Clause 248 - Pre-contract information

Digital Markets, Competition and Consumers Bill – in a Public Bill Committee at 2:45 pm on 4 July 2023.

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Question proposed, That the clause stand part of the Bill.

Photo of Maria Miller Maria Miller Conservative, Basingstoke

With this it will be convenient to discuss:

That schedule 20 be the Twentieth schedule to the Bill.

Clauses 249 to 253 stand part.

New clause 5—Contract renewal: option to opt in—

“(1) Before a trader enters into a subscription contract with a consumer where section 246(2) applies, the trader must ask the consumer whether they wish to opt into an arrangement under which the contract renews automatically at one or more of the following times—

(a) after a period of six months and every six months thereafter, or

(b) if the period between the consumer being charged for the first and second time is longer than six months, each time payment is due.

(2) If the consumer does not opt into such an arrangement, the trader must provide a date by which the consumer must notify the trader of the consumer’s intention to renew the contract, which must be no earlier than 28 days before the renewal date.

(3) If the consumer has not—

(a) opted into an arrangement under subsection (1),

(b) given notification of the consumer’s intention to renew by the date specified under subsection (2), the contract will lapse on the renewal date.”

This new clause would allow the consumer to opt-out of their subscription auto-renewing every six months, or if the period between payments is longer than six months, before every payment. If the consumer does not opt-in of auto-renewal, they would be required to notify the trader manually if they wanted to renew.

New clause 6—Contract renewal: variable rate contracts—

“(1) Before a trader enters into a subscription contract with a consumer where section 246(3) applies, the trader must ask the consumer whether they wish to opt into an arrangement under which the contract renews automatically on the date the consumer becomes liable for the first charge or the first higher charge.

(2) If the consumer does not opt into an arrangement under subsection (1), the trader must provide a date by which the consumer must notify the trader of the consumer’s intention to renew the contract, which must be no earlier than five days before the renewal date.

(3) The trader must also ask the consumer whether they wish to opt into an arrangement under which the contract renews automatically—

(a) after a period of either six months from the first charge or higher charge and every six months thereafter, or

(b) if the period between the consumer being charged for the first and second time is longer than six months, each time payment is due.

(4) If the consumer does not opt into an arrangement under subsection (3), the trader must provide a date by which the consumer must notify the trader of the consumer’s intention to renew the contract, which must be no earlier than 28 days before the renewal date.

(5) If the consumer has not—

(a) opted into an arrangement under subsection (1) or subsection (3), or

(b) given notification of the consumer’s intention to renew by the date specified under (as the case may be) subsection (2) or subsection (4),

the contract will lapse on the next renewal date.”

This new clause would introduce an option for the consumer to opt out of their subscription auto-renewing after their free or discounted trial. Otherwise, they would have to notify the trader manually if they wanted to continue the subscription. It also introduces an option for the consumer to opt out of their subscription auto-renewing.

Photo of Kevin Hollinrake Kevin Hollinrake Parliamentary Under Secretary of State (Department for Business and Trade)

Clause 248 places duties on the trader to provide the consumer with pre-contract information set out in schedule 20 before they enter a contract. All key pre-contract information must be given together to the consumer and separately from any other information. That is to ensure that it is not obscured by technical detail or marketing material and the consumer’s attention is focused on the information that they need to make an informed decision.

Clause 249 sets out obligations on the trader in concluding a contract, such as ensuring that the consumer expressly acknowledges their payment obligation if the contract is made online. That will ensure that consumers are fully aware of the contract they are entering.

Photo of Giles Watling Giles Watling Conservative, Clacton

As the hon. Member for Gordon said, the national lottery has an amazing track record—£47 billion has been given to good causes over many years—and we do not want this great institution, of which we should all be proud, to be hamstrung by endless requirements such as reminder notices. Will the Minister table amendments to the Bill on reminder notices ahead of Report that would ensure that the national lottery is exempt, as intended?

Photo of Kevin Hollinrake Kevin Hollinrake Parliamentary Under Secretary of State (Department for Business and Trade)

My hon. Friend is absolutely right that we do not intend to include national lotteries or society lotteries in this legislation. We are talking to those bodies to ensure that they are confident that that is the case. If we need to amend the Bill to do that, we will, but those conversations will continue. I am grateful to my hon. Friend for making that point.

Clause 250 requires traders to send reminder notices in certain instances. A reminder must be sent on the first occasion that a subscription renews, including when a free or low-cost trial is coming to an end. That will ensure that consumers know they will soon become liable for payments, or higher payments, and can decide whether they want to continue the contract.

