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Firms warned against including unfair terms in consumer contracts

Small businesses are being warned they cannot enforce unfair terms in consumer contracts and could face legal action if they use such conditions.

The Competition and Markets Authority (CMA) is advising FSB members to review their terms and conditions to make sure they are fair.

“The rules on the use of unfair terms and conditions in consumer contracts are covered under the Consumer Rights Act 2015,” says Nisha Arora, Senior Director, Consumer, at the CMA.

Research by the CMA found just 15 per cent of businesses say they are familiar with the Act, and many incorrectly believe that they can enforce an unfair term in a contract if a customer has signed it.

The CMA has produced a series of short guides and videos on several areas where small firms are potentially putting themselves at risk of using unfair terms.

These include terms to do with deposits or advance payments; customer cancellations; limiting liability or the payment of appropriate compensation where the business is at fault; implementing excessive sanctions if customers do something wrong; and the use of automatic rollovers of contracts, where terms are used to unfairly tie customers into something they no longer want.

This is an area that FSB has also been lobbying on, arguing small firms need protection against such contracts that is similar to the type consumers receive.

For more information on unfair terms, visit gov.uk/cma/fair-contract-terms