1.1. The Government has recently proposed the Green Deal, a revolutionary programme to increase the energy efficiency of the UK's building stock. Under the Green Deal, millions of electricity bill payers will be able to have new energy saving home improvements without having to front up the cash. Instead, businesses will provide the finance and the necessary materials, equipment and services, getting their money back via the electricity bill.
1.2. At the heart of the offer is the "Golden Rule": the principle that the estimated savings to the consumer on energy bills will always equal or exceed the cost of the work. The Government hopes that the Green Deal will transform the market, removing a number of barriers that currently put people off energy saving home improvements and assist the UK's carbon emissions reductions target of 80% by 2050. These Plans could last up to 25 years so customers will need to be confident they will be protected whether as the original owner of the property which has received the improvements, or as buyers of properties with Green Deal Plan installments attached to their energy bills.
1.3. The Green Deal represents a significant opportunity for business. Retailers, trades people, energy companies and investors will have access to a huge and growing market, which could support around 100,000 jobs across the UK within five years according to Government estimates. Consumer confidence in the Green Deal is vitally important and will be for the benefit of the whole sector so it is essential that Green Deal Providers understand and follow the relevant consumer protection laws.
2. How will consumer law impact the Green Deal?
2.1. It can often be a difficult technical question as to whether a customer of a business is "a consumer" although under many of the proposals under the Green Deal there will clearly be a contract between the Green Deal Provider of the plan and a "consumer", for example, a private home owner. In this context, the Green Deal provider is the party who has the ultimate contract with the consumer, which as noted below, may be under a separate finance agreement. It may also be the case that small private landlords will be treated as consumers. Green Deal Providers must therefore be aware of consumer laws in all aspects of their sales and marketing practices.
2.2. This briefing note summarises the consumer laws relevant to the Green Deal, the new Green Deal consumer protection proposals suggested by the Government and some of the practical implications for Green Deal Providers. Consumer credit laws will also apply and these will be considered first of all.
3. Consumer Credit Law
3.1. Once a property has been assessed under the Green Deal and the consumer has received tailored energy saving recommendations from an accredited assessor, a firm quotation can be offered by a Green Deal Provider. Where Green Deal Providers are providing credit they will subject to the Consumer Credit Act 1974 (CCA) and will need to hold a consumer credit licence from the Office of Fair Trading (OFT). This provides protection against mis-selling of the credit and allows for "cooling off" periods, wherein consumers can change their mind about continuing the credit agreement within 14 days of its commencement. The on-going billing of the plan installments will need to be accurate, kept up to date and transparent to energy bill payers. The protections afforded to customers for the collection of their Green Deal Plan installments will be equivalent to those available for other credit repayments under the CCA.
3.2. The finance arrangement itself is usually a separate contract to the provision of materials and services and this means that there may be two concurrent Green Deal contracts, one for the finance and one for the materials and services. However, it appears from the Government's proposals that the Green Deal Provider may have one contract covering finance and the goods and services. Green Deal financiers need to consider the commercial risks associated with a separate agreement as those agreements which are regulated under the CCA could be subject to connected lender liability under s.75 CCA for any defects in the products/services provided. This is a similar liability that banks have to consumers when consumers buy goods using a credit card.
4. The Cancellation of Contracts Made in a Consumer's Home or Place of Work etc Regulations 2008 – The "Doorstep Selling Regulations
4.1. The Doorstep Selling Regulations give consumers protection when they buy goods or services from a trader at the following locations (NB – "trader" would include Green Deal Providers):
4.2. on the doorstep or in the home; or
4.3. in someone else's home; or
4.4. at the consumer's place of work; or
4.5. when the consumer buys from a trader on an excursion they have arranged away from their business premises.
4.6. It will not matter whether the consumer invites a Green Deal Provider into their home or not – the Doorstep Selling Regulations cover both solicited (invited) and unsolicited (uninvited visits or 'cold calling') visits. They also cover a follow up meeting prearranged at the home following an initial cold call or a letter sent to the householder.
4.7. If the consumer changes his or her mind about a purchase above the value of £35, the consumer has seven calendar days to cancel the contract (the "cooling-off" period). However, under the new EU Consumer Rights Directive, which must be implemented in the UK by the end of 2013, the cooling-off period will be extended to 14 days.
4.8. A Green Deal Provider must advise the consumer in writing that the consumer can cancel the contract – this information must usually be set out in the contract and should be legible and have equal prominence to any other part of the agreement. If the consumer is not given this information in writing the Green Deal Provider can't hold the consumer to anything in the contract. The Green Deal Provider may also be guilty of a criminal offence, and may be investigated by the relevant local authority Trading Standards Service.
4.9. The consumer can decide to have work done, or to receive goods, within the 7 day cooling-off period, if it gives its agreement in writing. This would need to be a notice that is signed by the individual consumer and provided to the Green Deal Provider.
