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When Tesco's Breached the Consumer Credit Act

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Tiffany Fieldman

on 19 April 2015

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Transcript of When Tesco's Breached the Consumer Credit Act

When Tesco's Breached the Consumer Credit Act

Tesco’s have breached the Consumer Credit act, Tesco’s bank is set to pay out £43 million in compensation after a loan statement blunder left 175,000 out of pocket. The supermarkets banking arm has apologised to customers after there was a technical breach,meaning they didn't send out personal loan and credit card statements.


Tesco’s are under criminal investigation for illegally overstating profits. The online Tesco bank has admitted the breach of industry rules and those who accused interest on loans during that time must be refunded, which will cost them on average £228 a payout. A customer received a cheque for £100 in the post, becoming the first person compensated for this mistake- which breached the 1974 Consumer Credit Act. Under the Act failure to provide prompt ‘post contractual’ information is viewed as a statutory breach. By failing to send prompt ‘ post contractual’ information to customers regarding personal loan and credit card statements, Tesco bank breached the Consumer Credit Act and will end up having to pay out £43million

Consumer Credit Acts 1974 &2006

Limitation: is a limiting rule or circumstance, limitations are basically a restriction.

Consumer Law : is a group of laws and organisations designed to make sure consumers have rights


Legal Constraints applies to something that is restricted because of the law.

Definitions

The employees at Tesco’s must always use acceptable language, by acceptable language i mean speaking formally and in an appropriate manner, with no swear words or rude comments when speaking to colleagues and customers

Consumerism is a social movement seeking to augment the rights of buyers in relation to sellers. An example is Watchdog, Watchdog is a BBC tv series that investigates viewers reports of problematic experiences with traders, retailers and other companies around the UK

This applies to Tesco’s as they are not allowed to advertise a specific product then sell a different product under the same product they have advertised. For example they cannot advertise Fairy washing up liquid then sell Tesco’s value washing up liquid under the same product that they have advertised

Consumerism

Pressure groups are groups of people who share same interests in a business or product, these groups can persuade or force businesses to make changes to their products or services. These pressure groups can persuade a business to change its products, its suppliers and the materials a business uses.

Pressure groups persuade or force business by generating publicity and lobbying politicians. A pressure group can be a huge organisation such as the CBI ( Confederation Of British Industry) which represents 150,000 businesses, and it can also be a single- issue locally based organisation such as CLARA which stands for ( Central Area Leamington Residents Association) which represents less than 300 households campaigning to preserve and improve the town of Leamington Spa.
Relating pressure groups to Tesco’s, a pressure group accused Tesco’s of breaking a promise to customers by abandoning its requirement that egg producers use only non-GM feed.

Pressure Groups

Voluntary Constraints are when companies voluntarily say that they will never do something or that they will always do something. This can include signing a code of practice stating certain behaviors ethically even though it cannot be legally enforced. The ASA ( Advertising Standards Authority) are the UK's independent regulator for advertising across the media.

ASA act on compliance and proactively check the media and take action against any misleading, offensive, or harmful advertisements, sales promotions and direct marketing. If they judge an ad to be in breach of the UK advertising codes, the ad will have to be amended or withdrawn and the advertiser must not use the same advertising style again. The ASA have led to 3,700 ads being withdrawn or changed. The ASA have a range of sanctions at their disposal to act against the minority who do not comply with the rules and the ASA ensures the comply with the rules.

