Introduction
The Trading Standards (Fair Trading) (Guernsey) Ordinance, 2023 (the "Trading Standards Ordinance") is due to come into force on 2 October 2023. From this date, businesses in Guernsey will be subject to trading standards requirements and consumers in Guernsey will have consumer rights in turn.
This briefing by Walkers Guernsey regulatory team summarises key areas of the Trading Standards Ordinance.
Who is affected?
The Trading Standards Ordinance applies to businesses selling goods and/or providing services in Guernsey, including financial services. Therefore banks, investment managers, pension providers, insurance providers and lenders are subject to the new consumer protection rules under the Trading Standards Ordinance (apart from certain exclusions referred to below).
The Trading Standards Ordinance provides consumers dealing with businesses various rights and protections. "Consumers" for these purposes are natural persons receiving services and digital content, or buying goods, for themselves and not wholly or mainly for their trade, business, craft or profession. If a business wants to claim that a person is not a consumer it is up to the business to prove it.
What are the new consumer rights?
The rules vary depending on whether the business is providing a consumer with services, digital content or goods. Consumer rights for digital content apply whether the content is bundled with goods or services (and not separately charged) as well as when it is separately charged.
The key rights are summarised below (please note that there are detailed provisos not covered in the below).
Quality
Services must be performed with reasonable care and skill, and (in the absence of any agreement as to price and/or timeframe) at a reasonable price and/or within a reasonable time.
Goods must be of a satisfactory quality, be fit for their purpose and must fit their description. Where applicable, the goods must match a sample or model provided to the consumer in advance. Where a business is responsible for installing the goods (e.g. installing a fridge freezer), the goods must be installed correctly.
Digital content must also be of a satisfactory quality, be fit for its purpose and must fit its description.
Consumer information in advance of contract
For services, goods and digital content, businesses must provide the consumer with certain information before the consumer enters into the contract, such as price. This information, whether it is provided verbally or in writing, will form part of the contract if the consumer takes it into account in making their purchase decision (subject to any changes agreed between the business and the consumer).
The information must be provided to a consumer in a clear and comprehensible manner before entering into the contract. This is to allow the consumer to make an informed decision, whether they are making their purchase face-to-face at the business, on the telephone or over the internet.
The information that must be provided to the consumer depends on whether the contract is concluded face-to-face or at a distance, and can include (where applicable) price, duration, delivery charges, how to complain, after-sales service and the consumer's right to cancel within any applicable cooling-off period. However, this requirement does not apply to certain contracts, including those for banking, credit, lending, insurance, personal pension, investment or payments (in many cases, separate regulatory rules apply pre-contract information requirements on the relevant financial services business).
Cooling-off period
Other than where a consumer and a business enter into a contract face-to-face, after entering into a contract, consumers will now generally have a 14 day cooling-off period to cancel the contract without reason and without incurring liability. This 14 days typically runs from the date of the contract, except for goods where it runs from when the consumer (or someone on their behalf) takes possession of the goods. This right to cancel is subject to restrictions in various circumstances, e.g. goods bought at auction, custom-made goods, where the consumer's handling of the goods has reduced their value or where the consumer has requested a business to attend to urgent repairs. This period is extended where the business fails to notify the consumer of their cancellation right.
Where a consumer does cancel the contract within the cooling-off period, the business must generally reimburse all payments received from the consumer and cannot charge a cancellation fee.
However, the cooling-off period and cancellation right requirement does not apply to certain contracts, including those for banking, credit, lending, insurance, personal pension, investment or payments (separate rules apply cooling-off periods to consumer credit contracts).
Consumer rights on breach of contract
For services, a consumer's rights on breach include a right to (depending on the breach) require repeat performance to bring the service in line with the contract, a price reduction or claim damages.
For goods, consumer rights on breach include the right to (depending on the breach) enforce the contract, reject, repair or replace the goods, require a price reduction or claim damages. There are also rules for when the wrong quality of goods is delivered, or when goods are delivered in instalments.
