Evolution and Development of Customer Protection

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CONSUMER PROTECTION REGULATIONS IN THE UK

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Word Count: 2000

Literature Review

A literature-centred overview of the evolution of the United Kingdom consumer protection regime and its current status is imperative.

Evolution and Development of Customer Protection

The advent of the United Kingdom customer protection regime is not regarded as a recent phenomenon as the development of customer protection legislation dates back to the late 17th century and mid-18th century during the pre-industrial era. Studies on the genesis and development of the customer protection regime show that since then, numerous jurisdictions have culminated in the development of a plethora of jurisprudence on the liabilities and rights that United Kingdom buyers and sellers have. Research by Muhammad Akbar concentrated on examining the origin and emergence of the customer protection regime. This work confirmed that the current customer protection legislation in the country is an outcome of imperative developments that occurred from the pre-industrial era to the post-industrial revolution. According to Muhammad Akbar, the pre-industrial period was characterised by low consumption levels within a simple social set up and fewer products than it is the case today. Later, the principle of caveat emptor within the English law was developed and incorporated to deal with this situation. This doctrine upheld the philosophy of individualism where customers had to look after themselves as laws to protect consumers were few and those that existed only dealt with measures and weights of basic commodities. With the growth in consumption and the number of services and products available for consumption, the principle of caveat emptor lost its relevance as sellers assumed greater responsibility in sales transactions. This necessitated the enforcement of specific customer protection legislation in the United Kingdom.

During the industrial revolution of the 18th century, urbanisation and manufacturing intensified, augmenting consumption. Sellers and product consumers began bargaining from long distances, with the former recognising the need for product quality to maintain market competitiveness. This furthered the need for a regime to safeguard the trading standards to ensure that they enhanced public health and customer protection, along with protecting honest traders from unfair competitor practices. During the period of the industrial society in the 19th century, more developments in customer protection laws took place in England, including case law revolving around buyer-seller relationships. However, consumer legal rights to safe products and services remained unrecognised. In the 20th century, mass production emerged, causing a consumer revolution as many products and services became available to consumers. During this time, large-scale developments occurred in consumer protection law, litigation, and the laws of negligence. Also, a movement initiated by an NGO stimulated the development of laws to protect consumers against unfair commercial and trade practices and defective services and products. This led to the development of customer protection laws used today, although they continued to undergo reforms to fit contemporary needs. From a critical stance, Muhammad Akbar’s work is valuable because it provides an informative and comprehensive account of the evolution of UK consumer protection, which enables one to grasp the changes that have occurred in consumer protection over the years.

Current Status of UK Customer Protection

Numerous researchers have focused on the current status of customer protection in the United Kingdom from different perspectives. For instance, Cliona examined customer protection from the perspective of the various reforms the regime will undergo within the context of the UK and Ireland considering the ongoing Brexit debate. According to this researcher, momentous regulatory divergences will be witnessed in customer protection before, after, and even without Brexit. Two of the most significant divergences before Brexit will be the Consumer Rights Act (CRA) 2015 and the Consumer Rights Bill 2015. The CRA 2015 was established to overhaul the contractual rights of consumers in the supply of digital content, goods, and services, together with regulating unfair contract terms in the United Kingdom. The CRA also integrated new rules relating to digital content, which the rest of the European Union is now catching up with as suggested by Taylor Wessing. On its part, the Consumer Rights Bill 2015 was published to reflect to consolidate the current customer protection law, along with endorsing new consumer rights and remedies in Ireland and the United Kingdom. As Cliona suggests, one of the divergences likely to be witnessed between Ireland and the United Kingdom as regards these two laws before Brexit include the objectives and scope of the CRA and the Consumer Rights Bill. Other divergences in implementing reforms of consumer law cover the areas of privity of contracts, jurisdiction relating to the supply of services and digital content, unfair contract terms, sale of gift vouchers, and transparency in contracts. The divergences possible after Brexit (if it happens) will include the areas of language and concepts utilised, the structure of consumer protection law, and the interpretation of the domestic provisions of the law in both the UK and Ireland. Finally, the divergences in implementing consumer law if Brexit becomes impossible will encompass the areas of the models of consumer protection adopted and modes of mapping amendments against the existing legal framework, which is the Consumer Rights Act 2015. Cliona’s research is critically valuable because it provides adequate illumination of possible differences in consumer protection likely to be experienced in Ireland and the UK if Brexit becomes effective.

Louise Nahon argued that reforms in consumer protection laws will have a significant impact in the United Kingdom, irrespective of whether Brexit is effected or not. This author suggests that some of the reforms proposed to come into effect in 2022 include the introduction of new digital consumer protection rules, revision of rules that impact digital service supply, and augmented transparency obligations on online endorsements and reviews. Also, this author suggested that changes will occur in the enforcement and penalty regime relating to unfair commercial practices and unfair contract terms within the harmonised framework across the entire EU. Wessing also acknowledges some of these consumer protection reforms that will occur in the wake of the recent Brexit referendum. These include the integration of the digital content directive and changes in consumer contracts associated with the online sales of goods. The works of both Louise and Taylor appreciate that the United Kingdom consumer protection regime is one of the most advanced regimes in Europe, which will augment consumer confidence when the proposed reforms are attained. Even so, the two differ in that while Louise believes what Brexit will have significant impacts on this regime, Taylor feels that Brexit will not cause great changes to the regime.

