The Competition and Markets Authority (CMA) has established a new taskforce to investigate and, if necessary, take enforcement action against organisations that breach consumer protection regulations in their response to the consequences of COVID-19. Specifically the taskforce will investigate refusals to administer refunds where goods or services have not been provided due to the disruption caused by the pandemic.
Making its position clear, the CMA stated, “Where a contract is not performed as agreed, the CMA considers that consumer protection law will generally allow consumers to obtain a refund.
The CMA expects consumers to be offered full refunds where:
- a business has cancelled a contract without providing any of the promised goods or services;
- no service is provided by a business, for example because this is prevented by Government public health measures;
- a consumer cancels, or is prevented from receiving any services because Government public health measures mean they are not allowed to use the services.
The CMA acknowledges that there are a number of other situations which may arise as a result of ongoing restrictions. It has provided the following guidance:-
- Ongoing contracts: where a business provides regular goods or services in exchange for a consumer’s ongoing payment, a refund should be offered for any services the consumer has already paid for but which cannot be provided because of current public health measures. The business can request a contribution to its costs from the consumer until the service is resumed but this is only permissible where the contract clearly provides for this.
- Non-refundable payments and fees: the CMA considers that consumer protection legislation permits a refund to be provided even where the consumer has paid a ‘non-refundable’ deposit or advance payment. Businesses should not charge administrative fees for processing such refunds.
- Credits and re-booking: consumers can be offered credits, vouchers, re-booking or re-scheduling as alternatives (and in addition) to a refund, but consumers should not be misled or pressured into their acceptance. Any restrictions that apply to alternatives, such as time limits within which they are to be used, must also be fair and highlighted to consumers prior to acceptance.
- Future contracts: businesses should not seek payments for services they know they will be unable to provide, even after current restrictions have been lifted. By contrast, where an organisation reasonably expects to be able to provide a future service those businesses can require consumers to continue making payments.
- Cancellation by consumers for other reasons: if a contract is cancelled by a consumer because they no longer require the goods or services even if they can still be provided, consumers are entitled to a refund in line with the applicable terms and conditions so long as the terms are fair.
The CMA has extensive powers of enforcement if it considers that a business has breached consumer protection regulations, including:
- requesting an undertaking from a business that it will change its practices;
- issuing civil proceedings;
- seeking an ‘enforcement order’ against a business to stop the offending conduct; and
- ‘enhanced consumer measures’ which enable it to seek redress on behalf of consumers.
Whilst COVID-19 continues to cause disruption to many aspects of daily living, businesses must nonetheless be mindful of their ongoing consumer protection obligations and act at all times in accordance with the applicable regulations, or else risk intervention and investigation by the CMA.