Three less known but no less important sets of consumer regulations relating to franchised businesses

They may therefore already be familiar with the key piece of consumer legislation, the Consumer Rights Act 2015, and how that relates to their relationship with their customers. But there are some less well-known pieces of consumer protection legislation which franchisors and franchisees are less likely to be aware of or familiar with. Compliance with those pieces of legislation is key to ensuring that franchisors protect the image of their brand and that franchisees can maintain customer satisfaction and financial success. This article looks at three often overlooked but very important pieces of consumer protection legislation including the steps businesses can take to ensure compliance.  

The consumer rights (Payment surcharges) regulations 2012

These Regulations prohibit, or in some exceptional circumstances, limit, the practice of passing on surcharges to consumers using a specific payment method such as a credit card. Except for certain types of contract in respect of which surcharging is generally prohibited, these Regulations do not apply to commercial debit or credit cards or to cash or cheque payments. Minimum spends, or non-acceptance of certain types of credit card is not prohibited by these Regulations but any surcharge applied must not exceed the charges applied by the card issuer to the trader for processing the payment. 

Unlawful surcharges are unenforceable against the consumer and, if already paid, must be refunded. Traders applying surcharges in breach of these Regulations are also at risk of: 

• Legal action taken by consumers to recover their money.

• Enforcement by Trading Standards in the form of a court order. Traders failing to comply with court orders obtained by Trading Standards can face criminal sanctions. 

Traders can take a number of steps to ensure compliance with these Regulations, including:

• where they are entitled to levy a surcharge, calculating it accurately and ensuring it does not exceed the cost assumed by the trader using that particular payment method;

• being transparent with the consumer about any surcharge and communicating it clearly from the outset; and

• alternatively, avoiding surcharges entirely and either absorbing the increased cost or offsetting it by charging a higher headline price for the goods or services. 

Consumer protection from unfair trading regulations 2008

Commonly known as the CPRs, these regulations aim to protect consumers from unfair or misleading trading practices. The CPRs apply before, during and after a consumer contract is entered into.

The CPRs contain:

A general prohibition

This prohibition is placed on traders from engaging in unfair commercial practices with consumers. This general prohibition ‘sweeps up’ those unfair trading practices which would not be covered by the rules on misleading or aggressive sales tactics and the thirty-one specifically banned practices (as to which see further below). It is also designed to cover unfair practices that do not presently exist but which may be devised in future. 

A ban on misleading and aggressive practices 

Both misleading trading practices and aggressive sales tactics are prohibited if they cause the average consumer to make a decision that they would not otherwise make. These practices include providing false information, omitting important information and creating confusion with competitors’ products. 

A blacklist of practices

Thirty-one practices are considered unfair in all circumstances. Examples include falsely claiming accreditation, advertising special offers with no real intention to supply the products, pretending an offer is only available for a limited time to pressure consumers into an immediate decision, bogus competitions and “engaging in persistent unwanted solicitation of customer by remote media”. 

Rights of redress

Consumers have a right to redress where a trader has acted in breach of its obligations under the CPRs.  The CPRs contain severe penalties for their violation, including: 

1. Prosecution. A breach of the CPRs can lead to a business being prosecuted and receiving an unlimited fine. Individuals can also be prosecuted. 
2. Personal liability. An officer or manager of the business who consented to, or acted negligently in respect of the breach can be found to be personally liable and fined or sentenced to up to two years in prison. 

Traders can ensure they are compliant with the CPRs by:

1. avoiding prohibited practices, misleading and aggressive practices, and generally ensuring that they do not trade unfairly;

1. devising and maintaining transparent business practices, which should be communicated clearly to the consumer; and

1. ensuring staff are trained effectively so that they in turn understand the CPRs to avoid unintentional breaches.

The consumer contracts (Information, cancellation and additional charges) regulations 2013

These regulations protect consumers who enter into contracts with traders at a distance (i.e. either online or over the telephone), contracts made face-to-face somewhere other than the business premises of the trader or contracts made in a store. As such many franchised business will be entering into contracts with consumers to which these regulations apply, though this does not include contracts where the payment by the consumer is valued at less than £42. 

The regulations outline, amongst other things: 

1. Important information that traders must give to a consumer before and after making a sale. The information differs depending on the type of contract but broadly it includes details about the product, the trader, and the consumer’s rights;

1. The consumer’s right to cancel the contract when buying at distance or off-premises. The cancellation period differs depending on the contract in question; and

1. The position on additional payments, particularly the prohibition of pre-ticked boxes for additional payments.

Consequences for non-compliant traders include:  

• Consumers will not be liable for any costs they may bear which they have not been made aware of pre-contract. Therefore, active consent is needed from all consumers.

• When an off-premises contract does not to provide the consumer with information about the cost of returning the goods, the right to cancel, and whether any payment is required for any services provided during the cancellation period it is a fineable offence.

For all the regulations described in this article, Franchisors should ensure that they are included as part of mandatory training and that operation manuals are written in such a way as to either mandate or promote compliance.  The consequences of failing to abide by the regulations are significant, so both franchisors and franchisees may wish to consider taking professional advice before they take any business decision that could lead to a regulatory breach. 

Co-author Sophie Imber

Sophie Imber is a paralegal in the Stevens & Bolton LLP’s Commercial & IT department, and is a part of the Franchising Group. Sophie assists in advising both franchisors and franchisees on a variety of different topics