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Consumer Protection RegulationsBack

ConsumerRightsRecent prosecutions of car dealers have brought into sharp focus the 2008 Consumer Protection Regulations (CPR’s).  The CPRs regulate against unfair commercial practices and apply to all businesses when dealing with consumers.  It would seem timely following recent Trading Standards activity to remind dealers of their obligations under these regulations.  Prosecutions have occurred where dealers have not declared that a vehicle they have sold is ex-rental, seen as a misleading omission that has influenced a consumer’s decision to buy.

The CPR’s were brought into UK legislation from the EU Unfair Practices Directive and were intended to simplify and increase consumer protection from practices seen to be unfair.  The CPR’s prohibit a number of practices seen as misleading actions or omissions, or aggressive business and banned practices. These are actions that could influence a customer’s buying decision at any time in the buying process either pre, during or post sale.

The NFDA has put this Guidance together to assist members to be compliant with the CPR’s.

Overview

The CPR’s expressly forbid, as the name would suggest, unfair businesses practices that could detrimentally impact a consumer or sway their decision to buy a vehicle.   The legislation particularly defines unfair practices, misleading actions, misleading omissions and aggressive commercial practices.  Dealers are able to protect themselves through the ‘Due Diligence Defence’.    Penalties for contravention of the regulation can be stiff and the offence may be both civil and criminal.

Breaches of the CPR’s

The CPR’s relate to business dealings with consumers.  A consumer is defined for the purpose of the regulations as an ‘individual who, in relation to a commercial practice, is acting for purposes which are outside his business.  There is also a concept of ‘average consumer’ which is distinct from an actual consumer.  Actions by a company need to be viewed by how they would impact the average consumers rather than an actual consumer, in other words would an action impact an average consumer not just the one you are selling too.

Businesses are expected to operate with Professional Diligence, if not there would be a breach of the CPR’s.  Professional Diligence means ‘the standard and special skill and care which a trader may reasonably be expected to exercise towards consumers.’  It is to act in good faith and use honest business practices at all times.  Further, businesses must always act in a professional manner.   Practices that might be seen as less than professional:

  • The failure to carry out pre-sales checks on vehicles for mechanical condition, mileage or history.
  • Declining customers their contractual rights if a vehicle has been sold with a fault needing rectification.
  • Failure to deal with customer complaints.

As well as the overarching requirement of professional diligence the CPR’s lay down a number of specific types of unfair practice which are set out below.

  1. Misleading Actions

Include:

  • False statement about vehicle condition or history, or claiming a vehicle history check has been undertaken when it has not.
  • Clocking or offering for sale a clocked vehicle.
  • Misleading advertising.
  • Using statements that might mislead customers such as ‘sold as seen’, ‘trade sale only’ or ‘no refund’.
  • Not making it clear about previous vehicle usage such as stating the vehicle has had one owner when it is from an ex-rental company or other multi-driver source.
  • Misleading customers about the value of their part exchange.
  1. Misleading Omissions

Include:

  • Failure to disclose existing faults on a vehicle.
  • Failure to disclose the results of checks such as mileage discrepancies or a mechanical check.
  • Omitting to declare that an ex-business vehicle has been used by multiple users such as a driving school or rental vehicle. (The original OFT Used Car guidance specifically mentions ex-rental vehicles)
  • Failure to alert customers to key exclusions or terms of a warranty or guarantee.
  1. Aggressive Business Practices

Include:

  • Using high pressure selling techniques to sell a vehicle or additional services.
  • Exploiting a consumer’s misfortune or circumstances.
  • Using aggressive behaviour to force consumers into dropping complaints against a business.
  • Forcing consumers to buy a warranty to have faults fixed which should be rectified by the dealer.
  1. Banned Practices

There are a number of business practices that are banned in all circumstances such as:

  • Must not claim to be signed up to a code of practice if this is not true.
  • Must not claim that you have approval, endorsement or authorisation by a public or private body when this is not true.
  • Must not use pricing to attract customers knowing that goods at this price cannot be delivered, such as advertising a base model car when only higher specification vehicles are available.
  • Falsely stating that a vehicle is only available for a limited period to force a quick sale.
  • Must not present rights given to a consumer in law as a distinctive feature of a traders offering.
  • Must not falsely claim or create the impression that a dealer is acting for a purpose unrelated to their business. For example, a dealer selling a second hand vehicle displaying it as if a private individual.

