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    OFT guidance for second hand

    car dealers

    Compliance with the Consumer Protectionfrom Unfair Trading Regulations 2008 and

    the Sale of Goods Act 1979 (as amended)

    An OFT consultation

    December 2009

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    Crown copyright 2009

    This publication (excluding the OFT logo) may be reproduced free of charge in

    any format or medium provided that it is reproduced accurately and not used in

    a misleading context. The material must be acknowledged as crown copyrightand the title of the publication specified.

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    Scope of this consultation

    Topic of this

    consultation

    As part of its second hand car market study, The Office

    of Fair Trading is conducting a public consultation on

    draft guidance for second hand car dealers on compliancewith the Consumer Protection from Unfair Trading

    Regulations 2008 and the Sale of Goods Act 1979 (as

    amended).

    Whilst the guidance is being produced primarily for

    second hand car dealers, it will also be of use to

    enforcers such as Trading Standards Officers, and to

    consumer advisors in understanding how the law applies

    to this sector.

    Scope of this

    consultation

    This consultation concerns the application of the

    Consumer Protection from Unfair Trading Regulations

    2008 and the Sale of Goods Act 1979 (as amended) to

    second hand car dealers.

    The primary focus of the guidance is on used car sales

    made through forecourts or other trade premises.

    However, in respect of compliance with the Consumer

    Protection from Unfair Trading Regulations, it is also

    relevant to dealers who sell through auctions. The

    guidance does not cover the private sale of cars.

    Geographical scope UK-wide.

    Impact assessment There is no impact assessment linked to this

    consultation. The OFT does not conduct impact

    assessments when producing explanatory guidance.

    Basic information

    To This consultation is aimed at anyone with an interest in

    the second hand car market. This includes franchised and

    independent car dealers, industry trade associations, car

    manufacturers, other businesses operating in the second

    hand car market, enforcers, government departments and

    consumer groups.

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    Duration The consultation period begins on 18 December 2009

    and will run until the 12 March 2010.

    Enquiries By telephone: David Micklefield on 0207 211 8285

    By email to: [email protected]

    By fax to: 020 7211 8926

    By post to: David Micklefield, Used Car Market Study

    Team, Office of Fair Trading, Fleetbank House, 2-6

    Salisbury Square, London EC4Y 8JX

    How to respond We would welcome your comments on the content of

    this draft guidance document. We want to ensure that

    the guidance is clear and comprehensive for its intended

    users and covers all relevant matters.

    Please respond to as many of the questions set out inAnnexe A as you are able and provide any suggested

    changes or comments on the draft in writing (by email, or

    alternatively by letter or fax, as indicated above).

    When responding to this consultation please state

    whether you are responding as an individual or whether

    you are representing the views of an organisation. If

    responding on behalf of an organisation, please make it

    clear who the organisation represents and, where

    applicable, how the views of members were collated.

    We are publishing this consultation on the OFT website

    are sending it to a range of stakeholders to invite

    comments.

    Additional ways to

    become involved

    If you wish to request a meeting with the OFT team

    involved please contact David Micklefield (contact details

    given above).

    The OFT also plans to host half day workshops for

    industry, Trading Standards Officers and consumergroups during the consultation period. If you would be

    interested in attending a workshop please contact David

    Micklefield (contact details given above) as places will be

    strictly limited.

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    After the

    consultation

    After the consultation we will publish our final guidance

    as well as a summary of responses received. Both

    documents will be available on our website at

    www.oft.gov.uk/publications.

    Following publication, the guidance will be kept underreview, and we will consider adding to it on an ongoing

    basis in the light of user feedback, practical experience

    and case law.

    Compliance with

    the Code of

    Practice on

    Consultation

    This consultation complies with BRE's Code of Practice

    on Consultation. A list of the key criteria can be found at

    Annexe C, along with a link to the full document.

    Background

    Why produce

    guidance at this

    stage

    The OFT launched a market study into the sale of second

    hand cars in May 2009. The study follows concerns

    about the large number of consumer complaints about

    this market. The purpose of the study is to understand

    the causes of such high levels of consumer complaints

    and to consider whether existing consumer protection

    legislation is sufficient and effective in this sector.

