Described rather coyly by the explanatory notes as merely setting out "a framework that consolidates in one place key consumer rights", once implemented, the impact of the Consumer Rights Bill is likely to be seismic, particularly for the motor finance industry. It is described as the most significant overhaul of consumer rights for decades.

The proposals are intended to streamline, overlapping and complicated areas from eight pieces of legislation into a single consumer bill. It’s likely that the Bill will become law early in 2015.

The new regime – an overview

Part 1 of the Bill covers the reform and consolidation of consumer rights and remedies in respect of goods and services and thereby amends the Sale of Goods Act 1979 (SGA) and the Supply of Goods and Services Act 1982 (SGSA) (which covers hire purchase).

Part 1 sets out:

  • The standards goods must meet;
  • Sets a time period of 30 days for consumers to reject and receive a full refund;
  • Limits the number of repairs/replacements before traders must offer some money back;
  • Sets limits on the extent that traders can reduce the refund to take account of use of goods;
  • Introduces a new category of digital content, including tailored quality rights and remedies;
  • Introduces a new statutory right that if a trader provides information regarding a service and the consumer takes this information into account, the service must comply with that information;
  • Introduces statutory remedies when things go wrong with a service.

‘Satisfactory quality’

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The definition largely corresponds with the former definition set out in section 14 SGA and section 10 SGSA and sets out the same requirements for the ‘reasonable man’ test having regard to the description and price, and also the same test regarding fitness for purpose, appearance and finish, freedom from minor defects, safety and durability.

The main changes

It was always difficult to determine whether a customer had ‘lost his right to reject’ as this was based mainly on case law and a construction of ‘reasonable time’.

The Bill now simplifies this issue and gives the consumer:

  • Early right to reject. A statutory right to reject within 30 days from the date of delivery. This can be paused for the duration of a repair;
  • Right to repair or replacement;
  • Right to a price reduction or a final right to reject.

If the short-term right to reject is lost, a residual ‘final right to reject’ remains. The consumer must first request a repair or replacement if appropriate – with the right arising if after one repair or one replacement (or one refused request that the goods be repaired or replaced) the goods still do not conform to the contract.

Any refund will be subject to a reduction for use, but there’s likely to be further confusion and case law concerning the quantum of any such reduction.


Consumers can now indicate they are exercising one of these rights to the dealer and there’s no requirement for the finance house to be notified. Your dealer agreements will need to be amended to impose obligations regarding notice on the dealer.

The Bill states that goods which do not conform to the contract at any time during the six months after delivery are taken not to have conformed at the date of delivery. I can foresee this will have a detrimental impact on your attempts to avoid liability for cheap, used vehicles with high mileage. What happens if the head gasket blows after five months?

The Department for Business, Innovation & Skills has suggested that it thinks a consumer is more likely to request a repair than exercise the early right to reject. I disagree. The initial depreciation on a new vehicle is steep and can be as much as 20%.

Consumers are becoming more sophisticated and aware of their rights and I think this right (which will no doubt be well published) will be exercised and, if it is, who will bear the costs of the depreciation?

Finally, if a right to reject is exercised then the customer will be able to demand return of any part exchange vehicle and any cash deposit from the dealer.

The Bill does not take in to account that in a standard HP transaction the deposit is paid to the dealer as agent for the finance house and is then shown as a credit on the invoice. The Bill does not take account of this practice or for the fact that any part exchange may have been sold on.

The implications

It’s inevitable that funders will see more statutory complaints and claims and although the scope of this article cannot extend beyond a high-level overview of the relevant changes, the overriding point is that funders (and their agents and advisors) will have to change their approach.

Given the definition of ‘consumer’ under the Bill, related complaints will arise almost exclusively in the context of regulated credit. Therefore, they must be dealt with in line with obligations imposed by the Financial Conduct Authority. This, of course, is a matter of awareness through training and audited compliance.

It’s also important to recognise that the Bill is just that: it is not an Act. Consequently, there remains an opportunity to reshape it, and the Finance and Leasing Association (FLA) continues with its attempts to.

The FLA would appreciate your support to ensure the practicalities of the Bill are appropriately considered.

Melanie Chell is a partner at Shoosmiths