Further to our feature on how the Financial Services Authority (FSA) has issued a statement on the application of the Unfair Terms in Consumer Contracts Regulations 1999 (1999 Regulations) concerning the use of “consequential loss “provisions in general consumer insurance contracts The Law Commission has recommended expanding the Regulations.
The Commission’s proposals suggest terms used in consumer contracts need to be “transparent” which means they need to be expressed in plain language, presented clearly and available for scrutiny.
The proposals have been accepted by the government in principle and follow on from the High Court’s decision in 2008 in which the OFT challenged the clarity of the banks’ overdraft charges.
The OFT has warned that terms could not be considered fair if they had some potential for detriment to the consumer and the 2008 judgement extended the concept from strict contractual documents to non-contractual thereby covering papers given to the consumer before making the contract (OFT v Abbey national PLC 2008 EWHC 875 Comm).
Accordingly a business that gives confusing pre-contract information may struggle to draft contract terms so their effect is clear.
It also has to be understood that FSA consumer contracts are more protected than normal consumer contracts due to additional FSA principles and conduct affecting firms so regulated. Firms in breach of these rules can be fined, publicly censured or even banned.
Contrast this with a normal B2B contract where the other party is not a consumer and is less well protected in law.
