24/11    24 February 2011

The OFT has today sent a clear warning to businesses that consumer contracts must be clear and have no unwelcome surprises buried in the small print. 

In publishing its market study into consumer contracts, which found that one in five people had experienced a problem with such contracts in the last year, the OFT has set out its framework for prioritising future enforcement in this area. 

The study examined when, how and why contracts may cause difficulties for people and identified the practices and contract terms which have the potential to cause people the greatest harm and which could breach consumer protection laws.

Harm can arise when a small print term alters the deal from what consumers understand it to be, or if the way the contract is presented makes it difficult for consumers to understand the deal properly, in effect hiding unfair terms in plain view. The OFT's research found that 80 per cent of these people who experienced a problem said that it came as a surprise.

Currently 70 per cent of the OFT's consumer enforcement cases relate to contract terms and conditions and the OFT is urging businesses to consider whether their customer contracts contain terms that may be detrimental to consumers. Detrimental terms include:

• Unexpected restrictions to contract scope. For example, the OFT has intervened against football season tickets not guaranteeing seats, and extended warranties offering limited cover. 
• Terms that impose unexpected risks on consumers. For example, the OFT intervened on Sale and Rentback deals in part on the basis that the tenancy offered was much less secure than many people realised. 
• Complex, deferred or contingent charges that exceed costs. Recently, the OFT brought a successful case against letting agents over small print charges that did not correspond to any service provided. 
• Obstructions to consumer switching. Recently, the OFT has intervened against onerous cancellation terms used by gyms.

This does not mean that the use of these practices and terms is automatically unlawful - this will depend on the specifics of the contract and a number of other factors.

Heather Clayton, Senior Director of the OFT's Consumer Group, said:

'On the one hand, we all know that people don't read the small print of contracts. On the other, small print is a necessary fact of life and consumer law isn't there to protect the careless or the over-hasty. This report reconciles the need for small print with the real life behaviour of consumers and sets out the OFT's expectation that consumers should be free to focus on the main elements of the deal, confident that there will be no unwelcome surprises in the small print.

'This report gives clear guidance to businesses and it will helps them to assess whether their contracts need reviewing to make sure that their customers are treated properly. Transparent business practices build trust in markets, allow people to shop around to find the best deal for them, stimulating effective competition and strengthening innovation and growth.'

NOTES

1. For a copy of the final report and more information about the market study go to www.oft.gov.uk/consumer-contracts
2. See further information about the Consumer Protection from Unfair Trading Regulations 2008 (CPRs).
3. See further information about the Unfair Terms in Consumer Contracts Regulations 1999.
4. See information about the OFT enforcement work.
5. Market studies are conducted under the OFT's general function under section 5 of the Enterprise Act 2002, which includes the functions of obtaining information and conducting research.
6. Market studies involve an analysis of a particular market with the aim of identifying and addressing any aspects of market failure from competition issues to consumer detriment and the effect of government regulations. Possible results of market studies include: enforcement action by the OFT; a reference of the market to the Competition Commission; recommendations for changes in laws and regulations; recommendations to regulators, self-regulatory bodies and others to consider changes to their rules; encouraging firms to take voluntary action; campaigns to promote consumer education and awareness; 'a clean bill of health' for the industry.
7. The OFT is unable to provide advice or resolve individual complaints for consumers. Consumers can seek advice from Consumer Direct (telephone 08454 04 05 06, www.consumerdirect.gov.uk).