Franchisee - Cooling Off Period/Refund Issue?

DavidG

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Jul 31, 2009
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I posted this on the Small Businesses Forums but I think this is a Consumer problem too... What do you think? Read this and please let me know?

Ok here's the story;
I am in Australia and following negotiations online and via phone, I acquired the licence for a UK Franchise service. I reached an agreement with the Franchisor to pay only 40% approx of the fee up front as the initial payment, with the remaining 60% to be paid in periodic smaller proportional payments upon each use of the service, until the full purchase price had been paid.

I clicked on an supposedly recognised and established Franchise website for further details and following several calls to my home and mobile by them even offering a discounted purchase in an effort to get in early before the offer ends. I received numerous emails about it all and was quite excited by the opportunity. I paid some due diligence and researched/googled as much about the company as I could and found no bad sites or threads except for one vague reference. It was and still is listed with Franchise selling websites here and in the UK. So I made the purchase.

There was NO 'try before you buy' option so I worked on the basis that I would be covered under Consumer Laws or others for any possible cooling off period.

The service was supplied but it was not complete initially and upon examination it took over some 30 subsequent days before I realised that the product was not as good as it appeared to be and on top of it all the support was awful. Time delays of several days when asking questions and waiting for replies; incorrect and inappropriate answers that didn't really answer the question; reference to features of the service that were not available to myself unless actually asked for and then some that weren't known until they were discovered later on and had to be requested; in adequate (very basic) user manuals; NO support paperwork such as invoices, receipts, order forms, etc etc; in fact many areas of disappointment.

Then the calls stopped. The emails too. My only contact was via one person or through their website on a ticketing system with great delays.

The service has NOT been used commercially in any way by myself. Upon closer examination of the contract and when requesting to cancel inside 30 days of trying the service out for performance commercially and as the product was inferior to my needs, substandard to that expected and due to the reasons above, as well as others, believing at that point that I would have a cooling off period of some sorts, I contacted them and at 31 days formally said I wish to cancel within my cooling off period and was told that there was NO cooling off period at all. That this was NOT a consumer contract but a Business to Business contract and not covered by Consumer Laws. I can cancel BUT there will be NO refund of my 40% fee.

I further confirmed my cooling off period cancellation request 4 days later but was again refused it.

I made the initial purchase using my own personal credit card. They wanted to do transactions that way and I am not a business with any credit facility apart from my credit card. My basis was that I made this purchase as an individual real person, so I am a consumer. I made the purchase which was subsequent to my normal trade and not in any way directly related to it. SO by that description under the DSR 2000 definition I am classed as a Consumer.

Also I made the purchase under a credit agreement (credit card) AND through a credit agreement with the Franchisor (proportional payments over time). Under the Consumer Credit Act 1974 (2006 amended), as my purchase in whole does not exceed 25,000 GBP, I would also have the same rights as a Consumer.

A few days after the initial transaction they further debited my card without authority for a smaller amount. It was again unauthorised so I when I received my CC statement and saw this I contact them and was told that it was an erroneous transaction for someone elses account and they will refund the smaller fee plus international transaction costs. I have not yet seen this refunded. This was the finally straw to me and helped me to make my mind up that I could NOT continue with this 'relationship' and would cancel and looked for the cooling off period clause.

Now to me, the fact that the Franchisor has NOT included a clause for cooling off poses two scenarios; 1.) that under the DSR Laws an automatic 3 months extension for a cooling off period will apply so I am within that time frame at 31 days; 2.) that even when made aware they refuse to accept that there is any cooling off period (and if there was it would only be 7 days they said) and they have further failed to notify me of ANY cooling off period, seems to tell me that the whole contract may now fail the test of 'reasonableness' and thereby be 'Unfair' and as such unenforcable.
Working on point 1.) above I further pointed out that they have 30 days to refund my fees under the DSR legislation or they may be breaking the law, of which at the time they had 19 days remaining. That was 17 days ago. 2 days left and still no refund.

I have outlined this to them and formally requested a full refund numerous times. Their reply was to insist that I have no rights to a refund but can cancel with NO refund but I must notify them formally in writing within 7 days of their notice if I wish to continue with the licence or part ways. They also stated that they are confident in their position that I had entered into a business to business agreement – and that this fact had previously been successfully argued in a court of law and they are prepared to do so again.

I replied that "Without Prejudice" to my position or rights to cancel as stated above I reserve the right to cancel in any cooling off period and return to this position in our discussions but will continue for the time being.

