UK’s DMCC Act imposes broader duty for protecting ‘vulnerable consumers’

The DMCC Act, which became law on 24 May 2024, will bring significant changes to the consumer law, expanding consumer rights while giving regulators more enforcement powers. A key change introduced by the Act is the increased responsibility for businesses towards vulnerable consumers.

The concept of “vulnerable persons” was already defined in the Unfair Trading Regulations, which refer to a consumer’s age, physical or mental health and credulity, but the DMCC Act expands the concept of vulnerability further to include a consumer’s individual circumstances. According to the DMCC Act’s explanatory notes, examples of relevant circumstances could include financial situation, mourning a loss, going through a divorce or losing a job.

Rhiannon Woodhouse of Pinsent Masons said that this expanded definition is not clear-cut and for some businesses may make the duty of consumer protection very broad.

A business is considered to have breached consumer law if it engages in commercial practices that mislead consumers, use aggressive tactics, fail to provide necessary information, or fall short of professional due diligence. These practices, in relation to vulnerable consumers, will now be evaluated by the standard of an average vulnerable consumer taking into account the consumer’s individual circumstances, creating a much higher standard that businesses will be required to meet.  

The vulnerable consumer test is applied in two main scenarios, where businesses and traders can reasonably be expected to foresee vulnerabilities. The first situation is when a person is vulnerable to a commercial practice, such as elderly consumers who may be vulnerable to certain misleading online choice architecture. The other type of situation is when certain consumer groups are vulnerable to particular products. Gaming products and the way they are advertised, particularly to consumers with mental health conditions, is one example.

“Overall, the Act requires a business to consider its market and use situational evidence to determine if a particular group of customers is vulnerable. For some businesses, this may be less obvious. They may be unaware of certain individual circumstances of their customers on entering into transactions as their services by nature do not target individuals going through divorce or bereavement like a funeral company,” said Woodhouse. “However, this may become apparent for certain types of providers. For example, after-sales services and businesses will know that their products do affect some groups of vulnerable customers.”

To comply with the higher standards required by the DMCC Act, businesses and traders should consider their customer base to ascertain whether they are aware of certain vulnerabilities of their customers and adjust their practices accordingly to avoid exploiting them. The additional measures businesses may take to protect vulnerable consumers include more transparent communication, simplified terms and conditions, and better customer support.

“Each business will need to consider its marketing and services on a case-by-case basis, assessing the impact on specific groups of vulnerable persons specific to its market and what can be done to prevent negative implications for them. Businesses will need to take care to exercise a higher standard of professional diligence, ensuring their practices do not fall short of what is expected of the standard care and skill towards consumers, and particularly those who are vulnerable,” she said.

She also noted that the concept of vulnerable consumers is an overarching concept throughout the Act, which prohibits harmful practices such as ‘fake reviews’ and ‘drip pricing’, a practice that occurs when consumers are shown an initial price for a good or service while additional fees are revealed, or dripped, later in the checkout process.

The concept of vulnerable persons is important also because it affects how monetary penalty is calculated by the Competition and Markets Authority (CMA), if the regulator decides to take any enforcement action. The impact on vulnerable customers is one of the ‘escalating factors’ the CMA will consider in determining the fine.

Under the DMCC Act, the CMA can directly enforce consumer protection laws and impose fines without first needing to obtain a court order if it has reasonable grounds for suspecting that a person has engaged, is engaging or is likely to engage in a commercial practice that constitutes a relevant infringement – or if a person is an accessory to such a practice.

“The Act significantly expands the CMA’s enforcement and investigation powers, so consequently the risk profile of non-compliance with consumer protection law has significantly increased which makes the duty to consider vulnerable consumers even more pressing,” said Woodhouse.

In July, the CMA opened a consultation on draft new guidance and procedural rules, detailing how the new regime will operate. The consultation closed in September 2024 and the final guidance is yet to be published. Similarly, most of the key provisions under the DMCC Act will be implemented via secondary legislation and are not yet in force. The consumer law changes and the CMA’s new enforcement powers brought by the Act won’t come into force until April 2025.