Law guide: Complaints & disputes

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Right to cancel a consumer agreement

Right to cancel a consumer agreement

Contents

When you buy goods or a service, you're entering into a contract with a supplier. The supplier must deliver the goods or service, and you must pay the purchase price. This contract can't be broken without good reason - you can't cancel it just because you change your mind.

However, in certain circumstances you can cancel a contract.

Consumer credit agreements

A consumer credit agreement is an agreement between you and the lender (the business you're borrowing from). Most consumer credit agreements are regulated by law under the Consumer Credit Act. Special rules apply when buying goods or services with a regulated consumer credit agreement.

A lender must assess your creditworthiness before offering you a credit agreement. Sometimes the supplier of the goods or services you're buying arranges the credit agreement.

The credit agreement must contain the following specific information in writing for it to be legally binding and enforceable by law:

  • Length of the agreement
  • Amount you're borrowing
  • Amount and frequency of payments
  • Type of agreement, such as credit sale or hire purchase
  • Total charge for credit and the annual percentage rate of interest (APR)
  • Details of your cancellation rights (if applicable) and other forms of protection and remedies available

If your credit agreement doesn't include all of this information and you have problems paying, the lender might not be able to take action to get their money back without first getting the court's permission.

A lender must ensure you're given an adequate explanation of the proposed credit agreement, such as the particular features of the agreement and the cost. The explanation should also include details of what will happen if you don't make the payments, so that you can assess whether the agreement is suited to your needs and financial situation. You can take the credit agreement away to review before agreeing to sign it.

Consumer credit agreements are complex, and you should always read the contract before you sign it. If you don't understand it, get help from a solicitor or the Citizens Advice Bureau, as once you sign you can't change your mind.

Cancelling a credit agreement

You can cancel a credit agreement without giving any reason in the following 2 circumstances:

Before the lender signs

You can cancel before the lender signs, but the time you have to cancel can be short. This is because often the loan is arranged by the supplier of the goods or services who can sign the credit agreement behalf of the lender.

Within 14 days

Most credit agreements can be cancelled within 14 days from the day after the agreement is made.

In either situation you must tell the lender that you wish to cancel. This can be done verbally or in writing (by recorded delivery if possible). You should use the contact details provided in the credit agreement.

You must repay any money you've received from the lender and any interest that has accumulated since you received the money. If you've paid a deposit or part-payment for goods or services that you're buying on credit, you should get all of your money back when you cancel, unless you arranged your own credit, such as taking a separate loan from a bank.

Note that the above cancellation right applies to the credit agreement only. It doesn't apply to the goods or services you've bought using the credit agreement. This means you'll still have to find another way to pay for them or return them to the supplier (if your contract with the supplier allows this). You must keep any goods safe until they're collected.

Credit agreements that can't be cancelled

You can't cancel the following types of credit agreements:

  • bank overdrafts
  • mortgages or secured loans
  • loans to pay death duties, such as inheritance tax
  • small loans of £50 or less (except hire purchase or conditional sale agreements)
  • small loans of £42 or less where the agreement was made away from the lender's offices

In addition, credit agreements for loans above £60,260 and loans secured by land are excluded from the right to cancel within 14 days.

Goods bought because of misleading or aggressive sales practice

If you've bought goods, digital content or services from a seller because of their misleading or aggressive sales practices, you can:

  • return goods or reject a service and recover the full price or a percentage of the amount you paid for it. You must ask for this (preferably in writing) within 90 days of goods or digital content being delivered or the service starting. This will result in the contract being cancelled; or
  • keep the goods or service and claim a discount, if the 90-day period has passed, the goods have been consumed or the service has been completed. If you paid £5,000 or less, the amount of the discount will depend on how serious the misleading or aggressive practice is.

In addition, you can start a court claim for compensation for any additional financial losses, alarm, distress, physical inconvenience and/or discomfort that you've suffered

If you make a claim either to recover your money or for a discount, you won't need to prove to the seller that you suffered any loss or that it acted dishonestly, recklessly or dishonestly.

For more information see the government guide on misleading and aggressive commercial practices.

Doorstep sales

You can cancel most contracts made away from a seller's business premises, such as at your home or workplace, within 14 days of making the contract. It doesn't matter whether or not you asked the seller to visit.

The exceptions include goods or services worth £42 or less, insurance contracts, consumer credit agreements that are required to have their own cancellation clauses (see above), any other credit agreement regulated by the Consumer Credit Act following a requested visit and certain financial services.

If you have the right to cancel, the seller must give you written notice of your right. This must be included in the contract, otherwise the seller can't enforce the contract against you.

The seller must also provide you with a cancellation form that you can use. If you decide to cancel, you should complete and return it to the seller. Also, keep evidence that it has been sent (like a copy of an email or certificate of posting as well as a copy of the cancellation slip).

You have the right to recover any deposit you've paid. If you've already consumed or paid for certain goods, or if certain services have already been carried out, you still have to pay for these. Otherwise you must return any goods supplied to you by the seller.

If you've used a notice to cancel goods or services bought using a consumer credit agreement, it will also cancel the consumer credit agreement. The agreement will be cancelled after you've repaid any money you received from the lender and any interest that has accumulated since you received the money.

Distance selling

Distance selling is when you buy goods, services or digital content from a seller without face-to-face contact, such as by telephone, fax, mail order or from the internet or digital TV.

You're legally entitled to cancel most goods and services that you buy in this way without giving a reason. However, there are a few exceptions, which include:

  • Perishable goods, e.g. food
  • Financial services, e.g. insurance
  • Contracts for the sale of land and auctions
  • Timeshares and goods bought from a vending machine
  • Personalised goods make to your specific requirements
  • Contracts concluded with a telecommunications operator using a public payphone

For goods, you have 14 calendar days to cancel the contract, starting with the day after you, or someone acting on your behalf, receive the goods. For services or the supply of digital content, you have 14 calendar days from the day on which you concluded the agreement with the supplier. The cancellation period can be longer if the seller fails to provide you with certain core information relating to the transaction (like the information about the right to cancel).

The seller must also provide you with a cancellation form that you can use. If you decide to cancel, you should complete and return it to the seller. Also, keep evidence that it has been sent (such as a copy of an email or certificate of posting as well as a copy of the cancellation slip).

Credit card protection

Credit card companies are equally liable with a seller if you buy goods or services and you later have a claim for breach of contract or misrepresentation. Breach of contract could be, for example, if goods aren't of satisfactory quality or fit for their intended purpose according to the Sale of Goods Act 1979. You'll only have a claim if the item you bought using the credit card costs between £100 and £30,000.

The amount you can claim isn't limited to the amount of the credit card transaction; you can claim for all losses caused by the breach of contract or misrepresentation. This applies even if you used a credit card only for the deposit and paid the rest using another method of payment. You're protected as long as the item costs more than £100.

You also get special protection against the fraudulent use of your credit card details.

Exclusions

You may not be able to claim for goods or services if payment is taken by an agent or third party on behalf of the supplier rather than being paid directly to the supplier. Examples include travel agents taking payments for an airline and online payment processors such as PayPal or Worldpay (unless the funds are paid directly to the supplier and there is a contract creating an arrangement to pay the supplier, like a 'commercial entity agreement'). Examples of suppliers selling through third party websites include Amazon Marketplace, Play.com traders and Groupon.

Unsolicited goods or services

These are goods or services that you didn't order or that are provided without you asking for them. In such circumstances there is no need to contact the seller as you're under no obligation to pay anything or to return the goods if you didn't order them.