    We have consulted with a range of stakeholders during

    the course of the market study including trade

    associations, local authority Trading Standards Services,

    consumer groups and other government departments. A

    number of those stakeholders identified the need for

    guidance on the application of two key pieces of

    consumer protection law, the Consumer Protection from

    Unfair Trading Regulations 2008 and the Sale of Goods

    Act 1979 (as amended), to second hand car dealers.

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    Previous

    engagement

    In May 2005 the OFT published guidance for motor

    traders who sell new or used cars and other vehicles to

    consumers by distance means - such as online, by mail

    order or by telephone - on compliance with the

    requirements of the Consumer Protection (DistanceSelling) Regulations 2000.

    In August 2008 the OFT published general guidance on

    the Consumer Protection from Unfair Trading Regulations

    2008.

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    Feedback about this consultation

    If you wish to comment on the conduct of this consultation or make a complaint

    about the way this consultation has been conducted, please write to:

    Jessica NardinOFT Consultation Coordinator

    5C9

    Office of Fair Trading

    Fleetbank House

    2-6 Salisbury Square

    London

    EC4Y 8JX

    Email:[email protected]

    A copy of the key criteria from the Better Regulation Executive's Code of

    Practice on Consultation can be found in Annexe C.

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    Data use statement for responses

    Personal data received in the course of this consultation will be processed in

    accordance with the Data Protection Act 1998. All information received

    (including personal data) is subject to Part 9 of the Enterprise Act 2002. We

    may choose to refer to comments received in response to this consultation in

    future publications. In deciding whether to do so, we will have regard to the

    need for excluding from publication, as far as that is practicable, any information

    relating to the private affairs of an individual or any commercial information

    relating to a business which, if published, would or might, in our opinion,

    significantly harm the individual's interests, or, as the case may be, the

    legitimate business interests of that business. If you consider that your response

    contains such information, that information should be marked 'confidential

    information' and an explanation given as to why you consider it is confidential.

    Please note that Information provided in response to this consultation, including

    personal information, may be the subject of requests from the public for

    information under the Freedom of Information Act 2000 (FOIA). In considering

    such requests for information we will take full account of any reasons provided

    by respondents in support of confidentiality, the Data Protection Act 1998 and

    our obligations under Part 9 of the Enterprise Act 2002.

    If you are replying by email, these provisions override any standard

    confidentiality disclaimer that is generated by your organisation's IT system.

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    CONTENTS

    Chapter/Annexe Page

    1 Using the guidance 1PART A

    2 Compliance with the Consumer Protection from UnfairTrading Regulations 2008 2

    3 Overview of the CPRS 44 Offences under the CPRS 55 Steps to avoid committing offences 106 What are the consequences of non-compliance? 19PART B

    7 Your obligations under The Sale of Goods Act 1979(as amended) 20

    8 Your legal obligations 219 Warranties 3110 Attempting to limit your liability under The Sale of

    Goods Act (as amended) 3211 What are the consequences of non-compliance? 33A Summary of questions for consultees 35B List of consultees 36C Consultation criteria 38

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    1 USING THE GUIDANCE1.1 This guidance is intended to help second hand car dealers comply with

    two important pieces of consumer protection law:

    the Consumer Protection from Unfair Trading Regulations 2008(CPRs), and

    the Sale of Goods Act 1979 (as amended).1.2 The guidance will also be of use to enforcers and to consumer advisors.1.3 The guidance is split into two parts. Part A contains guidance for second

    hand car dealers on compliance with the CPRs. Part B contains guidance

    on the legal obligations of second hand car dealers under the Sale of

    Goods Act 1979 (as amended).

    1.4 Part A of the guidance should be read in conjunction with the OFT'sgeneral guidance document on the CPRs, Guidance on the Consumer

    Protection from Unfair Trading Regulations 2008 OFT1008.1

    1.5 For further advice contact your local Trading Standards Service and/orseek independent legal advice.

    1 Call 0800 389 3158 for a free copy of this publication or download a copy at

    www.oft.gov.uk/advice_and_resources/publications/guidance/cprreg

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    2 PART A: COMPLIANCE WITH THE CONSUMER PROTECTIONFROM UNFAIR TRADING REGULATIONS 2008

    Introduction

    Aim of the guidance

    2.1 This guidance is principally intended to help second hand car dealerscomply with the Consumer Protection from Unfair Trading Regulations

    2008 ('CPRs'). It will also be of use to enforcers, and to consumer

    advisors in understanding what trading practices are likely to be

    prohibited.