Photo of Neil Coyle Neil Coyle Labour, Bermondsey and Old Southwark

The Minister says that clause 250 is relevant only in certain circumstances. Can he be clear that the Government’s intention is not for the provision to cover someone who has perhaps been a decades-long subscriber to, for example, Sky? I hate to pick a particular company, but it is for the purposes of the conversation—I am not a Sky subscriber. Is the Minister saying that, if a person had had a contract for a decade and was a regular viewer of sports channels, or whatever it might be, they would not be caught by the clause? The “certain circumstances” do not seem to be well understood by some businesses outside this building.

Photo of Kevin Hollinrake Kevin Hollinrake Parliamentary Under Secretary of State (Department for Business and Trade)

We have had dialogue with Sky, and many other organisations have contacted us to clarify some points. A subscription contract with Sky would fall under the provisions. Sky may be concerned about certain things, in terms of cooling-off periods, but I have not had any feedback from Sky or others that they have concerns about these particular provisions, unless the hon. Gentleman wants to mention something specifically.

Photo of Neil Coyle Neil Coyle Labour, Bermondsey and Old Southwark

I think that Sky briefed quite widely—it briefed members of the Committee and beyond—that it thinks that it is caught by the provision and that it covers all contracts. I can understand that a person would be caught by the new provisions if they had a new contract where there was a discount, as my hon. Friend the Member for Feltham and Heston already pointed out, but to impose the condition retrospectively on business contracts that someone could have had for decades seems to place a new onus on existing business arrangements. The Government have avoided doing that in other legislation, and I wonder about the rationale. I picked Sky off the top of my head, but it is an organisation that is concerned.

Photo of Kevin Hollinrake Kevin Hollinrake Parliamentary Under Secretary of State (Department for Business and Trade)

I did not quite understand the hon. Gentleman’s point when he first made it. I think he is saying that it covers existing contracts as well as new contracts. Is that his point, and can I come back to him on it?

Photo of Kevin Hollinrake Kevin Hollinrake Parliamentary Under Secretary of State (Department for Business and Trade)

After the first renewal reminder, consumers with a monthly renewing contract will be sent a reminder around the six-month mark. For contracts that renew less frequently than every six months, such as annual subscriptions, a reminder will generally be sent whenever the contract renews.

Clause 251 sets out the required timescales for serving reminder notices. Parts 1 and 2 of schedule 20 set out what pre-contract information traders must give to the consumer before they enter a contract. Part 3 of schedule 20 sets out the information that traders must include in a reminder notice.

I can address the point made by the hon. Member for Bermondsey and Old Southwark right now, if he would like: the subscription contract clauses will apply only to new contracts taken after chapter 2 comes into force. Reminder notices must include information on the forthcoming payment, including any increase since the last renewal. They must also include an indication of how long the consumer will be committed following renewal, and how to end the contract should the consumer wish to.

Clause 252 requires traders to provide a clear and straightforward cancellation route for consumers to exit a contract. Through the clause, consumers will be able to exit their contract in a single communication and without having to take any steps that are not reasonably necessary for ending their contract. That will put an end to poor practices that force consumers to spend a disproportionate amount of time and energy trying to exit their contract.

Photo of Neil Coyle Neil Coyle Labour, Bermondsey and Old Southwark 3:00, 4 July 2023

I thank the Minister for giving way; he has been very generous. To be clear, is it the Government’s expectation that a subscription could be cancelled through a single communication from any device or social media platform? Over recent days, significant figures have tried to close bank accounts and other things by tweeting. Is it the Government’s expectation that this communication would come from a verified point of contact, such as an email address or phone number that the company holds? Otherwise, I could set up a Twitter account—or a Threads account, as we have seen this week—in the Minister’s name and then cancel his TV, or other, subscriptions.

Photo of Kevin Hollinrake Kevin Hollinrake Parliamentary Under Secretary of State (Department for Business and Trade)

I may have misunderstood his point, but I think the example he gave was of a bank closing an account from Twitter. That is the other way around—that is the bank closing the account rather than the customer.

Photo of Kevin Hollinrake Kevin Hollinrake Parliamentary Under Secretary of State (Department for Business and Trade)

Okay, but I think clause 252 is clear that there must be a straightforward cancellation route for consumers to exit a contract. He appears to describe a convoluted route, but I did not quite understand it. Would he like to expand on his point?

