DMCC Act subscription contracts rules: What's the latest?

What do we know?

What further information are we expecting?

The new rules will capture most auto-renewing consumer subscription contracts for goods, services and/or digital content which renew for a fixed or indefinite period and which give the consumer the right to cancel. 

This includes contracts which offer consumers a free/discounted trial period, and where this is offered, traders must take some additional steps as described below.

Note that these rules only apply where the goods, services or digital content are supplied in exchange for payment – so free subscriptions are not caught. 

There is a list of excluded contracts set out in Schedule 22 – these consist predominantly of contracts which are already subject to sectoral regulation such as telecoms, utilities and financial services subscriptions.

Secondary legislation

We may see further categories of excluded contracts added to the list at Schedule 22, or categories removed but we are not expecting anything significant.

Guidance

We expect that the guidance will give some helpful examples of how to determine if your subscription product is in scope, but there are no major concepts that require clarification in the guidance. 

What do we know?

What further information are we expecting?

As well as ‘full’ pre-contract information, which is akin to that which is already required to be given to consumers under existing consumer rules, the DMCCA requires a list of ‘key’ pre-contract information to be brought to the attention of consumers before they sign-up to a subscription. 

The list of ‘key’ pre-contract information at Schedule 23 includes information about the recurring liability of the consumer to pay until they cancel, frequency of payments, monthly cost (even if not a monthly payment contract), the minimum total amount payable during the subscription etc. This must also include the timings for which reminder notices will be sent. 

This information must be given all together and separately from the ‘full’ pre-contract information, and the consumer must not have to take any additional steps to read it, which suggests that the use of hyperlinks is unlikely to be acceptable. It must be given as close as possible before the consumer commits to the contract.

In addition, the final step which the consumer takes to enter the contract must involve an express acknowledgement that the contract imposes an obligation to make payments to the trader. 

Secondary legislation

We are expecting to see further provision as to how and when information and notices required under the new subscription rules must be given to consumers, including the key and full pre-contract information. 

We are also likely see additional provisions dealing with the way that information as to delivery restrictions and acceptable payment methods – which are singled out within the legislation – must be communicated. 

Guidance

It is hoped that the guidance will give some further detail in relation to a number of requirements under the pre-contract information rules, including:

• The requirement for consumers not to have to take any steps to read the key pre-contract information other than those required to enter the contract – in particular, clarification as to whether this effectively prohibits hyperlinks, pop-ups and other space-saving methods of communicating information.
• Clarifying the extent to which the key pre-contract information must be given separately from the full information.
• Further guidance on reasonable timings for the provision of reminder notices, the timings for which must be set out in the pre-contract information.
• How to carry out the ‘minimum total amount’ calculation to determine the minimum total amount for which the consumer will be liable under the contract – which must be included in the key pre-contract information – in particular for subscriptions with variable costs. 

What do we know?

What further information are we expecting?

Traders will be required to provide consumers with a reminder notice in advance of renewal payments once in every six-month period – or, for contracts with less regular payments, in advance of each renewal payment. 

These notices must include the information set out in Part 3 of Schedule 23. 

We have some limited detail as to how this information must be given, including that it must be given all together, and these notices must be provided a ‘reasonable period’ in advance of the date on which the consumer becomes liable for the renewal payment (which must be determined by the trader and included in the key pre-contract information). Other information can also be included in the notice, but the prescribed information must be given more prominence.

Further notices are required where contracts have a free/discounted trial period, and for contracts which renew for 12+ month periods.

Secondary legislation

As above, we are expecting to see further provision as to how and when information and notices required under the new subscription rules must be given to consumers. Currently, the legislation is very light touch on the format in which these must be given, although the DBT consultation gives some indication of what may be expected, such as (for notices sent by email) that the subject line of a reminder notice email making immediately clear that the primary purpose of the email is to provide the reminder notice information, and such information to be the first thing that the consumer sees. 

We may also see regulations which modify this requirement, or remove it altogether, for specific kinds of traders or contract.

Guidance

In addition to further provision for how these notices must be given in secondary legislation, we expect to see guidance giving examples of what is and is not acceptable – for example, whether notices must be given by email or whether other formats such as in-app notifications are sufficient. 

What do we know?

What further information are we expecting?

