary charges that are included in traders’ ‘small print’. Section 64 of the CRA 2015 implements these recommendations. Section 64(1) expresses the first Law Commission proposal. While the price paid for a good is still and all not subject to a fairness test, this improved wording brings clarification that other aspects of the payment may be subject to scrutiny. For instance, the timing and method of payment may now fall within the court’s consideration of fairness. Section 64(2) echoes the second Law Commission proposal. The Act requires for the term to be ‘transparent’ and ‘prominent’ so as to benefit from the exclusion. The intention behind this is to contest ancillary fees which are often concealed in contractual small print. As an illustration, fairness assessment will now be applied to unauthorised bank charges, such as those in Office of Fair Trading v Abbey National plc, on the occasion that they are not prominently exposed to consumers while the relevant agreement is made.