Malte Kramme investigated consumer protection from the perspective of the ramifications that Brexit would have on the area of consumer protection. This scholar examined Brexit consequences to consumer protection under three scenarios, namely, UK membership to European Economic Area (EEA), relationships administrated by World Trade Organisation’s rules, and relationships directed by mutual recognition rules within a tailor-made agreement. Based on the EEA model, the most favourable Brexit scenario would entail UK membership of the EEA. The eventual consequence of this membership on consumer protection would the application of high consumer protection standards in the UK. However, Brexit provisions for strengthening the sovereignty of the United Kingdom are incompatible with the EEA agreement, which compels member states of the European Free Trade Association (EFTA) to adopt EU legislation strictly. This incompatibility will augment the complexity of the UK consumer protection regime if Brexit becomes effective. From a WTO-model outlook, the consequence of Brexit to consumer protection will include difficulties in interpreting EU consumer protection directives within the UK legal context and uncertainties of conflict-of-laws, enforceability, and jurisdiction associated with the applicability of EU consumer protection law in the UK. Lastly, from the tailor-made agreement model, the consequence of Brexit on consumer protection is the failure to achieve harmonisation of standards provided by both the EFTA and EU in all consumer protection areas. While Malte offers vital details of some Brexit consequences on UK consumer protection, his work has one weakness, which is the failure to identify the specific consumer protection laws directly impacted by the consequences addressed under each model.

Survey-based research by Oya Pinar, Ibrahim, and Mylenko addressed consumer protection regulations from the outlook of cross-country analysis. They examined the applicability of consumer protection principles and laws in deposit and loan services in 142 countries, including the United Kingdom. The outcomes of their study were that many countries have consumer protection legislation in place, but these laws fail to address specific issues in financial consumer protection. As regards the United Kingdom, these authors appreciated that the country has comprehensive consumer protection legislation. This is because the UK has consumer protection legislation with explicit references to financial services and consumer protection regulations outlined within the financial section legislations framework, besides having general consumer protection law with no explicit references to financial services and other forms of consumer protection legislation. The work of this scholar is dependable because it adopts a valid research instrument and is informed by a broad gamut of datasets, which reflect its reliability. The only problem with the study is its focuses on consumer protection regulations in only two financial services, which implies that its outcomes cannot be generalised to all financial services, especially in the United Kingdom.

In another research effort, Mark and Vickers furthered research on consumer protection in financial services. Specifically, these scholars explored the relationships between consumer protection and the contingent charges for financial services within the United Kingdom context. These authors established that the failure to regulate contingent charges can breed significant economic inefficiencies that compromise consumer protection. Further, they confirmed that contingent charges in conventional settings with sophisticated consumers are efficiently executed because these types of consumers are well informed about consumer protection and can hence influence prices, compared to settings with naive consumers, who are less informed about consumer protection. They concluded that sophisticated consumers use awareness of consumer protection regulation to protect naïve consumers when it comes to implementing contingent charges in UK financial services. Also, they suggested that markets dominated by sophisticated customers can perform inefficiently because these consumers can adopt socially ineffective approaches to evade the high contingent charges that naïve consumers pay. Their conclusions corroborate the claims by Matthew Hilton that the United Kingdom’s consumer protection regime is based on information, where information is provided to individual economic actors to prevent market failures. For this reason, consumer protection regulation in such a scenario would be vital in offsetting the distributional concerns. This study is important because it provides a new perspective for consumer protection policymakers that can be useful in designing policies for curbing monopoly of pricing in the financial sector in the United Kingdom towards ensuring consumer protection against exploitative contingent charges.

Bibliography

Books

Ardic, Oya P, Ibrahim A. Joyce, and Mylenko N ‘Consumer protection laws and regulations in deposit and loan services: A cross-country analysis with a new data set’ (The World Bank 2011).

Journal Articles

Armstrong, M and Vickers J ‘Consumer protection and contingent charges’ Journal of Economic Literature (2012) 50 (2) 477-93.

Hilton, M ‘Consumer protection in the United Kingdom’ (2006) 47 (1) Economic History Yearbook 45-60.

Kelly, C ‘Consumer reform in Ireland and the UK: Regulatory divergence before, after and without Brexit’ (2018) 47 (1) Common Law World Review 53-76.

Khan, Muhammad A ‘The origin and development of consumer protection laws in united kingdom’ (2017) 3 (3) Journal of Asian and African Social Science and Humanities (ISSN 2413-2748) 38-52.

Kramme, Malte F ‘Consequences of Brexit in the area of consumer protection’ GPR: (2017) 14 (5) Journal of European Union Private Law 210-222.

Electronic Source

Nahon, L ‘Consumer law reforms will impact UK regardless of Brexit’ (15 Nov 2019) Out-Law Analysis Pinsent Masons https://www.pinsentmasons.com/out-law/analysis/consumer-law-reforms-will-impact-uk-regardless-of-brexit.

Wessing T ‘UK Consumer law in the wake of the EU referendum (17 Jul 2016) University of Oxford, Faculty of Law https://www.law.ox.ac.uk/business-law-blog/blog/2016/07/uk-consumer-law-wake-eu-referendum.