Misleading and problem contracts led to consumers losing £3bn over the past 12 months, according to a study by the Office of Fair Trading (OFT). The highest instance of problems occured with telecoms and internet access packages, with 10.3% of consumers surveyed affected.
Announcing the results of an investigation into consumer contracts, which comprise 70% of the organisation's workload, the OFT warned businesses to review the small print used in contracts or face enforcement action.
It hopes its findings, when conveyed to business and trade assocations, will reduce the number of consumer problems – it estimates a fifth of the 26m-27m problems experienced by British consumers a year are directly related to goods and services sold via contracts.
The OFT study of 4,000 people who entered into a contract in the past 12 months found that only 23% of consumers read their contracts in full – and those that do experience fewer problems. The over-50s had marginally fewer problems than the under-30s, suggesting more experienced consumers read contracts in more detail than younger people.
Telecoms and internet access aside, of the 32 sectors investigated by the OFT problem areas included home entertainment, home deliveries, home improvement, travel, mobile phones and in-home services and repair.
Common problems included a lower quality of service than expected, firms interpreting contracts to their own advantage, problems accessing a service, and poor customer service.
But the OFT admitted that because enforcement cases involve individual firms and can take a year or more before they can be discussed publicly, there is little preventative work it can do beyond outlining when, how and why contracts cause difficulties for people; as well as identifying which practices and contract terms have the potential to do harm.
"This is a tricky and complicated area," said Heather Clayton, senior director of the OFT's consumer group. "Being transparent about our general enforcement plans across the economy helps businesses because they know what they need to do to comply.
"We hope this study will help them understand the problems that trip up customers, and we are putting together a pack that we will send to firms and trade bodies. But we can't tell businesses that their contracts should read a certain way or that there should be no small print in contracts."
The OFT is urging businesses to consider whether customer contracts contain detrimental terms, such as football season tickets that do not guarantee seats; extended warranties offering limited cover; contracts with deferred charges; or onerous cancellation terms such as those used by some gyms.
The OFT's study also found that consumers are less likely to read a contract in detail if the paper is thin, the contract is too long, or it is packed with jargon. Consumers tend to rely on the reputation of a business for fair treatment.
Announcing the results of an investigation into consumer contracts, which comprise 70% of the organisation's workload, the OFT warned businesses to review the small print used in contracts or face enforcement action.
It hopes its findings, when conveyed to business and trade assocations, will reduce the number of consumer problems – it estimates a fifth of the 26m-27m problems experienced by British consumers a year are directly related to goods and services sold via contracts.
The OFT study of 4,000 people who entered into a contract in the past 12 months found that only 23% of consumers read their contracts in full – and those that do experience fewer problems. The over-50s had marginally fewer problems than the under-30s, suggesting more experienced consumers read contracts in more detail than younger people.
Telecoms and internet access aside, of the 32 sectors investigated by the OFT problem areas included home entertainment, home deliveries, home improvement, travel, mobile phones and in-home services and repair.
Common problems included a lower quality of service than expected, firms interpreting contracts to their own advantage, problems accessing a service, and poor customer service.
But the OFT admitted that because enforcement cases involve individual firms and can take a year or more before they can be discussed publicly, there is little preventative work it can do beyond outlining when, how and why contracts cause difficulties for people; as well as identifying which practices and contract terms have the potential to do harm.
"This is a tricky and complicated area," said Heather Clayton, senior director of the OFT's consumer group. "Being transparent about our general enforcement plans across the economy helps businesses because they know what they need to do to comply.
"We hope this study will help them understand the problems that trip up customers, and we are putting together a pack that we will send to firms and trade bodies. But we can't tell businesses that their contracts should read a certain way or that there should be no small print in contracts."
The OFT is urging businesses to consider whether customer contracts contain detrimental terms, such as football season tickets that do not guarantee seats; extended warranties offering limited cover; contracts with deferred charges; or onerous cancellation terms such as those used by some gyms.
The OFT's study also found that consumers are less likely to read a contract in detail if the paper is thin, the contract is too long, or it is packed with jargon. Consumers tend to rely on the reputation of a business for fair treatment.
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