For digital content, consumer rights on breach include the right to (depending on the breach) repair any damaged device, replacement content, a price reduction or a refund. Consumers also have the right to require compensation where digital content damages other digital content or devices (e.g. where purchased software damages a computer).
Unfair contract terms
The Trading Standards Ordinance provides that contractual terms and terms in consumer notices should be both transparent (i.e. expressed in plain and intelligible language and legible) and prominent (i.e. brought to the consumer's attention in such a way that an average consumer would be aware of the term).
The Trading Standards Ordinance also provides that contract terms that are "unfair" to the consumer cannot be relied upon or enforced by the business, although the consumer can choose to rely on an unfair term.
A contract term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer.
There are terms which are always unfair (e.g. a term that restricts or excludes the business' liability for negligence), and then there are terms which may be unfair, depending on the circumstances (e.g. a term that allows the business to change the terms of the contract without affording the consumer a corresponding right in terms of their obligations). Further, generally a business cannot contract out of certain obligations under the Trading Standards Ordinance, such as the consumer's rights.
The Trading Standards Ordinance contains a non-exhaustive list of terms that may be considered unfair, which are modified in some cases for financial services.
Further information on unfair contract terms under the Trading Standards Ordinance can be found in our briefing here.
How does the Trading Standards Ordinance interact with the consumer lending rules introduced in July 2023?
The Lending, Credit and Finance (Bailiwick of Guernsey) Law, 2022, and the associated GFSC rules (together, "LCF") came into force on 1 July 2023 (you can see our LCF briefings here. LCF brought in consumer protection for consumer credit, such as personal loans, mortgages and credit cards, which included provisions relating to unfair contract terms. LCF also regulates other financial services, such as non-consumer credit and payment services. It is only consumer credit that is subject to consumer protection under LCF.
The Trading Standards Ordinance applies in addition to LCF, so all LCF licensees, including businesses that lend to consumers and those that don't, will be subject to the Trading Standards Ordinance (except in relation to a consumer's right to redress, which does not apply to regulated financial services businesses).
Broadly, both the Trading Standards Ordinance and the LCF take the same approach to unfair contract terms. Therefore, in practice, the terms that are considered as unfair by the Trading Standards Ordinance are virtually identical to the terms that are considered as unfair by the LCF (although the list of unfair terms for both regimes is not exhaustive). Therefore consumer lenders who updated their business terms for LCF should not need to do so again for the Trading Standards Ordinance.
Other matters covered by the Trading Standards Ordinance
The Trading Standards Ordinance also contains rules covering product safety and liability for defective products, as well as rules that prohibit unfair commercial practices (such as misleading a consumer, inertia selling or acting unfairly towards a consumer in a way that can affect their purchasing decision) and aggressive commercial practices. Consumers also have a right of redress in relation to contracts they have entered into with a business as a result of certain unfair commercial practices (although this right of redress does not apply to contracts for financial services).
The Trading Standards Service will have a duty to deal with consumer complaints in relation to contract terms, and the various obligations that the Trading Standards Ordinance applies to businesses. The Trading Standards Service will also have enforcement powers, including powers of entry, inspection and seizure (all without a warrant), inspection, and the seizure of documents, goods and other evidence, and issuing guidance/notices (including safety notices for unsafe goods) to encourage and promote voluntary action. It will also have the power to apply for an injunction or enforcement order in relation to certain breaches of the Trading Standards Ordinance.
Walkers' comment
The Trading Standards Ordinance is a significant piece of legislation for Guernsey, as it brings in rights and protections similar to those that consumers have in other jurisdictions, particularly the UK and Jersey.
Until 2023, consumers in Guernsey had very few rights. Consumer protection rules for consumer credit (such as loans and mortgages) came into force on 1 July 2023 and now consumer protection will apply more widely.
All businesses, including financial services businesses, that sell goods or provide services to members of the public will need to consider the impact of the Trading Standards Ordinance, and will need to ensure that their marketing materials, terms of business and policies comply. Businesses will need to consider their approach to customer complaints and what remedies they offer consumers.
Businesses should also ensure that their staff, especially sales and customer staff, are trained in the new consumer rights, as statements that they make to consumers could become binding.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
