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Monday, 20 October 2014

Driving Lessons 10@£99 Are the Terms and Conditions Fair?

In my previous blog - Bending Space & Time - I had a bee-in-my-bonnet about the standard of advertising in the driver training industry and gave an example of an advert where just one word made all the difference between it being completely honest and truthful or misleading. Having bought this to the attention of the advertiser, they did the decent thing and took action by removing the misleading word 'beginner' from the following campaign, which had a dramatic effect, as the number of people purchasing the lesson vouchers dropped from 220 sold to 77 and it would appear that the previous consumers may well have made a different transactional decision had it not included the word “beginner”.

The example I used is not the only business in the driver training industry using the cheap voucher offer scheme and in addition, it is becoming increasing common to see driving schools using introductory offers at bargain basement level prices, for example; 10@£99 (10 hours for £99.00 compared to the average price of £23-£25 per hour) - I'll explore the fairness of the terms and conditions later in this blog.

Misleading context
What if an advert said “buy six get four free” would that be fair?
Not necessarily and especially if it’s not made clear to the customer that they are obliged to purchase more than the six they've paid for in order to remain eligible for the four “free” lessons.

In the knowledge that I would be writing an article on this topic I contacted Nottinghamshire Trading Standards for advice and they provided a copy of the guide TSBI 43. According to this guide “Describing a product as 'free', 'gratis’, ‘without charge' or similar if a consumer is going to have to pay more than the cost of responding to the advertisement and collecting or paying for delivery of the item” is a breach of the Consumer Protection from Unfair Trading Regulations 2008 (the CPRs).”

What are the CPRs and what do the Regulations cover?
The CPRs cover commercial practices between traders and consumers. These are defined as "acts, omissions, course of conduct, representation or commercial communication (including advertising and marketing) by a trader, which is directly connected with the promotion, sale or supply of a product to or from consumers, whether occurring before, during or after a commercial transaction (if any) in relation to a product".  A product is any goods, or service, and includes rights and obligations.

Do you know these rules?
Much of the driver training industry relies on the trust shown by their clients and this trust is hard to establish but very easy to erode, so my guess is that the majority of us cannot afford to allow non-compliance. Without a thorough knowledge of these regulations you may easily ignore these rules and may well be unwittingly leaving both you and your business open to prosecution.

What are the consequences of non-compliance?
Enforcers may take civil enforcement action in respect of a breach of the CPRs under Part 8 of the Enterprise Act 2002. This can be done by applying to a court for an enforcement order and a breach of any order could lead to up to two years imprisonment and/or an unlimited fine. The CPRs also contain criminal offences, which can be prosecuted by the Office of Fair Trading (OFT) or Trading Standards. The penalties are:
· On summary conviction, a fine not exceeding the statutory maximum (currently £5000).
· On conviction on indictment, an unlimited fine or imprisonment for up to two years, or both.
What is prohibited?
Effectively the CPRs prohibit trading practices which are unfair to consumers. There are four different types of practices to consider:
1. 31 specific practices which are always considered to be unfair. (Listed in the guide TSBI 43)
2. Misleading actions and omissions.
3. Aggressive practices.
4. A general duty not to trade unfairly.
For practice types two to four it is necessary to show that the action of the trader has an effect (or is likely to have an effect) on the actions of the consumer. There does not have to be a physical consumer, as this is a test looking at how the average consumer is, or is likely, to be affected. The CPRs identify three different types of consumer - the average consumer, the 'targeted consumer' and the vulnerable consumer - recognising that different types of consumers may react to a practice in different ways.
A full version of the CPR 2008 can be downloaded from this link https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/284442/oft1008.pdf

Playing Fair
Lets revisit the first four words of my previous blog - Legal, decent, honest and truthful. These are the benchmark values for all advertising and are included at the foot of each communication from ASA, including the one they sent to me when kindly providing the following statement for my article.

The Advertising Standards Authority is responsible for ensuring the content of UK ads stick to the rules. One of the key rules is that ads shouldn't mislead.  Misleading ads are not only unfair to consumers; theyre also unfair to those businesses that play by the rules.
The Advertising Codes apply across media, including online.  We are aware of concerns around ads for driving schools, and whether theyre being upfront and clear about the services they offer.
In particular we've received complaints that ads for driving school services have misled because they have:
·         Exaggerated pass rates or claimed guaranteed passes
·         Not provided clear pricing structures
·         Failed to ensure testimonials are always genuine
·         Made market leader claims without holding suitable evidence
The ASA has previously taken a dim view of marketers claiming to guarantee results.  Furthermore, advertisers should ideally hold evidence to back up their claims.  If anyone has any concerns that an ad for a driving school is misleading and not upfront and clear with consumers, or that it denigrates a competitor then we encourage them to get in touch with us.
We take these concerns seriously and can and will take action to stop misleading claims from appearing.
Visit www.asa.org.uk for further information, or to raise a complaint.