    Scope of the guidance

    2.2 The guidance identifies the main kinds of trading practice or conductspecific to second hand car dealers which are likely to be considered

    unfair under the CPRs. The guidance also sets out some of the practical

    steps dealers should take to comply with the law.

    2.3 Although the focus of this guidance is on sales made through forecourts,it is also relevant to dealers who sell through auctions. Whilst consumers

    may have lower expectations when buying from an auction, many of the

    kinds of unfair trading practice highlighted for example in respect of

    applying misleading descriptions to vehicles or failing to disclose

    important information about the vehicles history or condition do,

    nevertheless, apply to auction sales.

    2.4 Not all points listed will apply to every car dealer, nor is the list intendedto be exhaustive. It is based on the OFT's, Trading Standards Services',

    industry's, consumer groups' and other stakeholders' experiences of

    problems with unfair trading in the second hand car market.

    2.5

    The guidance should be read in conjunction with the OFT's generalguidance document on the CPRs, Guidance on the Consumer Protection

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    from Unfair Trading Regulations 2008 OFT10082 as well as the OFT's

    guidance for used car dealers on their Sale of Goods Act obligations. For

    further advice contact your local Trading Standards Service and/or seek

    independent legal advice.

    2 Call 0800 389 3158 for a free copy of this publication or download a copy at

    www.oft.gov.uk/advice_and_resources/publications/guidance/cprregs

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    3 OVERVIEW OF THE CPRS3.1 The CPRs3 came into force in May 2008. They replaced many of the

    provisions of the Trade Descriptions Act 1968 and some other

    legislation. The changes affect all traders whose practices may affect

    consumers, including those engaged in the motor trade.

    3.2 The CPRs prohibit businesses from engaging in unfair commercialpractices when they supply goods or services to consumers. Unfair

    commercial practices can occur before, during or after a transaction

    between a business and consumer (and sometimes further up the supply

    chain between traders). An example of a transaction to which the

    Regulations will apply is a sale or purchase transaction between a

    business and a consumer.

    3 Statutory Instrument 2008/1277

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    4 OFFENCES UNDER THE CPRS4.1 There are a number of criminal offences under the CPRs, and breaches

    can also be enforced through civil court injunctions.

    Misleading actions (regulation 5)

    4.2 It is an offence to give false information to consumers, or to deceiveconsumers, where this is likely to cause the average consumer to take a

    different decision ('misleading actions').

    4.3 An unfair business practice may mislead consumers through the falseinformation it contains, or through the practice itself, or because its

    overall presentation is deceptive or is likely to be deceptive.

    4.4 Misleading information may be given verbally or in writing. Examplesinclude providing information over the telephone or in the course of

    discussions prior to the sale of the vehicle, or in writing in advertising on

    the car, in the showroom, in a newspaper, website, email, text, or other

    types of documentation provided to the prospective buyer.

    4.5 Regulation 5 applies to any misleading actions before, during or after thesale, provided that they are directly connected to the promotion, sale or

    supply of the vehicle to a consumer and are likely to result in the

    consumer making a different decision from the one he would haveotherwise made. For example, the false or misleading information may

    cause the consumer:

    to buy the car when he would not otherwise have done so, and/or to buy the car at a much higher price or on more disadvantageous

    terms than he would have otherwise done.

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    Examples:

    Misrepresenting the specification or history of the vehicle, forexample by making misleading statements about the service history,

    any previous accident damage, or number of previous owners.

    Supplying, offering to supply or having on your forecourt for sale avehicle with a false mileage reading that is, advertising an incorrect

    mileage.

    Altering, or arranging for the alteration of, the mileage on a vehicle'sodometer to show an incorrect mileage reading.

    Advertising a vehicle for sale at one price for example, on awebsite or in a newspaper when the actual sale price of the

    vehicle is higher.

    Falsely claiming or creating the impression that cars have beenchecked by motoring organisations or that checks are used which

    meet such motoring organisation standards when they do not.

    Misleading consumers about their statutory or other rights, orseeking to restrict these rights, for example, by:

    - Using or making restrictive statements such as 'Sold as Seen' or'Trade Sale Only' or 'No Refund' even if the statement 'this doesnot affect your statutory rights' is included.

    - Providing a warranty or guarantee the terms of which seek totake away or diminish any rights which the consumer wouldotherwise enjoy in law.

