Bye to Big Deposits

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The Competition and Markets Authority (CMA) has advised over 100 function venues that insisting on large deposits and applying cancellation charges could breach consumer law. It recommends venues change their terms where necessary.

The letters inform the businesses of when their terms are more likely to be fair under consumer protection law, including the following:

  • a deposit is just to reserve the goods/services and is no more than a small percentage of the total price
  • advance payments reflect the business expenses and leave customers with a reasonable amount still to pay on completion
  • customers do not lose large advance payments if they cancel, in all circumstances
  • businesses set sliding scales of cancellation charges so they cover their likely losses directly from the cancellation

The CMA has sent the letters on behalf of the Consumer Protection Partnership (CPP) which has been considering the use of advance payment and cancellation terms by businesses in their consumer contracts.

Nisha Arora, CMA Senior Director, Consumer, said: “Planning a wedding or any large event can be stressful. Consumers are particularly vulnerable when they are focussing on preparing for a special event and have paid significant sums up-front. Businesses need to treat their customers fairly and should not require unjustifiable, non-refundable deposits or impose unreasonable cancellation charges which could mean customers lose a significant amount of money if they change their mind about the venue or have to call off the event.

“Clear and fair terms benefit consumers and businesses, help to prevent disputes and provide protection should things go wrong. Unfair terms, even when a contract is signed, are not legally binding and we encourage any businesses which use advance payments and cancellation charges to review their terms to ensure they comply with consumer protection law.

“We have worked closely with Trading Standards Services and consumer advice bodies to help businesses improve their practices and ensure they comply with consumer protection law. Many businesses in this sector comply with consumer protection law and engage in good business practices, but we urge others to raise their standards. Businesses that use unfair terms risk enforcement action.”

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