New ADR obligations on businesses/Consumer Dispute

Introduction

Legislation has come into effect from the 1st October 2015 which is designed to encourage the use of ADR to resolve consumer disputes. Although the new legislation does not impose any form of mandatory ADR, it does extend the obligations on businesses to provide consumers with information about ADR options.

To whom do the regulations apply to?

The regulations apply to all businesses in the United Kingdom selling goods, services or digital content to consumers with the exception of health professionals.  The regulations do not apply to business to business nor to consumer to consumer transactions.  For the purposes of these regulations a consumer is in “an individual acting for purposes which are wholly or mainly outside that individual’s trade, business, craft or profession.”

Public sector providers of services are outside the scope of the regulations unless the consumer is paying the public sector provider directly for those services.

Contracts for sale of property are also outside the scope of the regulations.

The requirements of the regulations

From the 1st October 2015:-

(i)         Where a business is obliged (either by law or by virtue of its membership of a trade association) to use ADR provided by a particular ADR entity, the business must provide the name and website address of that ADR entity.

(a)        On its website if it has one; and

(b)        In the general terms and conditions of sales or service contracts between it and a consumer.

(ii)         Where a business has exhausted its complaints handling procedure in respect of a consumer complaint, the business must inform the consumer on a durable medium (which can include email);

(a)        That the business cannot settle the complaint with the consumer;

(b)        That the name and website address of an ADR entity that would be competent to deal with the complaint, should the consumer wish to use ADR; and

(c)        Whether the business agrees to submit to an ADR procedure operated by that ADR Entity.  (Businesses obliged or committed to using the ADR entity will of course have to agree).

This requirement will apply to all disputes that are unresolved after the 1st October 2015, even if the contract was entered into, or the complaint first arose, before that date.

From 9th January 2016:-

All businesses that sell goods or services online must provide on their website a link to the EU’s Online Dispute Resolution (“ODR”) platform.  Online businesses who are legally obliged or committed to using ADR must also provide information about the ODR platform in their terms and conditions of business.

Daven Naghen head of our Litigation Team commented as follows:-

“Some businesses are already obliged by either law or virtue of a membership of a trade association to use ADR.  For example many travel agents through their membership of ABTA are obliged to use its ADR scheme.  In such circumstances the business must ensure that its website shows the name and website address of the ADR entity and that the details are also included in terms and conditions of business.

The more interesting provision relates to businesses that are not currently obliged by law or by virtue of a membership of a trade association to use ADR.  Quite often such businesses will have an internal complaints procedure and if that fails to bring a resolution to matters then it will be left to the consumer usually to go to Court to seek a remedy.  Now once the internal complaints procedure has been exhausted, the consumer must be given the name and address of an approved ADR entity that would be competent to deal with the dispute.  Unless the business is obliged by law or virtue of its membership of a trade association to use ADR then the business still has the option about whether or not to use that ADR entity.  The obligation merely relates to referring the consumer to the details of an approved ADR entity.

However in view of the obligation in litigation for the parties to participate in ADR it may be appropriate for the business to agree to use ADR provided by the stated ADR approved body.  Furthermore it might just resolve the dispute in a timely and cost effective way.

As I understand it many of the ADR approved bodies will be charging businesses a membership fee for being able to give their details to a consumer and then the ADR approved entity may charge another fee on a case by case basis for each matter that it deals with.

I am not sure how effective these regulations will be in terms of getting businesses to enter into ADR when they are not legally obliged or committed to doing so, but there must be something of a reasonable chance that some businesses at least will use the ADR approved entity that they at least have to notify the consumer about.  Provided the standard and quality of the ADR approved entity is good, then this cannot be a bad thing as it will hopefully reduce the number of matters that need to be litigated through the Court.”

If you are either a business or a consumer that requires advice about these new ADR regulations, or about any consumer matter then please contact Daven on 01775 722261 or email daven.nagen@maplessolicitors.com or visit our offices or arrange an appointment at our offices at 23 New Road Spalding Lincolnshire PE11 1DH.