Businesses risk breaching consumer laws by leaving too long a gap between contract reviews, according to the competition watchdog, which also suggests businesses are not making enough use of solicitors.
Research conducted by the Competition and Markets Authority, published today, shows that over half of the businesses it surveyed do not fully understand the rules on ‘unfair terms’.
Unfair terms give businesses an unfair advantage over consumers, often by reducing their rights or ability to complain if things go wrong. Such terms can include excluding the business’s liability for things that are its fault, such as delays and faulty goods or services.
According to today’s report, the average time between reviews of consumer contracts is typically between four and five years. Only two in five businesses surveyed reviewed their contracts in the past year.
The CMA says the length of time means businesses could be subjecting themselves to risk should new laws or regulations come into force that render their terms and conditions outdated. A change in the law or to the product cost is more likely to prompt a review, rather than customer complaints.
With only 15% of businesses familiar with the Consumer Rights Act 2015, the CMA says it is important that any updates to contract terms are administered by those with a better understanding of the law.
However, its findings suggest this is not always the case.
The report states: ‘For the majority of businesses, an internal member of staff predominantly conducted their most recent review, but only one in five made use of a legal adviser or solicitor to help them; indeed, general “business advisers” or accountants were just as common.’
CMA communications director Paul Latham said the majority of businesses want to do the right thing by their customers, ‘but it’s worrying that many businesses are not familiar with the law’.
Some businesses believe a signed contract is final, the watchdog found, not realising they cannot enforce a term against a consumer if it is unfair. Some may copy terms from larger businesses or competitors, assuming incorrectly that these will be automatically fair and legally binding.
The watchdog today unveiled a campaign to inform businesses about what makes a term ‘unfair’.