In addition to the existing 14-day cooling-off period which consumers are currently afforded at the beginning of a contract under the Consumer Contracts Regulations 2013 – termed the “initial cooling off period” under the DMCCA subscription rules – the DMCCA introduces a new 14-day “renewal cooling-off period” which applies following a relevant renewal. 

A relevant renewal is either the first payment following a free/discounted period or where a contract renews onto a 12+ month period. 

To ensure consumers are aware of these new subscription-specific cooling-off rights, traders are required to send consumers a “cooling-off notice” on the first day of the period, containing prescribed information such as that the consumer has such rights, when they end, how they cancel etc. which must be given separately from any other information. 

Specific details on the consequences of consumers exercising these rights has not yet been determined, and was one of the issues covered in the DBT consultation at the end of last year.

Secondary legislation

The DBT consultation sought views on the consequences of consumers exercising their new cooling-off rights in certain circumstances, such as the ability for traders to recover goods already supplied, the circumstances in which consumers may not be entitled to a full refund, how these rights should apply to subscriptions for services and digital content where a large proportion of the value of the subscription is received during the cooling off period and whether there are circumstances in which consumers can waive these rights etc. We are therefore expecting the secondary legislation to set out further detail on the operation of these rights.

In addition, this will set out circumstances in which the cooling-off period may be extended – primarily, where a trader fails to inform the consumer of their cooling-off rights as required. As above, this legislation will also provide further detail on how and when notices must be given, including the cooling-off notice.

Guidance

The rules setting out how the cooling-off rights apply to different contracts, and in different scenarios, are likely to be complex and therefore we expect detailed guidance to accompany these to ensure traders know what they need to do to comply.

In addition, it is hoped the CMA will give guidance on the level of detail expected to be included in the cooling-off notice. For example, the notice must include information on the refund that the consumer would be entitled to if they exercised their cooling-off rights but it is unclear whether it would be sufficient to just confirm the consumer would be entitled to a refund or whether specific details of the exact refund that consumer would be entitled to (which may be difficult for digital content subscriptions, where this may depend on usage) must be specified. 

What do we know?

What further information are we expecting?

The government was clear that it wanted to make subscription contracts as easy to get out of as it is to sign up to them, to tackle so-called “subscription traps”. However, the DMCCA is currently light in detail on the way the cancellation provisions will work, and makes provision for substantial detail to be provided in secondary legislation. 

What we do know is that traders must make arrangements to enable a consumer to bring contract to an end in a way which is straightforward and without having to take any steps which are not reasonably necessary. For subscriptions entered into online, consumers must be able to cancel online and such options must not be hidden away. 

Traders must also make arrangements for consumers to be able to cancel their contract by making a clear statement to the trader setting out their decision to bring the contract to an end. It is unclear at this stage how widely this is intended to apply, for example whether a comment on a social media post expressing a desire to cancel would be sufficient (which would place a significant burden on traders), and we expect more guidance on this point.

Finally, traders must send an end of contract notice within prescribed timeframes to acknowledge the consumer bringing their contract to an end, and refund any overpayments. This notice must be given in writing on a durable medium.

Secondary legislation

The DMCCA makes provision for regulations to be made to cover a number of issues relating to the way in which consumers can bring their subscriptions to an end, including:

• How and when cancellation rights may be exercised
• The consequences that follow incl. refunds
• Potentially requiring the right to cancel to be exercised before the end of a specified period
• Whether other conditions or restrictions can be imposed on the right to cancel, e.g. where the consumer chooses to be supplied with digital content during their cooling-off period
• When liability for payments under a cancelled contract is extinguishes
• A trader’s rights to recover goods and/or digital content under a cancelled contract
• What happens where a consumer has more than one right to cancel
• The period of time within which refunds of overpayments must be made
• What remedies are available to a consumer after the contract is cancelled for breach of an implied term

We will also see further information about how and when notices must be given, including the end of contract notice.

Guidance

The topics to be covered in secondary legislation are likely to be detailed and complex, accounting for cancellation and its consequences in all different types of subscription contract, and therefore we expect this to be accompanied by detailed guidance.

One important clarification will be what constitutes a “clear statement” given by a consumer which enables them to cancel. For example, whether a tweet or a comment on a social media post is enough, or whether this can be limited to statements made through official communication channels.