Back to school for universities on Consumer Law?

DWF’s Paul Maddock and Helen Otty discuss the rising consumer complaints among universities

In 2014, the Office of the Independent Adjudicator (OIA) reviewed and closed 2,175 complaints from higher education students at a cost of £400,000[1]. According to the OIA[2], approximately 15% of those cases related to service issues covering complaints made by students relating to the course or facilities of their University failing to meet their expectations, compared to what was agreed on enrolment.

Which? has carried out an investigation[3]  into this “expectation vs reality” issue with University courses and raised a number of questions as to the fairness of some terms and conditions which many Universities are incorporating into contracts with students.

These findings may have a significant impact for Universities beyond their customer (or student) satisfaction levels, and in particular may have implications relating to this issue around the upcoming Consumer Rights Act 2015.

What are the rules: Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR)?

Let’s start at the beginning; the contractual arrangement between a University and a student. The UTCCR Regulations sets out what is deemed to be an unfair contract term (where the terms have not been individually negotiated only). A contract term will be unfair if:

“…contrary to the requirement of good faith, it [the term] causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer [the student]”[4]

If this is applicable to a term of the contract then the term will be deemed unfair, unenforceable and subject to a potential legal complaint being made – not a situation any University wants to find itself in. In November 2014 Which?  sought to determine the extent to which our Universities are falling foul of this requirement.

The findings of their investigation are striking. They revealed a wide-scale use of unfair and unlawful terms which allow Universities to make changes to courses – including increasing fees – after a contract has been agreed with the student.

Of the Universities investigated (131), they found that:

  • 20% use terms that Which? considered to be in contravention of the UTCCR;
  • 31% use terms that Which? considered to be bad practice and likely to be in contravention of the UTCCR;
  • 37% failed to provide enough information, making it difficult to for students to know their rights and obligations
  • Only 5% of institutions use terms that considered to be good practice by Which?

This highlights that despite the guidance of the Competition and Markets Authority (CMA)[5] on how consumer law applies to the higher education sector, a number of Universities are failing to comply with the Regulations.

What may be unlawful?

Examples of contract terms that can be considered unlawful include:

  • Fees are subject to annual increase. In enrolling at the Institute, students accept that fees in second year and subsequent years of study may increase.
  • The University reserves the right to amend any programme of study, or module, or to withdraw any module, or programme at any time.

What may be bad practice?

Examples of contract terms that while may not be considered unlawful but are likely to constitute poor practice include:

  • We reserve the right to alter the timetable, location, numbers of classes, method of delivery, content/ syllabus and method of assessment of your programme, provided such alterations are reasonable.
  • We have the right to withdraw your programme or combine it with others. In the unlikely event that the University discontinues or can no longer provide your programme, we will tell you at the earliest opportunity to enable you to withdraw or help you to make other suitable arrangements.

These kind of terms put the University at greater risk of legal complaint, and are likely to be the cause of the kind of complaints identified by Which?.

What steps should be taken to ensure compliance with the Regulations?

This is clearly an important issue for Universities and other higher education bodies, as the increased focus on the return on investment from tuition fees is likely to remain. To ensure compliance, there are a number of steps Universities can take:

  1. Review the relevant practices, policies, rules and regulations and if necessary, make any changes if required as soon as possible;
  2. Consider mechanisms to ensure that departments and faculties are complying with the law;
  3. Ensure that all relevant staff are aware of and understand and follow the CMA guidance as well as compliant internal procedures and practices.
  4. If necessary, make changes to the practices, policies, rules and regulations to ensure compliance.

Such action is required as soon as possible in light of the upcoming changes under the Consumer Rights Act 2015 (CRA15); as of 1 October 2015, provisions within CRA15 will come into force with the effect of simplifying current legislation.

For the most part, changes to the unfair terms legislation will be minimal. However, the Act will extend the scope of what can be classed as an unfair term to all terms within consumer contracts; not just those which are not individually negotiated. Accordingly, a failure to give consideration of this issue now may have wider ramifications in the not too distant future. 

Paul Maddock, Solicitor, and Helen Otty, Associate, are from the Commercial Litigation team at law firm DWF.

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