Unfair practices and vulnerable customers

3rd October 2013

Businesses need to ensure that they are treating vulnerable private customers with care and do not engage in unfair practices.

In the case of a 76 year old man was supplied within one month with two sets of CCTV equipment at a cost to him of £5,000. It was questionable whether this individual needed or wanted the equipment.

The sales representative visited the elderly gentleman’s home for over three hours and he agreed to purchase various items of equipment and a home security system (cost £2,574). Within 3 days of the equipment being installed, a further salesman visited and sold him further equipment for £2,336.

The CCTV system was unplugged. The victim’s mental condition was deteriorating, and he appeared to know nothing about the system. A complaint was made and the local Trading Standards officer investigated.

The CCTV company was charged with four offences: 

  • engaging in a commercial practice which is a misleading action;
  • engaging in a commercial practice of making a materially inaccurate claim concerning the nature and extent of the risk to the personal security of the consumer or his family if the consumer does not purchase the product; and
  • knowingly or recklessly engaging in a commercial practice which contravenes the requirements of professional diligence and materially distorts or is likely to materially distort the economic behaviour of the average consumer with regard to the product. 

At the trial the CCTV company was able to avoid prosecution on the basis that an interaction with one individual could not trigger an offence as it did not amount to a commercial practice.

There was an appeal and the Court of Appeal determined that a single incident could trigger such an offence and the matter was sent for a fresh trial.

This is a timely reminder to all business where salesmen are selling to vulnerable people that they can be held criminally responsible for the actions of their sales staff even in relation to a one-off sale.

Ansons Solicitors dispute resolution specialist Martin de Ridder explains how consumer protection legislation provides a general prohibition on unfair commercial practices, and this covers a range of activities as follows:

Misleading acts or omissions

A business must not mislead consumers through acts or omissions. For example: 

  • when a business falsely tells a consumer their boiler cannot be repaired and they will need a new one – this constitutes a misleading action; or
  • when a business sells a satellite television package to a consumer, without indicating that sports channels are only available at an additional subscription cost – this constitutes a misleading omission. 

Aggressive commercial practices

Businesses must not subject consumers to aggressive commercial practices. An example would be bringing a consumer to a holiday club presentation with no means of getting home unless they sign a contract.

Definitively unfair commercial practices

Consumer protection legislation contains a list of 31 commercial practices that are always unfair. These include: 

  • displaying a quality mark without authorisation;
  • falsely claiming to be a signatory to a code of conduct; and
  • falsely claiming a product is able to cure illnesses. 

Unfair terms in consumer contracts

Businesses are reminded that in relation to their standard terms and conditions that: 

  • consumers can challenge contract terms on the basis that they are unfair;
  • consumer protection legislation applies to any unfair terms in contracts between a consumer and a business selling goods or services;
  • a term will be regarded as unfair if it causes a significant imbalance in the parties’ rights and obligations under the contract in favour of the business;
  • if a term is unfair, then it is not binding on a consumer, although the remainder of the contract will continue in force if it is capable of doing so. 

When deciding whether a term is unfair, a court will take into account: 

  • the type of goods and services being provided;
  • the circumstances surrounding the conclusion of the contract; and
  • all the terms of the contract, or of another contract on which it depends. 

Potentially unfair terms in consumer contracts

Consumer protection legislation provides a non-exhaustive list of potentially unfair terms. The types of terms identified are those that, in effect, are trying to achieve the following: 

  • make a consumer pay an unfair penalty.
  • mislead a consumer about his legal rights, or mislead him about the contract.
  • deny a consumer full redress.
  • tie a consumer into a contract unfairly.
  • allow a business to not perform its obligations.
  • not allow a consumer to recover his prepayments on cancellation.
  • allow a business to vary the terms after the contract has been agreed.
  • a business will commit an offence if it engages in unfair commercial practices.the Office of Fair Trading and the Trading Standards Services can take enforcement action against a business if the business breaches consumer protection legislation.

Penalties include: 

  • a fine not exceeding the statutory maximum on summary conviction; and
  • a fine of up to two years imprisonment or both on indictment. 

If your business sells products to private consumers Ansons can assist you in ensuring that your contracts and procedures comply with the relevant legislation.