Background
The DMCCA creates a new regime designed to give consumers greater protection against so-called "subscription traps" (where consumers are misled into signing up for a subscription through a “free trial” or reduced price offer). When consulting on the new subscription regime in late 2024, the Department for Business and Trade ("DBT") stated that unwanted subscriptions are costing consumers £1.6 billion a year.
Secondary legislation is required to bring the regime into force and the most recent indication from the DBT is that this will not be until Autumn 2026 at the earliest. It is worth noting that not all subscription contracts are in scope of the DMCCA, particularly those related to regulated industries like utilities, banking and healthcare.
Through provisions which are already in force, the DMCCA also enhances the powers of the Competition and Markets Authority, including the right to issue fines for infringement of up to 10% of a trader's turnover, as part of its consumer protection enforcement activity.
What is the new regime?
- Pre-contract information: Traders must give consumers "key pre-contract information" and give or make available "full pre-contract information" before entering into a subscription contract. Whilst much of this information should be familiar to traders (with the DMCCA replacing (and largely reproducing) certain obligations in the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013), some information is new and will require traders to revisit their existing pre-contract processes.
- Renewal reminders: Traders will need to provide consumers with advance notice of certain renewal payments, the timing of which will depend on the nature of the subscription and the pre-contract information supplied by the trader about such notices. The notice should include information prescribed in the DMCCA, including: (a) the renewal date and amount due; (b) that the consumer will become liable for the renewal payment unless the consumer takes steps to bring the contract to an end; and (c) if the renewal payment is higher than the previous renewal payment, that information and the difference in the amount.
- Cooling-off periods: Traders must offer consumers a 14 day "initial cooling off period" at the outset of a subscription and, if a renewal is following a free/discounted period or is for a 12-month period or more, a 14 day "renewal cooling off period" following such renewal. During this period, a consumer can cancel the subscription without penalty. This prevents consumers becoming locked-in inadvertently for renewal periods.
- Straightforward exit: Traders must "make arrangements" to enable consumers to bring subscription contracts to an end in a way which is straightforward and without having to take any steps which are not reasonably necessary. The DBT's consultation on the DMCCA in 2024 suggested expanding on these requirements through guidance, for instance by clarifying that an exit method is more likely to be considered straightforward if a consumer only has to contact a trader once.
What can businesses do to prepare for change?
Traders should review their existing subscription offering to consider if any subscriptions fall within scope of the DMCCA.
Where subscriptions are in scope, traders should map out the existing consumer journey (particularly pre-contract, renewal and exit) to understand the processes already in place, paying attention to how this journey differs based on how the subscription is entered into (e.g. in-person or remotely).
Traders can start to consider the requirements of the DMCCA to assess where existing processes do not go far enough in light of the new regime and start to consider what solutions (e.g. automated renewal notices) could bridge these gaps.
For more information on how the DMCCA could affect your business, please get in touch.