Voluntary Constraints

Consumer Protection from Unfair Trading Regulations



Traders who do not take no for an answer, refuse to leave until a contract is signed or if they use any threatening behaviour will be committing a criminal offence. A practice is seen as aggressive if the average consumer’s freedom of choice is significantly impaired**. The legislation contains a list of criteria to help understand whether a commercial practice uses harassment, coercion, including physical force or undue influence.
In addition to tackling aggressive and misleading behaviour, the Consumer Protection from Unfair Trading Regulations outlaw 31 specific practices. Some of the banned practices that help provide consumer protection include:
• Aggressive doorstep selling ( conducting visits to consumers home ignoring the consumers request for them not to return)
• Bait and switch – which is promoting one product with really having the intention to sell a different product
• Bait advertising, which is luring the consumer with attractive advertising and special prices when the trader really knows that they cannot offer that product ( there are only a few available in stock for that price)
• Limited offers, which can mean a few different things such as, falsely stating that a item will only be available for a limited time
• Pressure selling which means giving the impression that the consumer cannot leave the premises until a contract has been signed

For example, a company advertising for sale a 'Dyson ' vacuum cleaner where the intention is to deceive customers into thinking it is an actual Dyson Product

Consumer Protection from Unfair Trading Regulations 2008


The Consumer Protection from Unfair Trading Regulations provide consumer protection from unfair/ misleading trading practices, misleading omissions and aggressive sales tactics. The three main sections in the Consumer Protection from Unfair Trading Regulations are :
• The general ban on unfair commercial practices
•Misleading and aggressive practices which are assessed on the effect that they have, or are likely to have on a normal consumer
•The Black List which contains the list of the practises which are unfair and therefore banned

Organizations aren't allowed to use misleading tactics to get you to spend money. These misleading actions could include things such as advertising goods/services that do not even exist, or whether its offering a few items at the advertised price with no actual hope of meeting a large demand. If a trader has signed up to the code of practise and then fails to follow this code, it can be a breach of the Consumer Protection from Unfair Trading Regulations.
The consumer Protection from Unfair Trading Regulations also offer protection against traders whom can miss out key information about the goods/ service that you may need to be able to make a final decision.
Its considered misleading if a trader does any of the following:
• Hides or provides information in an unclear, ambiguous, unintelligible manner
• fails to identify the commercial intent of the commercial practice if not already apparent from the context
• omits information that the average consumer needs
Also information must be displayed clearly, as not doing that could too be an omission.


Consumer protection from unfair Trading Regulations 2008

Trade Description Act 1968

Examples of companies that breached the Sales of Goods Act 1979 are Comet and Curry's. Both companies failed to understand consumer laws, which state that customers have the right to return broken items two years after they have bought them. Comet staff told an undercover researcher, who bought in a faulty fridge that was bought a year before that they would have to pay for an engineer. Curry's said that they could not do anything and that the researcher would have to take it up with the manufacturer. A woman sued comet in the Small Claims Court for breach of the Sales of Goods Act and was awarded with £399 cost of goods plus costs. The woman purchased a Toshiba Laptop from Comet in 2008, in 2009 the laptop developed a fault. Comet took the laptop for inspection, then returned the laptop to the manufacturer for repair . At the time the woman accepted the repair under the Sales Of Goods Act 1979. Later on in August 2009 the same manufacturing fault recurred, in that the previously carried out repair failed. She then returned the laptop to the Comet Store and informed the manager of the repair and current fault. Comet refused and verbally informed the woman that she had no rights to return the laptop. The Sales of Goods Act 1979 makes it an implied term of the contract that the goods must be as they are described, of satisfactory quality and fit for purpose. The laptop was not fit for purpose as it had the same fault twice, which makes it unusable . A Comet spokesman said ' we revised our training on the Sale of Goods Act and the relevant programme module has been rewritten, simplified and ratified by Trading Standards'.

Sales Of Goods Act 1979

P2 Describe the limitations and constraints of marketing

By Tiffany Fieldman

The Data Protection Act 1998 protects information that is held about individuals from being misused as most organisations nowadays store and use information that they have about individuals.

