On the 13th June 2014 the new EU Consumer Rights Directive came into effect. Since it was passed in October 2011 it has provoked a fair amount of controversy amongst UK retailers. But, whether for or against, the new legislation is now in place and the reality is that it will have an impact on your business practice.
So, if you are not exactly sure what the new EU Consumer Rights Directive is all about and what it means for your business, then read on. We’ve put together a brief overview of the key factors most likely to have a direct impact on small businesses.
What is the EU Consumer Rights Directive?
In a nutshell, the new directive was implemented with the aim of ensuring all consumers have equal rights across the EU, regardless of how they choose to shop – whether in a high street shop, through the post or downloading electronic content. In particular, this has meant stronger rights for people when they are shopping online.
As we mentioned at the beginning, the new legislation has been controversial and not necessarily welcomed with open arms amongst many UK retailers indeed, as The Guardian notes in an article earlier this year 40% of small businesses actually want to leave the EU. However, the EU Commission argues that the new legislation will actually help businesses enter new markets and make it easier for them to trade across the European Union through the introduction of a single set of common rules for all 27 member states. According to statistics from the EU Commission:
- Only 25% of EU traders sell across borders
- 40% of traders in the EU see the cost of complying with differing national consumer protection rules as a big obstacle to trade
What does the Directive mean for you as a small online businesses?
If you read around there is a general consensus on the key factors that are likely to have a direct impact on SME’s and will therefore require you to make some changes to your current practice. We’ve outlined the key changes below:
- Pay Now button: Your order confirmation button will now need to make it very clear to the customer that by clicking on the button they are actually entering into an agreement and acknowledging their obligation to pay. Buttons need to be clearly labelled as something like ‘Pay Now’ so the customer is in no doubt that they are agreeing to an order and have an obligation to pay. Buttons with wording like ‘Buy Now, Confirm. ‘Check out’ are no longer adequate. And, if you don’t make this clear, then the customer may well be eligible for a refund.
- Total Costs upfront: You must make clear to customers the total cost of goods at the point of sale, before they place an order. This includes all shipping costs, taxes or duties – there should be no surprises for the customer once they have committed to the order – if there are any additional charges not previously pointed out then they will not have to pay them.
- Refunds issued within 14 days. The amount of time you have to issue a customer with refund has been reduced from 30 to 14 days (this is from the point of returned goods being received). You are now also liable to refund standard shipping costs back to the customers. Make sure you factor this into your budgeting – if you are not already offering it then it is going to have an impact on your profit margin. Businesses are now also entitled to offer only partial refunds to a customer should the returned item be ‘diminished in value’. The new legislation states that the customer should take be expected to take reasonable care of the goods they are returning.
- Cancellation rights extended to 14 days. Consumers previously had the right to cancel their order up to 7 days from receipt of their goods. The new legislation extends this to 14 days from receipt of goods. You are also obliged to ensure that a customer is made aware of this before placing their order. In addition you must also make sure you provide a downloadable cancellation form that customers can use (should they so wish) if they wish to cancel their order and return their goods.
- Order confirmation. An order confirmation needs to be sent to customers via a ‘durable medium’ – this essentially means in a way that the customer is able to access and reproduce any time he or she requires it. An email is fine so is a printed receipt or even a personalised account page.
- Digital downloads. New rules have also come into place for electronic downloads. The new legislation requires sellers to provide more detailed information about the downloadable content they are providing. For example if there are limits on the number of copies a customer can make or if there is any relevant software or hardware compatibility information. Your customer also has the right to cancel their order right up to the point the download starts. You need to make sure that you have made the customer fully aware (prior to purchase) that their right to cancel is only applicable until the download commences.
- Opt-in tick boxes: Most of you are probably already undertaking this as part of the Privacy and Electronic Communications Regulation Act, but essentially you must make sure you have no ‘ pre-ticked’ opt in boxes. Your customers need to be able to actively tick the sign-up box and opt-in.
What actions should you be taking?
As this is just a short blog, we’ve just focused in brief on the key factors that as a small business you will need to take into account. Some of the changes you will need to make are minor tweaks such as changing the text on your order confirmation button to ‘Pay Now’. Others will be involved and require you to amend your terms and conditions and even re-train support staff in the new legislation. You may well wish to look at the EU Consumer Rights Directive 2014 in more detail, therefore we’ve added some relevant links in at the end of the article.
As a starting point, we would suggest that you review your current processes and systems to make sure you are in compliance and work through the following checklist so you make sure you’ve covered.
Budgeting. Make sure you have factored in any additional costs into your profit and loss. For example refunding standard shipping costs on returned goods will have an effect your profit margin.
Terms and Conditions: there are a number of changes that will need to be made on your terms and conditions with regard to changes in the cancellation period, shipping, returns and refunds and partial refunds policy.
Order confirmation page: you need to make sure that your order confirmation page reflects the new legislation. The total cost of goods (shipping, takes, duties etc.) must be made clear at the point of sale, your call to action button must clearly show the customer they are entering into an obligation to pay so should read ‘Pay Now’ or ‘Order with Obligation to Pay’ (as suggested in the new regulations) and your terms and conditions are accessible. So there are no misunderstandings, it is a good idea to get customers to acknowledge that they have read T&C’s prior to placing their order.
Delivery information: Update your delivery information and Terms and Conditions to reflect the new mandatory rules that unless there is a previously agreed delivery date, items must be delivered without undue delay and within 30 days from the day the product was purchased.
Paperwork: Make sure all your supporting paperwork has also been amended to update the new regulations.
Customer services and support staff: Make sure your customer services and any relevant support staff are fully briefed on these new regulations as they will have to deal with queries about cancellations, refunds, delivery etc.
Website. Once you have been through all the changes make sure you update your website to reflect all the changes. For example, amend the text on your order confirmation button to ‘Pay Now’, make sure your sign-up boxes are not pre-ticked and enable the customer to ‘opt-in’, your Terms and Conditions are updated to incorporate the new legislation and is easily accessible on the website so customers are aware of their rights prior to placing their order, check there is a link in place so customers can download the cancellation form, FAQ and Delivery and Returns information is up-to-date and easily accessible to customers.
We’d love to hear your thoughts and experiences on this topic, so please do leave a comment.
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