    - Misleading consumers about the extent to which an offeredwarranty or guarantee enhances the rights which the consumerwould in any event enjoy in law.

    Creating a misleading impression that a vehicle has one previousprivate owner for example through the use of statements such as

    'one previous owner' when in fact it is an ex-rental vehicle that

    has been rented out to many drivers.

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    Misleading omissions (regulation 6)

    4.6 It is an offence to mislead consumers by failing to give them theinformation they need in order to make an informed purchasing decision

    before the sale ('misleading omissions'). This might, for example, be by

    omitting or hiding important information or providing important

    information in an unclear, unintelligible, ambiguous, or untimely manner.

    Examples:

    Failing to disclose the existence and results of all checks carried outon the vehicle (for example, mechanical, history, mileage) and any

    adverse findings.

    Failing to disclose details of any additional charges payable, forexample 'administration fees', until the point of sale.

    Failing to disclose that a vehicle for sale is an ex-rental vehicle whichmay have had a number of drivers/users - it is not sufficient to only

    inform the consumer of the mileage and the number of previous

    owners.

    Aggressive practices (regulation 7)

    4.7

    It is an offence to engage in practices that intimidate or exploitconsumers, restricting their conduct or ability to make free or informed

    choices and which are likely to cause the average consumer to take a

    different decision ('aggressive practices'). You must not, for example:

    Engage in high pressure selling techniques to sell a car (for example,stating a false deadline for a discount offer) or to sell additional

    services such as finance, insurance or warranties.

    Exploit a consumer's misfortune or circumstances and/or a positionof power over a consumer.

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    Intimidate, pressurise or coerce consumers into dropping complaintsagainst your business, for example by the use of threatening or

    abusive language or behaviour.

    Banned practices (schedule 1)

    4.8 There are a number of other commercial practices which are consideredunfair in all circumstances and which are prohibited ('banned practices').

    Examples:

    You must not falsely claim, or create the impression, that you areacting for purposes unrelated to your business or falsely represent

    yourself as a consumer that is, as a private seller ('banned practice

    22'). For example, a second-hand car dealer puts a used car on or

    near a road and displays a handwritten advertisement reading 'One

    careful owner. Good family run-around. 2000 or nearest offer. Call

    jack on 07734 765890.' The advert gives the impression that the

    seller is not selling as a trader, and would breach the CPRs.

    You must not use 'bait and switch' tactics, for example advertising acar, despite knowing theres no stock, with the aim of selling a more

    expensive alternative vehicle ('banned practice 6).

    General prohibition of unfair commercial practices (regulation3)

    4.9 It is also an offence to knowingly or recklessly fail to act in accordancewith honest market practice or in good faith in your dealings with

    consumers (known as 'professional diligence'), where such dealings are

    likely to change the decision that an average consumer would make.

    4.10 You are required to approach sales professionally and fairly (according toreasonable expectations). If you knowingly or recklessly fail to do so and

    your business practice significantly impairs the average consumer's

    ability to make an informed decision, you will be committing an offence,

    even if the practice is widespread in the industry.

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    Examples:

    Failing to deal with complaints at all or in an honest, fair, reasonableand professional manner.

    Systematically failing to check that the vehicles you supply, offer tosupply or expose for sale are safe and roadworthy in accordance

    with the requirements of the Road Traffic Act 1988, and of

    satisfactory quality in accordance with the Sale of Goods Act 1979.

    Ignoring your contractual obligations to customers, for example byrefusing to provide appropriate redress to consumers who are

    seeking to exercise their contractual rights against you under the

    Sale of Goods Act 1979 (as amended).

    4.11 The unfair practices highlighted at paragraph's 4.2 4.8 above will alsocontravene the requirements of 'professional diligence'.

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    5 STEPS TO AVOID COMMITTING OFFENCESA. You must take all reasonable steps and exercise all due

    diligence to ensure that any descriptions you apply to a

    vehicle are accurate.

    Pre-sale checks

    5.1 Before you expose any vehicle for sale you must take all reasonablesteps and exercise all due diligence to ensure that all descriptions applied

    are accurate.

    5.2 You should keep a full written record of all checks carried out on everyvehicle. Trading Standards staff will want to see such records when they

    visit your premises.

    5.3 Examples of the types of checks you may need to carry out are givenbelow. The specific checks you need to undertake will depend on the

    circumstances of each vehicle you intend to sell to consumers. If you

    decide not to undertake certain checks you will need to be able to show

    that you were justified in making that decision and that it was

    reasonable in those particular circumstances, for you not to do those

    checks.