The Data Protection Act 1998 governs the protection of this important data with eight vital points, which are:
• Data must only be used for the reason that it was collected
• Businesses which process personal information must register with the Information Commissioners Office
• The information is not allowed to be sent out of the European Economic Area unless there is protection that is in place
• Data must not be passed onto other organisations unless the individual gives permission
• Individuals have the right to correct incorrect information about themselves
• The individuals are allowed to have access to the information that is held about them with a few exceptions
• All information must be kept up to date and cannot be kept for longer than necessary


An example of a company who has breached the Data Protection Act 1998 is Sony. In April 2011 Sony got hit with a £250k fine for allowing a serious breach of the Data Protection Act. Hackers broke into the Sony online store which exposed customers names, addresses, birth dates and even credit card details. Since this scandal the Sony executives have rebuilt the whole service in order to make it more secure.

Data Protection Act 1998

The distance selling regulations no longer apply in UK Law, after June 2014 the new Consumer Contracts regulation which implement the Consumer Rights Directive in UK law apply to every purchase you make at a distance, these purchases include by mail order, phone , online shopping or through a television shopping channel. Until 2014, the Distance Selling Regulations were the rules that protected consumer rights when doing all of the above.
Information was set out that the seller must provide about the goods/ services that they are offering which include:

The price of the goods/ services
• A description of the goods/services
• Delivery procedures and cancellation rights
• Information about the seller
All of this information will usually be set out in the terms and conditions, but if the individual is purchasing over the phone the seller can provide this information verbally.
The information about the seller needs t include an address if the payment is taken, when you place an order the seller is obliged by law to provide further information which could be either in writing or by email, this will include details of how to exercise any right to cancel and whom is responsible for the cost of returning goods.


The Distance Selling Regulations state that your right to cancel an order starts from the moment an order is placed and does not end until 7 working days from the day the goods are received. Conformation of the cancellation should be sent by either email, fax or by letter.
Some goods cannot be returned if the person changes their mind, for example; CD's, DVD's, software where the seal has been broken, jewelry such as earrings, or tailor-made goods.
If a service has been bought such as a gym membership, normally it can be cancelled up to seven working days from the day after you come into the contract. Some contracts such as hotel bookings, flights, car hire cannot be cancelled because of a mind change.
The Distance Selling Regulations say that goods must be delivered within the time frame you agree with the seller, if there is no time frame that has been agreed it is usually 30 days after you have placed an order.

A woman bought a suit from a business seller for her husband on eBay for £48 as a buy it now transaction, the eBay returns and legal pages stated that she would be entitled to a full refund if she was not satisfied with the item and contacted the seller within seven days. The seller refused to refund the item, directing her to his returns policy, which denies customers right to return items. The eBay appeal system refused to support her claim. She asked eBay whether she would be entitled a refund under the distance selling regulations and they dodged her question.

Consumer Protection ( Distance Selling ) Regulations 2008

The Consumer Credit Act 1974 & 2006 gives consumers a broad range of rights against businesses who provide credit, for example the right to be able to look at any credit file, or if they give limited liability or no liability when a credit card is lost or stolen, or the right to pay off credit early.

The Consumer Credit Act also sets out conditions and procedures which credit companies have to abide* by when they sell or advertise credit, these are backed up by criminal punishments.
Section 75 of the Consumer Credit Act allows people the right to have their money back from credit card companies if they use their credit card in order to buy something which ends up being faulty*, this will only apply to goods and services that are worth more than £100 and less than £30,000, this also does not apply to bank loans, debit cards, charge cards and specific shop cards. Nevertheless, this does apply to any purchases that have been made abroad or to any goods or services that have been bought from overseas via the internet, phone or mail order for delivery into the United Kingdom.
What this actually means is that if an individual uses their credit card to pay for something that breaches laws, for example the Sales Of Goods Acts, they will be entitled to get their money back from the credit card company rather than from the trader itself, this is very handy as the trader could be either out of business or unhelpful.
Most credit card companies, whilst disputing liability will pay out if the individual loses money because of fraud or if someone has used their card unauthorized
The Consumer Credit Act 2006 offers consumers wider protection from lenders and creates a fairer more competitive credit market.



There are a few real life examples of the Trade Description Act relating to Tesco's. One case was to do with the sale of discounted washing powders in the stores.

