The Competition and Markets Authority (CMA) and the consumer group, Which?, have found that thousands of consumers are struggling to obtain refunds from companies where contracts are cancelled as a result of COVID-19. Both the CMA and Which? have identified that refunds are being refused, or consumers are being pressured into accepting vouchers instead of cash refunds.
On 30 April 2020 the CMA announced the further investigation into three sectors: weddings and private events, holiday accommodation, and nurseries and childcare provision, due to a high number of complaints from consumers about cancellations and refunds related to these sectors. After the investigation is complete, the CMA will then move on to other sectors.
As well as launching the investigation, the CMA published its views on consumer rights which are a helpful reminder of consumer protection law.
The CMA’s action has led to a number of businesses changing their policies. On 9 June 2020 holiday letting company, Vacation Rentals, changed its terms and conditions to reflect those views, offering full refunds to customers unable to use bookings due to lockdown. The update was communicated with customers via direct contact and indirectly through its website and social media channels. In a statement, the CMA has welcomed this progress, but hopes that other organisations who still face scrutiny will follow suit.
Is a full refund possible?
The CMA advises that a full refund should be offered to the consumer when:
- The contract is cancelled, and the business as not provided the services;
- The business is prevented from providing the service, e.g. due to government measures; and
- The consumer cancels a service that they are not allowed to use/receive due to government measures.
The CMA also advises that deposits should also be refunded, even if a business stated to the consumer on contracting that deposits or advancements are non-refundable.
What about a partial refund?
Businesses should consider whether the consumer has already received part of the service under the contract. If so, the it may be appropriate to issue only a partial refund.
The CMA adds that in rare cases a business may be able to deduct a contribution of the costs incurred in relation to the contract that cannot be recovered elsewhere.
Refunds must be made in a timely manner and time frames should be communicated in clear language to consumers.
Vouchers and postponement
Businesses should not put pressure on consumers to accept vouchers instead of cash refunds, or force them to postpone the service by rescheduling to a later date. Refunds should be as easily available to consumers as any other options, and not be indicated as a ‘last resort’.
A breach of consumer protection law
The refusal to issue a refund for cancelled or prevented services is ultimately a breach of the Consumer Rights Act 2015 and the Consumer Protection from Unfair Trading Regulations 2008 (the 2008 Regulations). Businesses failing to provide refunds for cancelled or prevented services in light of COVID-19 could therefore face court action. While the CMA has enforcement powers, consumers can also apply to court to ask for a refund.
The CMA could ask a civil court to:
- Stop the conduct in question, as it breaches consumer protection law;
- Implement redress, i.e. by ordering the business to refund the consumer;
- Enforce compliance measures on the businesses so the breach does not happen again; and
- Implement consumer information measures so they are aware of offending businesses.
Engaging in a commercial practice that omits material information or contains misleading statements is a criminal offence under the 2008 Regulations and therefore providing misleading or incorrect information on refunds may also be a criminal offence.
Comment
The CMA’s statement on consumer protection law is helpful for both businesses and consumers. If you would like to discuss your approach to refunding or rescheduling options, please get in touch with Martin Sloan or your usual Brodies contact.
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