The Financial Conduct Authority (FCA) has intervened to force a debt management firm to amend three of its terms and conditions that related to cancellations. The regulator says it has taken action under the Consumer Rights Act 2015 (the CRA) and the Unfair Terms in Consumer Contracts Regulations 1999 (the UTCCRs).
The first issue concerned part of the firm’s ‘Pre-Contract information sheet’, where it stated:
“If you wish to cancel your Debt management plan you can do so at any time. However, as our commitment to you will begin when you enter into an agreement with us, if you do subsequently cancel the agreement we will lose the time we have spent on your case and we reserve the right to charge you an amount which is sufficient to cover any losses and costs suffered due to your cancellation.”
Similar wording was contained in the Debt Management Agreement, which stated:
“Our commitment to you begins when you sign this agreement. If you cancel this agreement, we will lose the time we have spent on your case and we reserve the right to charge you an amount which is sufficient to cover any losses and costs suffered because of your cancellation. If you cancel this agreement with 14 days, which is known as the cooling off period, we will refund all fees paid. If you wish us to commence work before the 14-day period expires you may elect to waive the cooling off period.”
The FCA was concerned that these terms allowed the firm to impose disproportionately high fees, and that they effectively gave the firm sole discretion to charge unspecified amounts. It cited section 62(4) of the CRA and Regulation 5(1) of the UTCCRs, which state that a 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.”
The firm has now amended its terms to state that any cancellation fee will not exceed the total of the initial set-up fee plus one month’s servicing fees, less any sum already paid by the customer.
The third area where the FCA had concerns was where the Agreement Conditions stated:
“The Client(s) may terminate this agreement at any time by given [name of firm] one month’s notice of their intention to do so.”
Here the FCA’s undertaking refers to sections 64(3) and 68(1) of the CRA and Regulation 7(1) of the UTCCRs. The regulator believes that the Agreement Conditions did not use “plain and intelligible language”.
The firm has now removed this third offending statement entirely. It has also amended the two other terms so that they now state customers must provide one month’s notice if they wish to cancel the contract outside of the 14-day cooling-off period.
The firm is now writing to all its existing customers to provide them with a copy of the new contract terms. It will not now seek to enforce the original wording in respect of existing customers; and previous customers, who had cancelled their agreements with the firm, will be provided with appropriate redress.
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