Speeches and Presentations



LCQ7: Provision of a cooling-off period clause in consumer contracts

Following is a question by the Hon Starry Lee and a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, in the Legislative Council today (May 22):

Question:

In 2010, the Government published a consultation paper on combating unfair trade practices, in which the proposal of providing for mandatory cooling-off periods was included. However, the Government ultimately did not incorporate the proposal into the Trade Descriptions (Unfair Trade Practices) (Amendment) Bill 2012 (the Bill) due to the worries expressed by the business sector. During the Second Reading debate on the Bill, the Secretary for Commerce and Economic Development (the Secretary) indicated that he would explore and study the arrangement of a cooling-off period with various stakeholders in greater detail and focus. The Bill was passed by this Council in July last year. On the other hand, the Consumer Council (the Council) proposed in April last year that the relevant industries should adopt a consumer contract of a standard format (standard contract) containing a cooling-off period clause to protect the rights and interests of consumers. In this connection, will the Government inform this Council:

(a) whether it knows the number of complaints involving the pre-payment mode of consumption received by the Council in the past three years, the total amount of money involved and follow-up results, together with a breakdown by industry (including beauty and fitness industries);

(b) whether the Government has re-opened discussions on the cooling-off period with the relevant industries; if it has, of the details; if not, the plan and timetable;

(c) whether there are specific measures in place to encourage operators of slimming, beauty and yoga centres to adopt the standard contract proposed by the Council; if so, of the details; if not, the reasons for that; whether it knows how many business operators have adopted the standard contract containing a cooling-off period clause; and

(d) whether it will consider promoting the adoption of the standard contract containing a cooling-off period clause among some industries first, so as to enhance protection for consumers; whether the Secretary has any plan to legislate on the provision of mandatory cooling-off periods within his term of office; if so, of the details; if not, the reasons for that?

Reply:

President,

The Trade Descriptions (Unfair Trade Practices) (Amendment) Ordinance 2012 (the Amendment Ordinance) was enacted by the Legislative Council in July 2012. The Amendment Ordinance extends the coverage of the Trade Descriptions Ordinance so as to prohibit some commonly seen unfair trade practices in the market, including false trade descriptions of services, misleading omissions, aggressive commercial practices, bait-and-switch, bait advertising and wrongly accepting payment. Convicted traders may be liable to a maximum penalty of imprisonment for five years and a fine of $500,000. The Administration's plan is to implement the Amendment Ordinance within this year.

Meanwhile, the Consumer Council (the Council) published the Report on Unfair Terms in Standard Form Consumer Contracts (the Report) in April 2012, the purpose of which was to encourage and assist traders to avoid using unfair terms. Taking the beauty services sector for illustration purposes, the Report provided a set of guidelines on drafting standard form consumer contracts and a sample contract for voluntary adoption by the trade. The Administration welcomes the Report and hopes that the trade will take reference from the recommendations of the Report when drawing up standard form consumer contracts.

My reply to the various parts of the question is as follows:

(a) The relevant complaint statistics in the past three years of five industries which are more frequently involved in pre-payment mode of consumption are set out in the Appendix. As regards complaints about other industries, the Council does not keep a breakdown of complaints relating to the pre-payment mode of consumption. Regarding the result of follow-up actions, the Council has mediated successfully in around 75 per cent of its cases on average.

(b), (c) & (d) The sample standard contract recommended by the Report is for voluntary adoption by the trade. In this respect, the Council has been paying attention to the standard contracts used by slimming, beauty services and yoga centres, and has maintained communication with them. For example, earlier this year, the Council studied the standard contracts of a few relatively large-scale beauty and slimming services companies as well as telecommunications/broadcasting companies. It has then written to these companies inviting them to amend the terms of their standard contracts with reference to the drafting guidelines and the sample contract in the Report. The Council will continue to heed various standard contracts in the market. If any contract is found to contain unfair terms, the Council will invite the trader concerned to refer to the Report and amend the contract. The Council does not maintain statistics on the number of traders having included terms on a cooling-off period in their standard contracts.

During the public consultation on the legislative proposals to combat unfair trade practices from 2010 to 2011, the community widely discussed the issue of cooling-off period, on which we had communicated with different stakeholders. On the one hand, there are aspirations for a cooling-off period from general consumers. On the other hand, the implementation of a cooling-off period involves certain non-straightforward and controversial fundamental issues. For example, whether a cooling-off period should generally apply to all goods and services; how small-value transactions should be handled; whether consumers may consume the goods or services concerned during the cooling-off period; and whether consumers having consumed part of the goods or services concerned during the cooling-off period should be required to pay for the consumed part if they request to cancel the transactions and how the payment should be computed. Furthermore, some practical issues should also be considered, including how consumers should exercise their right to cancel contracts, how refunds should be made etc. Some traders consider that a cooling-off period will increase the costs of honest traders but will have no substantial deterrent effect on unscrupulous ones.

Introducing a cooling-off period will change transaction modes and have significant implications on both traders and consumers. Detailed consideration is therefore warranted. In fact, the new offences under the Amendment Ordinance, such as aggressive commercial practices, wrongly accepting payment, bait-and-switch and misleading omissions, will combat unfair trade practices at source to enhance consumer protection. For the pre-payment mode of consumption, if traders at the time of accepting consumers' payment intend not to supply the goods or services concerned, or there are no reasonable grounds for believing that the traders will be able to supply the goods or services concerned within a reasonable period, they may commit the offence of wrongly accepting payment.

Wednesday, May 22, 2013

Annex PDF