Tesco's had advertised the price of the washing up liquid on poster within the supermarket and when they ran out of the product they began stocking the shelves with regularly priced stock.
Tesco's was then found guilty of breaching the regulations within the Trade Description Act 1968.

Another example of a company who has breached the Trade Description Act is Marks & Spencer. M & S was found guilty of misleading customers and was also fined £10,000.

The M & S marketing department had advertised that many of their menswear items have been made in Italy when the products have really been made in India, Egypt and Lithuania.


The Trade Descriptions Act 1968 makes it a criminal offence for a trader to make any misleading or false statements about the goods of services which they are offering.
If the trader does this they could be facing criminal penalties.

This is enforced by the Trading Standards Officers and states that it is an offence for a trader to do any of the following :
Supply or offer to supply any goods to which a false trade description has been applied
apply a false trade description to any goods
make false statements about the provision of any services, facilities or accommodation
The description of the goods or services could be given; in writing which could be an advertisement, given orally which could be from the salesman, or an illustration which could be on the packaging of the product.

Trade Description Act 1968

The Sales of Goods Act 1979 is vital for consumers as it refers to laws which have extended the basic 1979 Act.
This is the main piece of legislation which helps buyers gain compensation for when their purchases do not go to plan. This Act sets out a few conditions that all products that are sold by a trader must meet.



Sales of Goods Act 1979

Examples of companies that breached the Sales of Goods Act 1979 are Comet and Curry's. Both companies failed to understand consumer laws, which state that customers have the right to return broken items two years after they have bought them. Comet staff told an undercover researcher, who bought in a faulty fridge that was bought a year before that they would have to pay for an engineer. Curry's said that they could not do anything and that the researcher would have to take it up with the manufacturer. A woman sued comet in the Small Claims Court for breach of the Sales of Goods Act and was awarded with £399 cost of goods plus costs. The woman purchased a Toshiba Laptop from Comet in 2008, in 2009 the laptop developed a fault. Comet took the laptop for inspection, then returned the laptop to the manufacturer for repair . At the time the woman accepted the repair under the Sales Of Goods Act 1979. Later on in August 2009 the same manufacturing fault recurred, in that the previously carried out repair failed. She then returned the laptop to the Comet Store and informed the manager of the repair and current fault. Comet refused and verbally informed the woman that she had no rights to return the laptop. The Sales of Goods Act 1979 makes it an implied term of the contract that the goods must be as they are described, of satisfactory quality and fit for purpose. The laptop was not fit for purpose as it had the same fault twice, which makes it unusable . A Comet spokesman said ' we revised our training on the Sale of Goods Act and the relevant programme module has been rewritten, simplified and ratified by Trading Standards'.

They must be :
• As described - this means that the goods must be as described in any verbal description or advertisement that has been made by the trader.

• Of satisfactory quality – This means small defects and also significant problems are covered, it also covers the fact that products should last a reasonable time. But one issue is that you wont have any rights if there was a fault in the product that was obvious to the consumer or if the fault has been pointed out when the item was being sold.

• Fit for purpose- This covers any purpose you enquired and were given guarantees about the trader, not only the obvious purpose and function of an item
This Act also covers second-hand items and second-hand sales for example websites such as eBay


The description itself covers a variety of factors, such as :

Quantity and size
Composition
Method, place and date of manufacture
Fitness for stated purpose
Endorsements by people or organisations

Acceptable Language
Tesco has apologised after they were fined £300,000 for misleading consumers over a half price deal on punnet of strawberries.

Tesco had claimed in 2011 punnet of British strawberries were 50 % cheaper for a longer time than they had been sold at the full price.
Birmingham City Council’s trading standards office brought forward a case that found Tesco sold 400g punnet of British strawberries marked as half price at £1.99, with the previous prices of £2.99 and £3.99 crossed out.
This deal lasted 14 weeks, but the original £3.99 strawberries had been made available for a shorter period.
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