LCQ15: Cooling-off periods for consumer contracts involving pre-payment for services
Following is a question by the Hon Tang Ka-piu and a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, in the Legislative Council today (February 24):
Since last year, I have received a total of nine complaints from members of the public alleging that they were misled, deceived or even coerced by staff members of fitness centres into signing contracts for the purchase of services, which involved amounts ranging from $7,000 to $300,000. In addition, the Consumer Council received 220-odd complaints about the sales practices of fitness centres in the first seven months of last year, showing that the problem is serious. There are views that the aforesaid situation reflects that the Trade Descriptions Ordinance (Cap. 362) cannot adequately protect the rights and interests of consumers and the Government should therefore implement a mandatory cooling-off period arrangement for consumer contracts involving pre-payment for services, under which consumers may unconditionally cancel the contracts during the cooling-off period and receive a full refund of the paid fees, with a view to enhancing the protection of consumers' rights and interests. In this connection, will the Government inform this Council:
(1) whether it has honoured the pledge, made to this Council by the Secretary for Commerce and Economic Development in July 2012, i.e. to "explore and study the arrangement of a cooling-off period, with various stakeholders in greater detail and focus"; if it has, of the details and specific progress of such exploration and study; if not, the reasons for that, and whether it will honour such a pledge expeditiously, including conducting public consultations on the issues concerned;
(2) of the industries in Hong Kong the operators of which currently implement self-regulatory cooling-off period arrangements, and the details and effectiveness of such arrangements;
(3) whether it knows which countries/regions have made provisions on cooling-off periods in respect of certain categories of consumer contracts; if it knows, of the details; and
(4) whether it will, by making reference to the experience of the relevant countries/regions, consider amending Cap. 362 expeditiously to require that consumer contracts involving pre-payment for services should contain cooling-off period provisions; if it will, of the details; if not, the reasons for that?
My reply to the four parts of the question is as follows:
(1) The Trade Descriptions (Unfair Trade Practices) (Amendment) Ordinance 2012 (the Amendment Ordinance) was enacted by the Legislative Council in July 2012. The Trade Descriptions Ordinance (Cap. 362), as amended by the Amendment Ordinance, prohibits some commonly seen unfair trade practices, 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.
Generally speaking, the calls for imposition of mandatory cooling-off periods primarily target unfair trade practices deployed by certain traders in the context of accepting pre-payments. Since the Amendment Ordinance has come into operation in July 2013, the Customs and Excise Department (C&ED) has been sparing no effort in law enforcement. It has taken prosecution action against unscrupulous traders engaging in aggressive commercial practices and wrongly accepting payment in the course of accepting pre-payment, thereby combatting unfair trade practices at source.
The issue of imposing a mandatory cooling-off period was widely discussed in the community during our public consultation on the legislative proposals to combat unfair trade practices in 2010 to 2011, and we had communicated with different stakeholders on the topic. On the one hand, consumers generally have aspirations for a cooling-off period. On the other hand, certain fundamental issues that should be considered in relation to implementing a cooling-off period are not simple and are controversial, such as whether a mandatory cooling-off period should generally apply to all goods and services, how small-value transactions should be handled, whether consumers can enjoy the goods and services concerned during the cooling-off period, and whether consumers having enjoyed part of the goods and services concerned during the cooling-off period should be required to pay for the enjoyed part if they request to cancel the transaction, and how the payment should be computed etc. Some practical issues also cannot be disregarded, including how consumers should exercise the contract cancellation right and how refund should be made etc. Some trades consider that a mandatory cooling-off period would only increase the costs for honest traders but would have little effect on unscrupulous traders. Following discussion with stakeholders and careful consideration, the Government considers that imposing a mandatory cooling-off period will change the course of transactions and have significant implications on both traders and consumers. It is necessary to consider the matter carefully.
The Government will continue to keep a close watch on the community's views on imposing a mandatory cooling-off period, and monitor the effectiveness of the new offences under the Amendment Ordinance in tackling unfair trade practices. With the enforcement agencies' continued efforts in combating unfair trade practices, the establishment of successful enforcement cases, as well as measures in publicity and public education, we believe that a deterrent effect will be achieved against unscrupulous traders and consumer awareness of self-protection will be heightened.
(2) We note that certain trades in Hong Kong provide for cooling-off periods. Relevant information is set out in the Annex. The Consumer Council published a Report on Unfair Terms in Standard Form Consumer Contract in 2012, which includes a sample consumer contract that provides for a cooling-off period and can serve as a reference to traders.
(3) and (4) We understand that some jurisdictions impose cooling-off periods on certain selected types of transactions. For example, according to the People's Republic of China Law on Protection of the Rights and Interests of Consumers, which has come into effect on the Mainland since March 2014, under prescribed circumstances, consumers who purchase goods using the Internet, television, telephone or by mail order have the right to return the goods within seven days of receipt without giving any reason. Separately, according to the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, which has come into effect in the United Kingdom since June 2014, under prescribed circumstances, consumers who enter into off-premises and distance contracts with traders may cancel the contracts within 14 days without giving any reason.
We will continue to study issues that pertain to consumer interest as appropriate.
Ends/Wednesday, February 24, 2016