Put to the test
When advertising a deal is it essential to consider the CPRs, which say “it is a breach of the regulations to omit material information; to hide material information; to provide material information in a manner which is unclear, unintelligible (take note Voucher Scheme), ambiguous or untimely”

Armed with this knowledge and ASA’s advice I carried out a quick internet search and soon came across numerous deals/offers for 10@£99 – except a customer can’t buy just 10@£99 as without exception, the examples that I reviewed imposed various restrictions to the number of beginner lessons with the remaining “free” lessons being held back until more are purchased. This in itself is not the issue and some terms and conditions were very thorough, however I suspect not all of these terms and conditions have been checked for compliance with regulation and one particular example penalised the consumer by withholding ANY refund if the prerequisite number of lessons weren't taken.

Unfair Terms and Conditions
In an attempt to protect their interests a driving school may consider introducing a number of terms and conditions, but in doing so they may also inadvertently create unfair terms within that contract. Therefore it is vitally important to be conversant with and consider the regulations covered in the Office of Fair Trading downloadable guide (OFT311) Unfair Contract Terms Guidance - Guidance for the Unfair Terms in Consumer Contracts Regulations 1999.
Take for example; Group 4: Retention of prepayments on consumer cancellation –paragraph 1(d) of Schedule 2.
This states; those terms may be unfair if they have the object or effect of: (d) Permitting the seller or supplier to retain sums paid by the consumer where the latter decides not to conclude or perform the contract, without providing for the consumer to receive compensation of an equivalent amount from the seller or supplier where the latter is the party cancelling the contract.

I don't use contracts - or do I?
Perhaps the simplest forms of contract we have in our industry are those used for lesson bookings, whereby much of the industry has a set number of hours required for cancellation without incurring a fee. An instructor may charge if the customer cancels within that set number of hours, but often ignore the requirement to have a reciprocal clause compensating the customer if the instructor was to cancel at short notice. If there's no reciprocal clause the contract may be in breach of the regulations.

Guaranteed Pass - there's only one way to do this and it's not legal

Continuing my online search I also came across a school with the headline offering a GUARANTEED PASS which upon further inspection wasn't actually guaranteeing a pass at all, instead it guaranteed free training if the customer failed three attempts at the driving test.  There were numerous statements such as “XYZ are the fastest growing driving school or ABC is the UKs largest and London's Premier school or XYZ has an exceptionally high first time pass rate

The Advertising Code clearly states; before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation.

It would be interesting to see, if challenged, whether any of the aforementioned advertised claims are capable of objective substantiation. Take this example of a genuine advert that I think pretty much sums how not to comply.

“XXX is one of the fastest growing independent driving school in East London. We are only one of few driving schools to use DSA certified instructors only. Our lessons are premium quality and our PASS RATE is just AMAZING. Book your lessons with London's premier driving school and give yourself the chance to pass FIRST TIME [sic]

Let’s look at the content of this advert.
Ironically in the first statement the advertiser asks, “Who are you going to trust with your lessons?” It would be interesting to ask a psychologist what conclusions they might draw from this opening statement.

Fastest growing - not capable of objective substantiation unless they have evidence of their competitor's growth rate
We are only one of few driving schools to use DSA certified instructors only - Honest? Truthful? You decide.
Our lessons are premium quality and our PASS RATE is just AMAZING - not measurable or substantiated by documentary evidence
Book your lessons with London's premier driving school -  that's a big statement and one not capable of objective substantiation

The driver training industry is striving to be recognised for its professionalism, we are changing the way in which we teach, but we also need to review the way in which we run our businesses. Therefore my motivation for writing about these issues is to hopefully raise awareness and prompt some inward thinking and reflection. I've touched upon just some of the regulations, but hopefully you've gathered by now that there are a raft of measures set in place for consumer protection, many of which you may or may not be familiar with and you may or may not already be using to ensure compliance. Our industry and the services we provide are in no way any different to any other, we haven’t got, and shouldn't have any special dispensation and most importantly we are all open to prosecution should we fail to comply.
In addition, due to the nature of our relationship with our customers and reliance on recommendation, in some ways we need to be more credible and I strongly believe that a firm foundation for credibility is to hold true to those four values - Legal, decent, honest and truthful and so I’ll leave you with this final thought.

Would your marketing stand the test if challenged? 

Driver Instruct Partnership provide driver training business support and advice plus much more for its members. Go to www.driverinstruct.co.uk for more details on how to join the "John Lewis Partnership" of the driver training industry, where the business is owned by its members.
©Stu Walker 2014

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