Of Subscription Traps, Fake Reviews and Savings Club Funds

In April, the UK government [well, let's face it, the civil service] announced plans to deal with a range of consumer problems known to successive Conservative regimes and never tackled. But no date was set for introducing the measures and, given the change of government, they might fall by the wayside again. Here are some problems from which officials thought consumers needed protection, and measures proposed to address them:

• Subscription traps: the plan was to add pre-contract information for subscription contracts and require traders to send reminders before a free/introductory offer ends or a contract auto-renews; 

• Fake reviews: the idea was to declare certain practices to be unfair under the Consumer Protection from Unfair Trading Regulations, such as: 
• commissioning another person to write or submit a fake review;
• advertising for people to submit or commission fake reviews; and 
• hosting consumer reviews without taking reasonable steps to ensure they are genuine. 

This reflects some of the changes to the EU Unfair Commercial Practices Directive by the Enforcement and Modernisation Directive, that took effect in May 2022. Fair enough, but I do hope we'll still see genuinely funny reviews (e.g. effusive praise for a white mug).

• Safeguarding funds in prepayment/'saving' schemes: The government says this is to deal with problems such as Farepak. But Farepak went to the wall having used its customers Christmas hamper money for property investments in October 2006. Wrapit, the failed wedding list company, was another example. The Treasury belatedly began calling for such funds to be ring-fenced from the retailer's assets in 2010 (though it mistook Farepak for a 'gift card' or 'closed loop' stored value programme, where amounts at stake are smaller and not dedicated to a specific purchase by the customer over a lengthy period of time). The requirement would be that retailers or intermediaries offering dedicated pre-purchase schemes, like Christmas savings clubs, must fully safeguard contributors’ money by setting it aside from the company's own assets in a properly constituted trust account, or by taking out an insurance policy (which would also need to be held in trust for potentially affected customers). One suspects this would spell the end of such schemes, but given the deep recession facing the UK that might be no bad thing: at least customers wouldn't lose their money if they keep it in a bank instead (assuming they have at least a basic bank account).

• Regulatory teeth: The Competition and Markets Authority is to be given the power to enforce  consumer legislation directly, so it can award compensation and impose financial penalties for breaches without going to court [the Tories don't like courts], including turnover-based fines (up to 10% of global annual turnover, rather than 4% in the EU) and fixed monetary penalties for failing to co-operate with an investigation, breaching an undertaking, or breaking a consumer law. 

• Alternative dispute resolution: Leaving the EU meant the end of consumers' access to non-court dispute resolution schemes ('ombudsman') for low value issues [where nobody wants to go to court]. These were set up and funded through the EU rather than national governments. Having lost that scheme, the government now realises it was worthwhile [a very common occurrence]. Britain's very own ADR service providers will need to be accredited under a common set of standards, which presumably will look a lot like the EU programme.

But, as I said at the outset, maybe none of this will actually happen, leaving UK consumer law even more diverged from EU law.