Photo of Neil Coyle Neil Coyle Labour, Bermondsey and Old Southwark

Sorry if I was not clear. I thank the Minister for checking. Will it have to be from a single point of contact, such as a verified address, to protect the customer as well as the business? If I wanted to cancel a contract, would I have to use the email address or phone number that the company holds for me and not, as the Bill currently reads, a Facebook post or something that the business may not be able to confirm is mine? Does that help?

Photo of Kevin Hollinrake Kevin Hollinrake Parliamentary Under Secretary of State (Department for Business and Trade)

I am not sure whether it does or not. I refer the hon. Gentleman to one of my earlier points: it is a straightforward cancellation route. What he describes to me is not a straightforward cancellation route. That is the key definition. We can have a discussion after this sitting.

Clause 253 requires a trader to send a notice confirming when the contract was, or will be, ended once they have been notified of cancellation by the consumer. This also applies where a consumer exercises a cancellation right under this chapter. The trader must provide this notice promptly, and on a durable medium, and refund consumers any overpayment for which they are no longer liable.

I now turn to new clauses 5 and 6, which I will address together. They propose that traders must obtain a consumer’s express agreement to an auto-renewing contract by the consumer’s active opt-in. Through new clause 5, when consumers sign up to a subscription contract, they would have to be given the option to choose whether their subscription auto-renews after six months. If they do not choose this auto-renewal option, the contract would end after six months unless the consumer expressly asks for it to continue.

New clause 6 would apply equivalent requirements to contracts that auto-renew after a free or low-cost trial and may also auto-renew again subsequently. The Government share the view that consumers must be able to avoid being trapped in unwanted subscriptions and ensure their hard-earned cash is spent only on subscriptions they actually want. However, we know that the majority of consumers enjoy the auto-renewing features of their subscription contracts and the convenience they provide.

Through these new clauses, if a consumer had not opted-in to an auto-renewing contract, but they decide they want to keep their subscription, they would have to repeatedly respond to emails or similar to continue their subscription, or risk it unintentionally lapsing. That risk could be multiplied across each subscription they hold. For that reason, the Government decided not to pursue that approach, which was supported by our public consultation.

It is also important to consider the burdens the changes could place on businesses. The measures would add significant regulatory costs to businesses as they adapt their business models to meet the proposals. We are confident that the approach we have taken strikes the right balance of ensuring consumers are able to exit their contracts at various points during their contract, as well as maintaining consumer convenience.

Furthermore, the existing clauses in this chapter already achieve much of the ambition of the amendments. As I set out earlier, clause 250 will ensure consumers are sent regular reminders about their subscription, including towards the end of a free or low-cost trial. These reminders will ensure that consumers have the right information at the right time to decide if they want to continue their contract, or cancel it.

In addition, through clause 252 we will ensure easy cancellation routes so that subscriptions are as easy to leave as they are to enter. Finally, the Bill enhances consumers’ existing cooling-off rights. Clause 256, which we will discuss shortly, introduces an extra 14-day cooling-off period after a free or low-cost trial, and at the 12-month mark when a longer-term contract auto-renews. That means that, if for any reason a consumer has not been able to take action to cancel before renewal, they have an extra chance to do so.

Together, those measures will ensure that consumers can make informed decisions about their subscription contract. They also make it easy to leave while avoiding creating additional steps for those who want to continue. I hope that reassures hon. Members that the Bill will enable consumers to manage their contracts effectively, and that they feel able to withdraw the amendments.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy)

Clause 248 introduces provisions requiring traders providing a subscription contract to give consumer information as set out in schedule 20, which I will say a few words on shortly.

We very much welcome this clause as necessary in ensuring consumers are as informed as they possibly can be before entering into a subscription contract. I just ask the Minister to expand on subsection (2) It sets out that the information must be provided

“as close in time to entering into the contract as is practicable”.

I would welcome clarification on that requirement. Under that provision, exactly when would the Minister expect a time as close to entering into the contract to be practicable?

Schedule 20 on pre-contract information and reminder notices sets out information that is required for traders to give to consumers before entering into a subscription contract. Among other things, it would require traders to provide information on how often payments will be taken, to provide consumers with a pro-rata cost per month, to state the minimum total amount for which a consumer would be liable under the contract, to outline how the consumer could exit the contract, and to provide a summary of the consumer’s right to cancel the contract and of the right to cancel the contract within a renewal cooling-off period. The schedule is necessary for giving consumers the chance to have that information before entering into a subscription contract. We welcome its inclusion in the Bill.

