Changes to the Consumer Rights Act 2015 mean Terms and Conditions that aren’t clear for customers won’t count for anything. And the lawyers agree.
We wrote this after our recent mention in The Telegraph on the legal implications of the Consumer Rights Act 2015 to business terms and conditions.
How many times have you sighed and reluctantly clicked ‘agree’ on the Ts & Cs button? Ts & Cs have always been more about protecting businesses rather than being understood by customers. But now a new change in legislation means they need to be a great deal clearer.
Section 68 of the Act makes it pretty unambiguous (appropriately enough).
Requirement for transparency
(1)A trader must ensure that a written term of a consumer contract, or a consumer notice in writing, is transparent.
(2)A consumer notice is transparent for the purposes of subsection (1) if it is expressed in plain and intelligible language and it is legible.
That means that there’s no more hiding product details, fees, penalty clauses or get-out clauses in Ts and Cs or language so opaque that even Stephen Hawking would struggle to understand it.
The potential risk to business from unclear Ts & Cs
There’s a clear business risk as regulators shift the emphasis towards clarity and transparency. That means a lot of firms are going to have to get on the case with not just updating but completely transforming some dusty old material.
Personal finance journalist Katie Morley recently worked out that it would take fifty years to read the Ts and Cs for every product you own. It wouldn’t be a pleasant experience, either. More importantly from this month it will be much easier to challenge unfair or unclear Ts & Cs on any new purchases or contracts you enter into.
She quoted Rubuss: “Most terms and conditions are written in lawyer-speak that should never see the light of day. It may as well be written in Chinese as far as most savers and borrowers are concerned.”
To be fair to most businesses, they’ve run the Plain English pencil over most of their Ts and Cs and they’re much better than they were.
But where the wording is bad, it’s really bad. Tough to understand, jargon-packed and forcing customers to flip between pages to find related material.
Things to avoid in your terms and conditions
Even some of the UK’s biggest names in insurance, banking and telecoms are still afflicting people with Ts and Cs that belong in the crypt, not with customers.
These are in no particular order, but each would be so much better for customers if it were clearer, simpler and shorter.”Flipping”
This one fuses jargon with ‘flipping’, where the customer has to flip between pages of material to find what they need.
“Where the balance outstanding under the loan facility is more than 80% of the Security Value, you are required to make monthly Capital Repayments as specified in the accompanying offer document. Your obligation to make Capital Repayments will cease as described in paragraph 12 below.”
The obvious one. And just because you put jargon in inverted commas doesn’t mean customers can understand it:
“The price at which this transaction has been made is calculated on a ‘forward price basis’. This means that it is calculated on asset values at the next transaction point following the time of the transaction. A statement of the time of the transaction can be supplied on request.”
This one’s a great example of old-fashioned legalese. A customer hasn’t a chance of understanding this.
“19.6 If a provision or part-provision is illegal, invalid or unenforceable, that provision or part-provision shall be treated as having been modified to the minimum extent necessary to make it valid, legal or enforceable and to ensure it achieves the intended commercial result of the original provision. If modification is not possible, the relevant provision or part-provision shall be deleted. Any modification to or deletion shall not affect the validity of the rest of this Agreement.”
Going on…and on…and on…
Then there are the problems with length. For example, this Car Insurance Policy Doc is 19,950 words long. That’s the length of a decent novella.
Too much information! Do customers even need to know this amount of detail about their insurance contract? And if they do, can’t we make its relevance clear and make it a hell of a lot simpler to understand?
“You will enter into two separate contracts when you take out an insurance policy through us. The first contract is with us for arranging and administering your insurance policy, on your
behalf, and we shall charge you arrangement and administration fees for providing our services. Our terms and conditions are set out in this document. The second contract is with the insurer noted on your certificate of motor insurance and your policy schedule, for providing your insurance and they shall charge you a separate premium inclusive of insurance premium tax. Their terms and conditions are set out in this document (pages 22 –end) and your statement of insurance, certificate of motor insurance and schedule. The new business arrangement and administration fees and insurer premium will form the
cost of the insurance. The amounts paid in respect of the cover you hold are found in your statement of price.”
It’s not always the long ones that are the worst though. Jargon’s a proper killer. This set of Terms and Conditions for mortgage offers is a great example of three letter acronyms (TLA) being allowed to run riot:
“Tracker products (including Flexclusives) are available online for customer switching up to 80% LTV. If your mortgage is above 80% LTV and if you are on the Standard Mortgage Rate (SMR) or due to revert onto the SMR, you can still apply for a tracker in your local branch.”
Does it have to be words?
Sometimes things would be just better with diagrams (and this is from a set of Ts and Cs that have been Crystalmarked by The Society for Plain English):
“How we allocate payments
If a payment you make is less than your total outstanding balance as shown on your statement, we’ll use it as follows:
• If you have any purchase plans on your account, to make any purchase plan instalments due for that month.
• To reduce your main balance (your statement balance less any purchase plan balance).
We’ll start with the balances charged at the highest interest rate first and then reduce the lower-rate balances. If you have more than one promotional balance at the same interest rate, we’ll use your payment to reduce the balance with the promotional rate that ends first.”
If all else fails, try modified Latin
Even glossing over the confusing sentence construction, a customer is going to need a pretty detailed grammatical understanding to know that these Ts and Cs use “pro rata” as a verb. Mind you, that may be less of an issue than knowing what “pro rata” means.
“If the Owner’s contract is terminated you are no longer eligible for the discounted Household plans and they will automatically be charged at the standard price for these plans, pro-rated from the date the change in status occurs.”
TMI (another TLA)
In the spirit of openness, one can end up giving customers too much information (TMI). You thought you were just paying monthly for your insurance, not getting involved in a complex financial instrument. Pick the bones out of this:
“Q: What will it cost me?
A: You will have to pay back the money you draw down under the agreement and pay interest, a facility fee (if charged) and any credit agreement fee you may have been charged by your broker (unless you have chosen to fund this with us, in which case it will be included in the amount you draw down under the agreement).”
Falling off a cliff
Compare material like this with the ‘front end’ marketing and advertising that customers see before they sign up. It’s as though the post-sale material has fallen off a cliff. This is the gulf the government is trying to bridge with its changes to the Act.
But even without the Consumer Rights Act, tough-to-understand Ts and Cs give customers the impression you’re trying to hide something – even when you’re not. They also send the message that you care more about protecting your own business than looking after your customer.
The irony is that, thanks to the Act, there’s probably now more business risk in opacity than clarity.