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CMA guidance to universities about consumer protection law

The CMA has recently published guidance to help universities to understand and apply consumer protection laws in dealing with undergraduate students.

The Competition and Market Authority (CMA) has recently published (12 March 2015) guidance to help universities to understand and apply consumer protection laws in dealing with undergraduate students. The advice focuses on three issues: 

  • Information provision
  • Terms and conditions
  • Complaint handling processes and practices 

It also ensures compliance with: 

  • Consumer Protection from Unfair Trading Regulations 2008 (CPRs)
  • Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (CCRs)
  • Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) 

What are the obligations of Higher Education (HE) providers under the current legislation?

Under the CPRs, HE providers must prohibit the use of unfair commercial practices toward consumers. This encompasses anything done in connection with the promotion, sale or supply of goods and services. The CPRs protect students from misleading omissions and aggressive practices to ensure that students obtain the necessary information to enable them to make an informed decision in relation to products and services.

The CPRs apply throughout all stages of the relationship between the student and the HE provider including before the student has even accepted an offer and enrolled on a course with the HE provider.

The CRRs requires HE providers to give students access to certain information before the contractual relationship is formed and to inform students of their cancellation rights if the contract is made off premises.

HE providers’ rules and regulations are likely to be subject to the UTCCRs and to a test of fairness. Consequently, terms may be deemed to be unfair if it is deemed that they are not made in good faith or if they create a significant imbalance in the parties' rights and obligations to the detriment of the consumer.

The three areas of focus

The first area is information provision. HE providers need to supply the right information at the right time. For instance, students need to be aware of costs at all stages of their communications with the HE provider (research/application, offer and enrolment stages). They must be provided with accurate and up-to-date pre-contract information before they accept a place. HE providers must also signal to students any contractual amendments and any unusual or surprising clauses. These requirements aim to ensure that prospective students have the necessary resources to make informed decisions.

The CMA’s state that the contract between students and HE providers is binding and enforceable when students accept the offer granted by HE providers and refers to the cases of Moran v University College Salford (No. 2), (1993) Times 23 November and Orphanos v Queen Mary College (1985) 1 AC 761 as support for that position.

The second area of focus is the requirement that the terms binding students and HE providers are fair. The CMA’s definition of “terms” encompasses for example any contracts, rules and regulations. As the contracts entered into are for the provision of educational services, they are subject to the test of fairness established in the current UTCCRs, and so students may rely upon the unfair terms legislation in proceedings against HE providers.

To prevent this from occurring, HE providers should make their terms clear, comprehensible and easily located, in addition to drawing students’ attention to important and unusual clauses before the student accepts an offer.

It is important to note that terms allowing a wide discretion to vary important aspects of the services, for instances fees and course content, may be held to be unfair. However, this does not prevent HE providers from making adjustments which are necessary or which do not adversely impact on students. Any such adjustments must be drawn to students’ attention. Similarly terms that seek to exclude HE providers’ liability for service performance beyond that which is allowed by the legislation may be subject to a challenge of unfairness under the UTCCRs and to a challenge of unreasonableness under the Unfair Contract Terms Act 1977 (UCTA).

With regard to intellectual property rights, HE providers should not attempt to impose terms that result in a different ownership position than the one existing under the general laws.

Terms purporting to prevent students from graduating if they owe non-academic debts are likely to be considered unfair as they may constitute aggressive commercial practice under the CPRs.

The third area of focus relates to complaint handling process. HE providers must ensure that their complaint handling policy is clear, transparent, accessible and above all fair. Accordingly, prospective and current students should be made aware of the existence and location of relevant policies and procedures. The wording used should be unambiguous, intelligible and accurate. The HE providers must adequately address students’ complaint and should ensure that staff members receive appropriate training since any failure to follow a complaint procedure is the responsibility of the HE provider.

What HE providers need to do?

In an open letter to HE providers, the CMA recommends that providers review their current terms and amend them where necessary in order to ensure they comply with consumer protection law. HE providers are also advised to verify that staff members have been provided with appropriate training to adhere to the legislation.

What is next?

The CMA will undertake a review in October 2015 to assess the manner consumer protection law is applied in the HE sector. We will report further developments.