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CMA launches investigation to help consumers facing refund problems

On 30 April 2020, the Competition and Markets Authority (CMA) announced that it is investigating complaints about traders’ cancellation and refund policies for services affected by the COVID-19 pandemic. The investigation will initially focus on the three sectors identified as a priority by the CMA’s COVID-19 taskforce:

  • weddings and private events;
  • holiday accommodation; and
  • nurseries and childcare provision.

Where it finds evidence of consumer law breaches, the CMA will take appropriate enforcement action, including by moving quickly to court if a firm does not address its concerns.

The CMA has also published a statement setting out its general views about how the law operates in relation to consumer contracts affected by COVID-19. Significantly the CMA takes the view that consumers will normally be entitled to a refund for services not provided and cannot be obliged to accept re-scheduling or re-booking (although traders may offer this, provided they also make it clear that a refund is available).

What does this mean for consumers?

The CMA’s view is that a full refund should be offered if:

  • A business has cancelled a contract without providing any of the goods or services;
  • A business is prevented from providing a service, due to government public health measures; or
  • A consumer cancels a service or cannot receive a service which they are not allowed to use, due to government public health measures.

While the CMA acknowledges it may take businesses longer than normal to process refunds, it encourages businesses to communicate timeframes clearly to consumers, to refund within a reasonable time and to “take into account” any statutory time frames.

Any exceptions?

The CMA also notes that where a contract cannot be performed due to government public health measures, a business may be able to deduct a contribution to the costs it has already incurred in relation to the specific contract in question (where it cannot recover them elsewhere). The CMA considers that such cases are likely to be relatively rare, and the deductions will usually be limited.

The guidance does not give any examples, however, imagine this scenario.

If a wedding arranged for late March did not go ahead and the venue owner had already incurred a cost modifying the venue specifically for that particular wedding, a partial refund would seem fair.

Other issues covered by the guidance include the treatment of ongoing contracts, payments stated to be “non-refundable”, the issuing of vouchers instead of cash refunds and consumers’ rights where they cancel for convenience.

If you require any legal advice in relation to consumer law issues, please contact Gordon Deane by emailing Gordon.deane@balfour-manson.co.uk.