So, the question is where do I go from here? Can I get my money back? Do the DSR laws, Consumer Credit Act 1974/2006, Unfair Contract Terms Act 1977 or any other common or business law or statutory instruments or legislation support my case to get my money back?

I am in Australia. The Franchisor is in the UK. This is difficult. ANY advice would be helpful, please?

Thanks
David
 

Witch consumer

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Sep 8, 2008
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Debtors retreat
I don't know a great deal about the law and business so I'll leave that for others but I don't think this is covered by the Consumer Credit Act purely on the basis that the first payment was made on a credit card. It looks like you had an informal agreement with the vendor to make ad hoc payments when business enabled you to do so.

Agreements under that act are for the purchase of goods or services and are formal agreements, usually with a finance company, at the time of purchase you would be given a copy of your agreement which must include legally specified terms. Your cover under the CCA would be in your agreement with your credit card company and not anyone to whom you make a payment using your card.
 

DavidG

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Jul 31, 2009
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Re CCA

Hi Thanks for that. I hear what you are saying but its not quite correct.

The protections of the CCA apply to agreements between traders and individuals or sole traders. Sole traders usually count as businesses rather than consumers for any purchases they make in connection with their business activities. However, if the trader offers you credit terms up to £25,000 you receive the same protection as individuals under the Consumer Credit Act 1974 for this element of the contract.

At purchase I signed a formal agreement with the Franchisor which outlined the initial payment and the (credit) terms and method of the remaining payments to be made. It was formal and contained legally specific terms sufficient, i believe, to comply with the Act. The CCA is a huge peice of legislation and covers a lot of areas. I know, I've waded through enough of it!

But you are right I would also be covered for the initial CC purchase through the CCA. It's really who is best positioned to argue the case I suppose. Either way as long as I get my money back I'll be much happier.

Thanks though.
 
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Tony

What Consumer Founder
Apr 7, 2008
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Hi David,

The DSRs do not apply to B2B transactions, you would only have a cooling off period if you negotiated this as a contractual term. If they are in breach of contract you can sue and possibly rescind it. You need to legal advice.

Tony
 

DavidG

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Jul 31, 2009
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Thanks Tony

That's true generally but the DSRs do make an exception in the case of say if a person makes a purchase not associated with their normal trade or business. So if a flower shop owner buys a computer then the DSRs would apply in that case. I work in a completely different industry to the services I purchased so in these circumstances the DSRs may just apply. IN any case the ECRs would apply definitely and where common ground is covered by the DSRs then BOTH Regs would apply.

It is interesting to note that through ALL the regulations and acts I have mentioned the term customer is used in the same reference to a consumer, as is too the term business is used in the same reference as comsumer, and business to customer. So when read through the terms are effectively the same and little difference is taken. As an addition under the ECRs the terms business and consumer are classed as the same equally meaning the ECRs and the DSRs DO apply to businesses so too in the CCA 1974 and 2006.

This information can be found in each legislation but it also provided direct from the OFT (Office of Fair Trading) and Business Link.

I am hoping that someone out there can give me some actual legal advice or guidance.????

Thanks for the opinion though.
Cheers
 
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Tony

What Consumer Founder
Apr 7, 2008
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I think you are clutching at straws. You cannot buy a business and claim it was not for business purposes. "consumer" is clearly defined in the regulations. The flower shop owner would only be covered if they didn't use the pc for any business purpose

"consumer" means any natural person who, in contracts to which these Regulations apply, is acting for purposes which are outside his business;
From: http://www.opsi.gov.uk/si/si2000/20002334.htm
 

DavidG

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Jul 31, 2009
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Thanks Tony, I do appreciate your comments.

It is interesting to note though that the DSRs and the ECRs (E-Commerce Regulations) came about through an EU directive to regulate distance and internet type transactions across the EU. If the DSRs don't apply as I would be regarded as a business purchaser then the ECRs definitely cover me as that is what they are aimed at.

What is also interesting to note I have since found out only yesterday is that even though the transaction would be regarded as coming under the scope of the CCA 1974/2006 it would also mean that as I have made a purchase or even a part purchase using a credit card (VISA) I have another course of action open to me especially as I consider that I have not effectively received the goods and in any case more particularly because they have not informed me of a cooling off period and have refused that one exists, that I can pursue a CHARGEBACK. In this scenario the Credit Card Provider is regarded as equally liable as the Merchant Provider and the Merchant and where a purchase is disputed must refund any monies I have paid under such circumstances. This is apparently a little known part of the CCA that acts as an add on to section 75.