    Vehicle history

    5.4 Before exposing any vehicle for sale you must take all reasonable stepsto check the vehicles history, for example whether it has been stolen, is

    subject to a financial charge, has been written off as an insurance loss,

    or is ex-rental. You must also check that you have good title to sell the

    car - for instance, if the car is still security under a bill of sale, you do

    not own it.

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    5.5 In most circumstances you would be expected to at least conduct avehicle history check with an independent and reliable company or make

    and record your own effective enquiries. Other checks may include:

    Asking the seller about the history of the car is it correct, incorrector unknown? Write the information on your purchase invoice and askthe seller to sign it - do not rely on verbal statements only.

    Checking the vehicle's registration details on the DVLA database. Checking with the Vehicle and Operator Services Agency (VOSA). If

    you have the document reference number from the V5 and the

    vehicle registration, you can check the MOT test results (if the

    vehicle is more than three years old).

    Mileage

    5.6 Before exposing any vehicle for sale you must take all reasonable stepsto ensure that the stated mileage is accurate.

    5.7 In most circumstances you would be expected to at least conduct aformal check on the vehicle's mileage with an independent and reliable

    company. Other checks may include:

    Checking with VOSA. If you have the document reference numberfrom the V5 and the vehicle registration, you can check the mileage

    shown on the MOT history (if the vehicle is more than three years

    old).

    Ensuring that the internal and external condition of the vehicle iscomparable with described age and mileage of the vehicle the

    condition/appearance of the vehicle may give cause to suspect the

    accuracy of the mileage reading (for example, worn out seats/pedals

    but low mileage on odometer).

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    Checking the mileage with all previous keepers shown in the vehicleV5 registration document. If you do not have this document, you can

    obtain details of previous owners by contacting the DVLA in

    Swansea in writing. Some companies such as HPI and Experian will

    provide this investigative service for you.

    5.8 Unless you are satisfied that the mileage of a used car shown by itsodometer is accurate, such mileage should not be quoted in

    advertisements, discussions or negotiations or in any documents related

    to the supply of the used car.

    Disclosure of mileage discrepancies

    5.9 As well as taking all reasonable steps to establish the vehicle's mileage,you must inform the consumer of the steps you have taken and the

    results of those steps. You should not rely on a disclaimer as a

    substitute for carrying out proper checks on a vehicle. Disclaimers

    should only be used where (i) if after completing all available checks you

    identify that the mileage is incorrect or (ii) it has been impossible to

    verify the correct mileage after the relevant checks have been carried

    out.Simply relying on a disclaimer of the mileage as a substitute for

    carrying out proper checks on a vehicle is likely to increase the risk of

    you committing an offence under the CPRs.

    5.10 If after completing all available checks you identify that the mileage isincorrect you should:

    display a notice alongside the mileage shown on the vehicle'sodometer, which is more prominent than the mileage itself, stating

    that the mileage is incorrect and should be disregarded, and

    draw this to the customer's attention and state this informationprominently on the sales invoice when the car is sold, and

    clearly inform the consumer of all the steps you took to try andestablish the mileage.

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    5.11 If after completing all available checks you are unable to verify themileage of the vehicle you should:

    display a notice alongside the mileage, which is more prominent thanthe mileage itself, stating that the mileage may not be true and

    should not be relied on as an indication of the distance the vehiclehas travelled, and

    draw this to the customer's attention and state this informationprominently on the sales invoice when the car is sold, and

    clearly inform the consumer of all the steps you took to try andestablish the mileage.

    Vehicles under preparation

    5.12 You should not sell a car to a consumer whilst that vehicle is still underpreparation - for example, where you have not yet had the opportunity

    to complete all of your pre-sale history and mileage checks. You should

    not use a disclaimer in these circumstances as it cannot substitute for

    completing proper checks on a vehicle, and simply telling the consumer

    that the results will be provided to him after the sale will not remove the

    risk of an offence under the CPRs being committed.

    B. Checking the mechanical condition of the vehicle

    Roadworthiness

    5.13 You should ensure that you have procedures in place to check thatvehicles you supply, offer to supply or expose for sale are roadworthy. It

    is not sufficient to rely on MOT or service histories. This will usually

    mean arranging for a suitably qualified or competent person to carry out

    pre-sale mechanical inspections of vehicles and any problems that make

    them unroadworthy must be rectified.