Clause 249 introduces provisions requiring traders to ensure that the final step consumers take when entering into an online contract involves the consumer expressly acknowledging that the contract imposes an obligation on them to make payments to the trader. This clause and clause 248 are vital in ensuring consumers are informed before choosing to enter into a subscription—a minimum requirement for ensuring effective consumer protection in this area.

The Opposition welcomes how, if the trader does not comply with that requirement, the consumer would not bound by the subscription contract. In addition, traders would be required to give consumers additional information on whether there are any restrictions on the delivery of the product to be supplied under the contract, and which means of payment would be accepted for the contract.

Clause 250 covers reminder notices. Alongside clause 251, it has the effect of requiring traders to issue written reminder notices to consumers explaining that a subscription contract is going to continue, and a renewal payment will fall due unless the consumer takes steps to end it. Those reminder notices would not need to be issued more frequently than once every six months, which we welcome as a timeframe allowing for informed consumers without causing undue annoyance. The first reminder notice must include the first renewal payment, for which the consumer will become liable under the contract, and each subsequent renewal payment. We welcome the clause, and I will further discuss ensuring that consumers are not locked into subscriptions in the provisions to come.

Clause 251 sets out the timing and content of the reminder notices. Under the clause, the reminder notice must be given to the consumer between three and five working days before the last cancellation date, meaning the last day on which the consumer can end the contract and avoid becoming liable for the next renewal payment. The Opposition welcome the timeframes, including that for a 12-month subscription contract, as giving the consumer sufficient time to decide whether they still want their subscription contract to continue and, if necessary, to cancel the contract before a renewal payment is due.

Clause 252 introduces provisions imposing on traders an obligation to put in place arrangements to enable consumers to end a subscription contract in a single communication and without having to take any unreasonable steps. The purpose of the clause is to prevent traders adopting practices that would deliberately hinder a consumer exercising their rights to exit a subscription contract. It is a welcome clause, which should tackle the practice of, as the explanatory notes set out, requiring consumers to phone a call centre, complete a long form, or complete a survey of their reasons for exiting—all those things are barriers to the consumer making the decision to exit the contract. Those are unnecessarily onerous cancelling terms, and could lead to consumers not cancelling a subscription when they need to. Sometimes that could also be because people are short of time or they may not be able to do everything in one moment.

It should be as easy to exit the contract as it is to enter it. Will the Minister expand on whether he is confident the provision will have the desired effect of stopping traders making it harder to leave a contract than to enter it? Does he think the provision goes far enough in ensuring there are not those undue hurdles?

Clause 253 relates to where the consumer has exercised a right to cancel and sets out a requirement on the trader. The trader is to give the consumer an end-of-contract notice acknowledging the request to cancel, which must be in writing and there must be a clear date when it is going to take place. The end of contract notice must be given within three working days after the day on which the consumer has given notice of cancellation, or, when the consumer notifies cancellation online, the trader must give the end of contract notice within 24 hours of cancellation. In addition, any overpayment received by the trader must be refunded to the consumer. We welcome the clause as providing greater transparency for the consumer throughout the cancellation process.

I move to speak to new clause 5 and 6, tabled by myself and my hon. Friend the Member for Pontypridd. As has already been expressed, while the measures in the Bill certainly improve current legislation and ensure that consumers are more informed of their rights and circumstances in subscription contracts, they fall short of the action we need. As Citizens Advice told us during the Committee’s evidence sessions:

“we think that the intent is right, but this is potentially a huge missed opportunity for action on subscription traps.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 14, Q17.]

That sentiment is echoed in the written submission of Which? to the Committee, which states that

“the Government could have gone further within this Bill” in tackling subscription traps. The Minister will be happy to hear that that does not need to mean going back to the drawing board. As I mentioned, we announced in April this year that we want to take action on subscription traps. As Citizens Advice again said in its evidence to the Committee:

“The specific change that would make a huge difference and is legislatively straightforward is to provide that, at the end of an annual trial subscription, the default is that the consumer opts out. That is not about things like car insurance, where there is a detriment to people opting out, but for basic subscriptions, opt-out should be the default.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 14, Q17.]

That is our policy, and it is precisely what new clauses 5 and 6 would do.

New clause 5 would allow the consumer to opt in to their subscription auto-renewing every six months or, if the period between payments is longer than six months, before every payment. If the consumer does not opt in for auto-renewal, they would be required to notify the trader manually if they wanted to renew. New clause 6 would similarly introduce an option for the consumer to opt into their subscription auto-renewing after their free or discounted trial; otherwise, they would have to notify the trader manually if they wanted to continue the subscription. These are two straightforward new clauses that would result in consumers being considerably more empowered at the start of, end of and throughout their subscription contract, allowing them to opt into auto-renewal.