4.10. It remains to be seen how Green Deal Providers will operate their sales practices under the Green Deal but if other business models within the energy sector are to be followed (for example the provision of solar panels to households), then it is likely that the Doorstep Regulations will be relevant. It is therefore important that Green Deal Providers are aware of the Doorstep Selling Regulations at an early stage so that they can structure their sales and marketing processes to allow for the cooling off period, for example, by correctly wording their contracts and by considering whether any installation services will start before the cooling off period has ended.
5. Sale of Goods and Services
5.1. The Sale of Goods Act 1979 (SOGA) and the Supply of Goods and Services Act 1982 (SOGSA) imply identical provisions which apply to goods sold to consumers and services sold at the same time. It is likely that under a typical Green Deal Plan the Green Deal Providers simultaneously will be providing goods and services.
5.2. The implied terms under SOGA and SOGSA means that products provided to consumers must comply with the following:
5.3. They must comply with any descriptions provided.
5.4. They must be fit for purpose.
5.5. They must be of satisfactory quality.Services must be carried out with reasonable care and skill.
5.6. The four requirements above are known as the Implied Warranties and there is a prohibition under the Unfair Contract Terms Act 1977 on a business attempting to exclude or limit the Implied Warranties in its contracts with consumers. Any limits or exclusions will be unenforceable and may in addition constitute a criminal offence of misleading a consumer as to his or her rights under recent trading standards laws.
5.7. Two important consequences of the Implied Terms are that:
5.8. The Green Deal Provider must take care that its terms and conditions of sale that are used with consumers and any sales materials used comply with the law and do not attempt to limit or exclude the implied terms.
5.9. The Green Deal Provider must carefully consider its purchase agreements with its own suppliers as if there is a limited warranty contained in a purchase agreement it will mean that the Green Deal Provider is exposed. For example, if the wholesale supplier gives a limited 12 month warranty to the Green Deal Provider in relation to a product, the Green Deal Provider is then exposed to the consumer for between 12 months and the length of warranty the consumer is entitled to, depending on the nature of the product and the actual circumstances at the time.
6. Unfair Contract Terms and the impact of the new Golden Rule
6.1. The Unfair Terms In Consumer Contract Regulations 1999 ( the "1999 Regulations") apply to the sale of goods and /or services to consumers in the UK when standard terms of business are used so they will be relevant to Green Deal Plans with consumers. The 1999 Regulations provide that an unfair term is not enforceable by a business against a consumer.
6.2. 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 consumers. Contract terms should also be in plain and intelligible language. If there is doubt as to what a term means, the meaning most favourable to the consumer will apply.
6.3. The recently decided bank overdraft charges litigation has been helpful to businesses as it has made it clear that provided that a pricing term is in plain and intelligible language and has certain prominence in the trader's documentation, then the pricing term will not be assessed by a court as to fairness.
6.4. The Government proposals regarding the Golden Rule will provide an important caveat to the decided principles of the bank overdraft charges case as the Golden Rule will require that the cost of the goods and services provided in connection with a Green Deal Plan cannot exceed the energy bill savings. This means that the courts may be able to consider and challenge the price charged to a consumer in connection with a Green Deal Plan if it does not comply with the Golden Rule. This is a new and untested principle in consumer law. A further twist lies in the fact that the charge attaches to the home/utility bill and not to the individual consumer that entered into the original plan. This is a further novelty in that a person who is not party to the original Green Deal Plan may have rights in the future.
7. How may the Green Deal proposals offer new protection to Consumers?
7.1. Accreditation – Assessors and installers will need to be members of a Green Deal accredited certification body which will apply appropriate standards. These standards will be independently accredited by the United Kingdom Accreditation Scheme (UKAS).
7.2. The new Green Deal Code – The licensing and accreditation that will be required for companies to trade as Green Deal Providers will require companies to meet a new Green Deal Code to be developed in partnership with industry. This will govern all aspects of Green Deal Plans and require Providers to:
7.3. provide a statement of expected energy bill savings, based on the assessment, showing how these should be sufficient for the customer to meet the plan installments;
7.4. only offer a Green Deal Plan to pay for energy saving measures recommended by an accredited Assessor, using an objective method;
7.5. only use Green Deal certified Assessors and Installers, certified by Green Deal accredited trade bodies;
7.6. guarantee the quality of assessment and installation, as well as their performance
7.7. The accredited schemes will build in processes to handle complaints and offer redress for their members' customers. The Green Deal Code will require providers to set out these details in the Plan documentation. The Government is also to set up Green Deal Advice Line which will be accessible to consumers when something goes wrong. Green Deal Code will deal with redress procedures and require all professionals operating under the scheme to inform customers of the Green Deal Advice Line.
8. Practical tips for Green Deal Providers
8.1. Green Deal Providers should consider if they are dealing directly with consumers at any time. If they are, then:
8.2. Consider the need to obtain a CCA licence from OFT and comply with the CCA;
8.3. Consider the application of the Doorstep Selling Regulations and be aware of the 14 day cooling off period that will be implemented by the end of 2013;
8.4. Be aware of the implied consumer warranties when negotiating contracts under which goods/services are supplied to itself;
8.5. Use terms and conditions which are suited to your business model and which take into account the relevant UK and EU consumer legislation; and
8.6. Follow the Green Deal Code once it is completed.
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.