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    5.14 It is an offence under the CPRs to sell something that cannot legally besold (Schedule 1, banned practice 9). To the extent that the

    unroadworthiness of any vehicle under the Road Traffic Act 1988, or the

    General Product Safety Regulations 2005, makes it an offence to supply

    such a vehicle, offer to supply it or expose it for sale on your forecourt,

    in your showroom or other part of your premises including on the

    highway, doing so will also breach the CPRs.

    Satisfactory quality

    5.15 You should also take reasonable steps through the pre-inspectionprocedures you have in place - to ensure that the used cars you sell are

    of satisfactory quality and fit for their purpose under the Sale of Goods

    Act 1979, taking into account the age, mileage, condition, description

    and price of each car. Prospective customers should be made aware,prior to sale, of any faults identified.

    5.16 You should keep a written record of inspections carried out on everyvehicle.

    C. Providing consumers with important information prior to the

    sale

    5.17 You must give consumers the information they need to make aninformed choice, before a sale is made. You must not omit or hide such

    information, or provide it in an unclear, unintelligible, ambiguous or

    untimely manner.

    5.18 Non-exhaustive examples of the types of information you should informthe consumer about prior to the sale include:

    the main characteristics of the vehicle - for example:- price- make, model, engine capacity and other physical characteristics- history.

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    any problems you are or ought to be aware of, after takingreasonable steps, such as:

    - if the vehicle has been written off as an insurance loss or hasbeen accident damaged- if the vehicle was imported into the UK- if there are any 'MOT Advisory' items- discrepancies in the mileage or service history of the vehicle- faults with the vehicle.

    if the vehicle is ex-rental

    details of any warranties offered (see section D below) details of your after-sales service and procedures.

    5.19 The CPRs do not specify the format in which important informationshould be provided to consumers before the sale is made. However, only

    providing such information verbally - rather than in writing as well may

    increase the risk of you committing an offence under the CPRs.

    Providing important information in writing will help you to comply withthe requirements of professional diligence and will also protect both you

    and your customers should disputes arise after the sale about what was

    said. If any important information is provided by alternative means then

    you will need to be able to demonstrate how you have complied with the

    information requirements.

    5.20 Where you provide important information in writing, it should be clearand prominentin the documentation given to the consumer and drawn to

    their attention before the sale is made. It is not sufficient to include such

    material information in small print or in a bundle of documents handed to

    the consumer at the time of sale.

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    5.21 As a matter of good business practice, the OFT would stronglyrecommend that such information is provided in the form of a short

    summary document, such as a checklist, which could be displayed on

    the vehicle.

    D. Warranties

    5.22 The key elements of warranties and, if applicable, any free extensions towarranties must be drawn to the attention of consumers. This includes

    details of what is and is not covered and the geographical scope of the

    warranties.

    5.23 Any relevant document published by the warranty provider must behanded over. The consumer must be advised of what type of warranty is

    being provided, for example, manufacturer's, free extended

    manufacturer's/dealer's, insurance backed used car or member's own

    warranty. The consumer must be informed of the identity of the

    warranty provider and the address to which claims may be directed. The

    different types of warranty and any significant differences between them

    should be explained to consumers as appropriate.

    5.24 The consumer must be informed of any conditions that need to befollowed for the warranty to remain valid.

    5.25 You should give advice to consumers about who they should address aclaim to if they have a problem regarding defective parts and accessories

    not covered by the manufacturer's warranty.

    5.26 The warranty document must include a statement advising the consumerthat the warranty is in addition to his statutory and common law rights.

    5.27 Remember: where you sell a car with a manufacturer's warranty, thisbinds you - as the seller - as well as the manufacturer.

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    E. After-sales service

    Complaints and enquiries

    5.28 You must have an accessible, appropriate and user friendly after-salesprocedure to ensure that all customer enquiries are dealt with in anhonest, fair and professional/reasonable manner.

    5.29 You must have an effective written customer complaints procedure,understood by all staff who may come into contact with the public.

    5.30 You must deal with complaints promptly, effectively and in aprofessional manner.

    5.31 You must make your best efforts to find a satisfactory solution tocomplaints. You need to ensure that the steps you take to satisfy the

    consumer are in accordance with reasonable expectations.