Action in this area could not be more necessary. We have talked about the people spend per year on unwanted subscriptions; indeed, the Government’s own analysis estimates that UK consumers spend £1.6 billion a year on subscriptions. In the midst of a cost of living crisis, this could well be an important support for family and individual income. As the Consumer Council stated in its evidence to the Committee:

“In the online detriment research that we carried out, one consumer told us that they signed up for a 30-day trial but it took them six months to get the subscription cancelled.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 35, Q47.]

In circumstances such as that, the simple process of opting in or out of auto-renewing at the start of the contract would have enabled the consumer to easily opt out and, in doing so, saved them valuable funds. We want to get this issue sorted. I welcome the Minister’s response and again make the offer to work with us on this as we move forwards through the passage of the Bill.

Photo of Kevin Hollinrake Kevin Hollinrake Parliamentary Under Secretary of State (Department for Business and Trade) 3:15, 4 July 2023

There are a few points to pick up on there. The shadow Minister wanted clarification on what “as soon as practicable” means. We expect traders to provide consumers with the relevant pre-contract information immediately before concluding the contract. If the contract is concluded online, that information should be provided during the online order process. If face to face, the trader should give that information before a contract is agreed.

The hon. Member for Bermondsey and Old Southwark raised a point about when the provisions will commence. We do not clearly have a set commencement date at this point in time, but we are keen to get these measures in place to protect consumers. We also recognise that there must be sufficient time for businesses to adapt, and we will engage with stakeholders, including the ones referred to by the hon. Gentleman, to ensure that an appropriate transition takes place. When cancelling or ending a contract, is a single tweet enough? I think that was the hon. Gentleman’s point. The ability of the consumer to end their contract by notifying the trader by any means is a safety net whereby consumers can always use the fall-back option of a simple notification if it is preferable or easier for them, particularly if the trader has failed to provide a clear route for consumers to end their contract.

Where necessary, the Government will provide further clarification in business guidance, which will obviously include discussions with stakeholders. However, as the provisions state, it is important that consumers notify a trader in a way that clearly communicates their intention to end the contract, which can be actioned by the trader. Hence this notification must be given in a sufficiently clear manner. I think it is fair to say that a sole tweet probably would not be sufficiently clear.

Photo of Neil Coyle Neil Coyle Labour, Bermondsey and Old Southwark

I think that last comment about a tweet not being sufficient would be welcomed by responsible businesses that just want to use the verified contact details.

The other point is perhaps a bit more worrying, Chair. We are quite well into this Bill Committee. There is an economic impact assessment. The Minister has said today that the measures would be implemented immediately, but has just corrected that in his final comment. The assessment set out here does not now include the cost to business of implementing these measures, because we do not have a start date. How can businesses plan to implement measures when they do not know their start date, and they do not know because the Minister is still clarifying what would be considered sufficient contact from a customer to close an account?

Do the Government intend to provide new impact assessments to reflect what the Minister has just said—?

Photo of Maria Miller Maria Miller Conservative, Basingstoke

I think that I say that. [Laughter.]

Photo of Neil Coyle Neil Coyle Labour, Bermondsey and Old Southwark

When will the Government provide the right figures for what this will cost businesses in Britain?

Photo of Kevin Hollinrake Kevin Hollinrake Parliamentary Under Secretary of State (Department for Business and Trade)

The assessment is set out. The impact assessment for businesses states a figure of £179 million, I think.

Photo of Kevin Hollinrake Kevin Hollinrake Parliamentary Under Secretary of State (Department for Business and Trade)

No, I am not giving way, thank you very much, because I want to address the hon. Gentleman’s points.

Regarding when these provisions will commence, of course we do not know how quickly this legislation will pass through both Houses of Parliament. It will be subject to much debate, including by people such as the hon. Gentleman. However, I have said clearly that the Government will give guidance and work with stakeholders to make sure that they fully understand the provisions in this legislation and have time to prepare for them. That is what I said in my earlier remarks, so I think the hon. Gentleman is being a bit churlish in terms of that perspective, perhaps for political purposes. However, all the way through this legislation, we have been keen to strike a balance between what is right for consumers and right for businesses. That is a balance we intend to strike, because we fully recognise the needs of business as well as the needs of consumers.

Question put and agreed to.

Clause 248 accordingly ordered to stand part of the Bill.

Schedule 20 agreed to.

Clauses 249 to 253 ordered to stand part of the Bill.