This information has also been provided by both the UK Financial Ombudsman and the Australian Financial Ombudsman who both agree on this position.

I have already disputed the transaction with my card provider but whom I will also be updating with this information. It was a Bank Holiday today so I'll have to wait til tomorrow
 

Tony

What Consumer Founder
Apr 7, 2008
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Hi David,

How do you think the E-commerce regulations help you? I can't see the relevance.

Under section 75 your Credit Card Provider is equally and severally liable, but for what? The DSRs do not apply so they do not have to provide a cooling off period.

I consider that I have not effectively received the goods
If this is the case then the contract has been breached and you can take them to court.

They may also have breached the Business Protection from Unfair Marketing Regulations. This does not help you directly as it would be for Trading Standards to take action.

Tony
 

DavidG

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Jul 31, 2009
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Hi Tony

The ECRs apply to business to business transactions over the internet which is how I acquired the service and through which the service is provided.

"information society services" (which is summarised in recital 17 of the Directive as covering "any service normally provided for remuneration, at a distance, by means of electronic equipment for the processing (including digital compression) and storage of data, and at the individual request of a recipient of a service") has the meaning set out in Article 2(a) of the Directive, (which refers to Article 1(2) of Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations[5], as amended by Directive 98/48/EC of 20 July 1998[6])"​
I am the customer or recipient....

"recipient of the service" means any person who, for professional ends or otherwise, uses an information society service,..."​
There are certain applications to my scenario in these regs and they include the following;
Information to be provided where contracts are concluded by electronic means
9. - (1) Unless parties who are not consumers have agreed otherwise, where a contract is to be concluded by electronic means a service provider shall, prior to an order being placed by the recipient of a service, provide to that recipient in a clear, comprehensible and unambiguous manner the information set out in (a) to (d) below -
(3) Where the service provider provides terms and conditions applicable to the contract to the recipient, the service provider shall make them available to him in a way that allows him to store and reproduce them.​
Compliance with Regulation 9(3)
14. Where on request a service provider has failed to comply with the requirement in regulation 9(3), the recipient may seek an order from any court having jurisdiction in relation to the contract requiring that service provider to comply with that requirement.​

Under Section 75 the CC Provider has a repsonibility for the purchase or sale. They assume the risk that it is all legally compliant. If not then the purchaser has a certain level of protection through using the credit card to make the purchase. Chargeback is one method of recovery.

Opinions are always arguable and that's why I seek facts through available legislation. One of mine is that they have not delivered the services in its entirety; also that they have failed to include a statutory right to cancel (cooling off period) so any cooling off period would be extend to 3 months; that they have still failed to notify me of any cooling off period so such a period would have not yet even started yet so the sale cold quite likely be regarded as 'not concluded'; that the omission of the cooling off period clause may constitute an 'Unfair Contract' and this be unenforceable.

I am sure that the courts would support my case(s). But why jump to court so quickly when litigation could provide a remedy and resolve the issues.

I am quoting the actual regulations here not my opinion.

I think Chargeback is my best course though for now. My Visa card provider has today confirmed they are pursuing this for me.

David
 
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DavidG

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Jul 31, 2009
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Tony

You are correct. I am doing a charge back for several reasons.
i) Breach of Contract (failure to deliver the goods)
ii) Breach of Contract (failure to deliver the goods as described)
iii) Business Protection - Misleading Advertisement for the services & costs involved.
iv) Unfair Contract - there was no cooling off period provided or communicated, this voiding the contract as unenforcable
v) Unauthorised transaction - additional illegal use of my CC for another transaction but allegedly related to my account.

My Visa card provider has today confirmed that my 40% initial costs, the initial transaction fee that I paid out through the card has been re-credited back to my card and that the dispute has now been resolved! That was quick! I must have had a good case.

The smaller amount (unauthorised) is still in dispute though.

I hope that once this amount has finally been resolved that that will be the end of it.

The ECRs apply to B2B transactions. Certain information must be provided and although this does not directly refer to cooling off periods, certain areas of the Regs do actually cover my circumstances. Whether or not they were the main crux of my case was not the point of the reference, merely the fact that they do apply to my scenario in a litigatious manner.

David
 

Tony

What Consumer Founder
Apr 7, 2008
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Hi David,

Good news that you got your money back. However, if you have entered a contract they could sue you for the monies. As you are in Australia this would be difficult I assume but it depends on the amount.

Some of you points above relate to criminal law and do not help your case e.g. BPRs (iii)

Are you going to let us know who you are talking about so others won't make the same mistake.
 
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