Our last post highlighted how, in the last year, the Competition and Markets Authority (CMA) advised over a hundred wedding and event venues that requiring large deposits could breach consumer law.
The CMA found advance payment terms are commonly used and included terms such as non-refundable deposits, schedules of advance payments and sliding scales of cancellation charges. In certain circumstances these terms may be unfair to consumers, cause consumers financial loss and breach consumer protection law.
Here we focus on non-refundable advance payments and cancellation charges.
Where do you stand?
Example 1: Advance Payments on Weddings and Cancellation Charges
Terms regarding advance payments and cancellation charges which are less likely to be considered to be fair in law involves:
Non-refundable advance payments and cancellation charges which are calculated to cover all of the business’ costs and loss of profit.
Where such terms are more likely to be considered as fair is when:
Non-refundable advance payments and cancellation charges reflect the business’ net costs or net loss of profit resulting directly from the cancellation – for example, the business’ actual loss of profit minus the amount it has saved from not providing the services or finding another consumer.
Example 2: Wedding Cancellation Charges
Terms regarding cancellation charges which are less likely to be considered to be fair in law involve:
Sliding scales of cancellation charges that allow the business to recover more from the consumer than the losses it is likely to suffer if the consumer cancels.
Where such terms are more likely to be considered as fair is when:
Sliding scales of cancellation charges provide certainty to consumers and reflect the business’ genuine pre-estimate of loss resulting directly from the cancellation.
The CMA or Trading Standards Services (TSS) may take enforcement action against businesses if there is evidence that they are using unfair terms. Terms must comply with consumer law and are set out clearly and fairly. Seek legal advice. This will save you time, help prevent disputes and reputational damage, and protect your business if something goes wrong.
Take a look at our previous blog on Deposits and Advance Payments for a further examples.