How can dealers ensure that they are compliant with the CPR’s

Of course it is easy to say that the best way to ensure compliance of the regulation is to avoid practices that are banned by the regulation.  However, it is not always so black and white.

The important thing to be aware of is the need to supply a vehicle in a satisfactory condition.  This means that the goods should be fit for purpose and be of a quality expected for the age, mileage and price of the vehicle.  Dealers should also ensure that all dealings with customers are polite, non-aggressive and transparent.  Dealers that always act in a professional manner will be able to prove they act with ‘Professional Diligence’ and this will help to ensure compliance and if needs be should provide a defence under ‘Due Diligence.’

Due Diligence

The CPR’s allow a defence of ‘Due Diligence’ if subsequently after sale a vehicle is found to be defective or that important details were not disclosed that swayed the customer’s decision to buy.

The following actions that would help establish due diligence and protect dealers from prosecution under the CPR’s are:

  • Vehicle history checks pre-sale – reasonable steps should be taken to ensure a vehicle is not stolen, does not have outstanding finance, has not been an insurance write off and that the seller has ‘good title’ to the vehicle. In most circumstances it would be advised to use a professional vehicle checking service provider.  Any information from the report should be cross referenced with the seller.  The seller should also be asked to provide documentary evidence such as service records and MOT certificates to support the vehicle history.
  • Vehicle Mileage Check pre-sale – reasonable steps should be taken to verify the mileage of a vehicle for sale. This should normally be done through a mileage checking company.  A dealer may take additional steps to confirm mileage by ensuring the physical condition of the vehicle tallies with the mileage declared and by consulting the VOSA database.  A dealer may also use other means to determine vehicle mileage such as service history if the car is being purchased from an existing customer and the vehicle is known to the dealer.  Unless you are certain the mileage is accurate you must not warrant the mileage and should let customers know that the mileage has not been verified. Sales documentation including adverts should not carry the odometer reading if the mileage has not been confirmed as accurate.
  • Disclose Mileage Discrepancies – Consumers should be informed prior to a vehicle sale if there are any discrepancies in the mileage record and what steps have been taken to verify the mileage of the vehicle.
  • Do not rely on Mileage Disclaimers – these should not be used as a substitute to carrying out a mileage check and should only be used as a last resort if mileage cannot be verified.
  • Pre-sales mechanical checks – reasonable steps should be made to ensure vehicles that are sold are in a roadworthy and good mechanical condition. A full mechanical inspection of the vehicle would be preferable.  However, in the absence of a full mechanical check a recent MOT could suffice as long as it is clear that it is an MOT check that has been carried out rather than an inspection.  A recent MOT would be within the last month and should be accompanied by disclosure of any advisory notices given by the testing station.  Supply of an unroadworthy vehicle is not only a contravention of the CPR’s but could also be an offence under the Road Traffic Act 1988 or General Product Safety Regulations 2005.
  • Check to see if the vehicle is subject to any recalls – for franchised dealers that hold the franchise of the vehicle this should be a simple check with your manufacturer. If not the VOSA website (http://www.vosa.gov.uk/vosa/apps/recalls/default.asp)  has a free facility to make enquiries that give details of all recalls that maybe searched by vehicle make and model.
  • Record all vehicle checks – ensure you keep a record of all checks (mechanical, mileage and history) in case there is a need at a later date to refer to them.
  • Avoid placing on the forecourt for sale any unchecked vehicles – vehicles that have not been fully check will expose a dealer to a breach of the CPR’s. You should also avoid selling the vehicle until all the checks have been completed.
  • Avoid using Disclaimers – using a disclaimer is not a replacement for a full vehicle check and leaves the dealer open to a customer cancelling as well a falling foul of the CPR’s.
  • Ensure customers are given all the information they require to make an informed purchasing choice – therefore not just the vehicle price and basic vehicle details such as make and model but: vehicle history; odometer reading and mileage check details; vehicle faults needing rectification and MOT status; insurance record such as previous accident damage and vehicle write off; multiple user vehicle such ex-rental or driving school. There is no specific requirement for this information to be given in writing but it is difficult to evidence verbal notification and we would therefore advise where possible for the details to be given in writing perhaps as a form of check-list.  The point about disclosing users is of particular importance due to recent Trading Standard prosecutions under the regulations for omitting to disclose that a vehicle is ex-rental.
  • Give clear details of any warranty or guarantee – should include details of cover, limits and any exclusions as well as the name of the warranty provider. Any specific conditions of the warranty should be disclosed i.e. where the vehicle needs to be taken if repairs are required under the warranty.   Any work carried out under the warranty should be done so promptly and the consumer kept informed of any delays or other problems with carrying out the work.
  • Have a robust and fair customer complaints procedure – a procedure needs to be well documented and staff members need to have a clear understanding of it. You should endeavour to deal with customer complaints promptly in a fair and professional manner at all times.  Complaints should be recorded and the outcome noted.  Failure to deal with customer complaints in the proper manner would be an infringement of the CPR’s.
  • Be mindful of the Regulations when advertising and display vehicles – the CPR’s are not intended to impact normal business practice but this does not mean that a dealer can ignore the rules. Good practice must be adhered to at all times but this may be tailored to the circumstances and the type of vehicle for sale.

