New Rules for Consumer Subscription Contracts

Earlier this year, the Digital Markets, Competition andConsumers Act2024 received Royal Assent, with some parts possibly entering into force in autumn 2024. Aside from significant reforms that the Act will maketo the enforcement of consumer protection law and consumer rights and dispute resolution, the Act also introduces a new regime for subscription contracts likely to enter into force in early 2026. This article provides a summary of key changes to the current regime that businesses dealing with consumer should be aware of.

It is worth pointing out that the new rules will only apply to business-to-consumer subscriptions; they do not have any impact on the rules applicable to business-to-business subscription arrangements. Also note that the provisions are mandatory and cannot be excluded or contracted out.

Pre-contract information

The Act requires traders to provide to consumers pre-contract information about the subscription, such as:

·      the main characteristics of the goods, services or digital content ordered;

·      business contact details of the trader, including their address, email address and telephone number;

·      that the consumer has the right to cancel the subscription during the initial cooling-off period and how they can do so;

·      that the subscription will continue unless the consumer takes steps to bring it to end;

·      that until the subscription ends the consumer will incur charges;

·      any steps or minimum notice period that must lapse before the contract can end;

·      any minimum total amount charged to the consumer;

·      that the consumer will be charged at a higher rate unless they end the contract before that higher rate becomes effective;

·      whether the contract allows the trader to change the frequency of payments;

·      a summary of the consumers rights, including cancellation rights during the initial or renewal cooling-off period; and

·      the existence and conditions of after-sales customer assistance, after-sales services and commercial guarantees.

All pre-contract information must be given together, in writing and on a durable medium, which includes emailing it to the relevant consumer.

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Renewal reminders

Traders must send to consumers notices that their subscription will renew, generally in respect of each six-month renewal period.Each renewal remindermust specify:

·      that the consumer will be charged the renewal payment unless they take steps to cancel the contract;

·      the renewal date;

·      the amount charged for the last renewal compared to the renewal to which the notice relates;

·      how the consumer may bring the subscription to an end so as to avoid becoming liable for the next payment, including contact details for the sending of the relevant notice and the date by which any steps must be taken.

Each renewal reminder must be sent to the consumer within areas on able period of the “last cancellation date”. An additional reminder notice must be given for subscriptions that renew for 12 months or more.

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Easy termination mechanisms

Further, traders must allow consumers to bring subscriptions to an end in a way which is straightforward and without having to take any steps which are not unreasonable for bringing the contract to an end. If a subscription contract has been concluded online, then the trader must allow the consumer to end the contract online, too, and ensure that instructions for doing so are displayed on the website in a place where a consumer seeking to end the subscription is likely to find them.

In any case, a consumer may exercise their right to end the subscription contract by sending the trader a clear statement setting out their decision to bring the contract to an end.

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Cooling off rights

Consumers have the right to cancel a subscription during the initial cooling-off period, as well as during any renewal cooling-off period.The “initial cooling-off period” lasts 14 days from the day the contract is entered into, or, in case of supply of goods, from the day on which the consumer received the first supply of goods. The “renewal cooling-off period” lasts 14days from the day on which the renewal occurs.

In relation to each renewal, a trader must give the consumer a notice setting out:

·      that the subscription is continuing;

·      that the consumer has a right to cancel the subscription during the cooling-off period to which the notice relates;

·      when that period begins and ends;

·      how the consumer may exercise the right to cancel;

·      if the consumer may lose the right, the circumstances under which that will happen; and

·      the consequences of the consumer exercising the right, including any refund the consumer may be entitled to, any reason that refund might be diminished, and in respect of a contract for the supply of goods, whether the consumer will be responsible for returning those goods to the trader.

A cooling-off notice must be given on the first day of the renewal cooling-off period to which it relates, and separately from the giving of any other information.

End of contract notice

Finally, where a consumer has exercised their right to cancel a subscription, the trader must give the consumer an “end of contract notice” acknowledging that fact. If the trader has received any overpayment from the customer they must also refund that overpayment.

An end of contract notice must be in writing on a durable medium(including by email) and given before the end of the relevant subscription period. It must also set out the date on which the contract was or will be cancelled.

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Conclusion

Despite the new regime not coming into effect until 2026, clients and prospective clients are strongly advised to review the new rules and amend their processes and documents accordingly. Doing so will not only future-proof their business practices, but also ensure that they are in line with the best practices applicable to business-to-consumer subscriptions. It is also worth noting that the Competition and Markets Authority (who is responsible to the enforcement of the provisions of the Act) will be able to impose fines of up to10% of a business' global turnover for non-compliance when the new rules enter into force.

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