Dealers Selling Through Auctions

One particular area of concern that has been raised by dealers is the risk of breaching the CPRs when selling vehicles through an auction.  Most auctions do not conduct closed sales and therefore buyers at sales may be consumers.  As consumers are present it is possible that the CPR’s would cover an auction sale if a vehicle is sold to a consumer.   In some circumstances it may be possible to use the argument that a consumer at the auction is not acting as a consumer if it can be proved they are buying cars to sell on, in other words acting as a trader.   However, this would need to be proved and the legislation is written in such a way that it may be difficult to confirm.

The other issue with auction sales is that the CPR’s do not just affect the auction sale but can be applied further up or down the sales chain.  A dealer who puts a vehicle into an auction with a fault or mileage discrepancy that is then bought by a consumer, could find itself with a breach of the CPR’s.   This could also be the case if the dealer entering the vehicle originally sourced the vehicle from another dealer.

Dealers therefore need to be very aware of the consequences of entering any vehicle to auction that may have a problem.   To ensure that dealers protect themselves we would recommend the following:

  • Avoid mis-describing vehicles – refrain from using descriptions such as in ‘good mechanical condition’ or declaring mileages accurate if they have not been confirmed by a mileage check.
  • Ensure all important information is disclosed – information such as insurance history, particularly write offs, multi-user ownership such as daily rental, and mechanical faults you are aware of.

Much discussion has occurred around the need to carry out thorough condition checks as well as history checks on vehicles put into the auction for sale.  We would recommend that as a minimum a vehicle history check is undertaken to ascertain clear title of the vehicle and any outstanding finance.  We would also advise a mechanical check but a dealer must decide whether the age and value of the vehicle would make this economically viable.

Trading Standards do accept to a point that buyers at auction, even consumers, will have a lower expectation of the vehicle than if they have bought in a dealership.   They also except that consumers are likely to pay less for a vehicle bought through this channel.   In light of this, any alleged breach of the CPRs through an auction sale would be looked at slightly differently to one happening at a dealership.  However, dealers should not rely on falling back on the defence that the vehicle has been sold by auction.

Finally

Dealers need to be fully aware to the CPR’s and actively ensure that they are not breaching them.  Trading Standards only need to prove that an average customer has been misled by a dealer by not providing relevant information for their prosecution to succeed unless the dealer can fall back on the due diligence defence.  An offence under the CPR’s carries a fine of up to £5000 or 2-year imprisonment for a Director who had knowledge the offence was being committed.  Current Trading Standards prosecution show that there is a real risk for dealers who do not take appropriate action to ensure the business complies with the regulations.    This means having systems in place to ensure all vehicles are properly checked, that all vehicles have full histories, that staff are trained to give the correct information to consumers, and you have a robust and effective complaints procedure in place.

This document should be taken as only guidance.   Further information can be sort from the NFDA or your local Trading Standards, as well as from your own legal advisors.

To contact the NFDA:

Telephone: 01788 538303

Email: Louisewoods@rmif.co.uk

Posted by Sue Robinson on 29/07/2016