    5.32 You must record all complaints and note the final outcome. You mustkeep complaint records on file.

    5.33 You should cooperate with any appropriate representative orintermediary, for example a Trading Standards Service or Consumer

    Advice Bureau, consulted by a consumer in respect of a complaint.

    Warranties

    5.34 You should ensure that warranty work is carried out promptly and thatcompletion dates are made clear to consumers before any work has

    commenced.

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    Contractual obligations

    5.35 You must follow practices and procedures that ensure that you fulfilyour contractual commitments to customers, for example:

    by providing appropriate redress to consumers who are seeking toenforce their contractual rights against you under the Sale of Goods

    Act 1979 and the Sale and Supply of Goods to Consumers

    Regulations 2002

    carrying out repairs to customer's faulty cars with reasonable careand skill and within a reasonable time (or within the specific time

    agreed) in accordance with your legal obligations under the Supply of

    Goods and Services Act 1982.

    Aggressive practices

    5.36 You must not intimidate, pressurise or coerce customers, for examplethrough the use of threatening or abusive language, into dropping

    complaints against your business. Any aggressive practice that is likely

    to cause an average consumer to take a different decision is also

    prohibited under Regulation 7 of the CPRs.

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    6 WHAT ARE THE CONSEQUENCES OF NON-COMPLIANCE?6.1 If you do not comply with the CPRs you may face enforcement action.

    The OFT, local authority Trading Standards Services (TSS) and the

    Department of Enterprise, Trade and Investment in Northern Ireland have

    a duty to enforce the CPRs. Enforcers can use a range of tools to ensure

    that businesses are complying with the CPRs, including criminal and/or

    civil enforcement.

    6.2 If you are convicted of committing an offence under the CPRs thepenalties are:

    on Summary conviction in the Magistrates Court (Sheriff or DistrictCourt in Scotland), a fine not exceeding the statutory maximum

    currently 5,000

    on Conviction on indictment in the Crown Court (Sheriff or HighCourt of Justiciary in Scotland), an unlimited fine or imprisonment for

    up to two years, or both.

    6.3 Trading Standards Services, the Department of Enterprise, Trade andInvestment in Northern Ireland and the OFT may also take civil

    enforcement action under Part 8 of the Enterprise Act 2002 for a breach

    of the CPRs (as well as in respect of a breach of the Sale of Goods Act

    1979, in relation to certain offences under the Road Traffic Act 1988,and for breaches of other consumer related legislation). This can include

    applying for a court order to prevent or stop breaches of consumer

    protection laws. Breach of any order could lead to up to two years

    imprisonment and/or an unlimited fine.

    6.4 The OFT is committed to ensuring enforcement action is necessary andproportionate. The OFT follows the guiding principles set out in it's

    Statement of Consumer Protection Enforcement Principles, details of

    which can be found at:

    www.oft.gov.uk/oft_at_work/enforcement_regulation/enforcement.

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    7 PART B: YOUR OBLIGATIONS UNDER THE SALE OF GOODSACT 1979 (AS AMENDED)

    Introduction

    Aim of the guidance

    7.1 The purpose of this guidance is to set out the legal obligations of secondhand car dealers under the Sale of Goods Act 1979 (as amended). As a

    second hand car dealer you need to know how the law relating to the

    sale of vehicles affects you and your customers.

    7.2 The law on the sale of goods has evolved over many years. It is nowprincipally set out in the Sale of Goods Act 1979 which has been

    amended by the Sale and Supply of Goods Act 1994 and more recentlyby the Sale and Supply of Goods to Consumers Regulations 2002.

    Scope of the guidance

    7.3 This guidance is intended for dealers who sell second-hand cars toconsumers4 through forecourts. The guidance does not cover sales made

    through auctions or private sales. It should be read in conjunction with

    the OFT's guidance for used car dealers on the Consumer Protection

    from Unfair Trading Regulations 2008 - failure to meet your obligations

    under the Sale of Goods Act (as amended) may also constitute a breach

    of the Consumer Protection from Unfair Trading Regulations 2008.

    7.4 Although this guidance is not intended to cover every situation that mayarise in the selling of a second hand car it is intended to provide some

    practical suggestions on how to comply with the law. For further advice

    contact your local authority Trading Standards Service and/or seek

    independent legal advice.

    4 'Consumers' are defined as people who are buying for purposes not related to their trade,

    business or profession.

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    8 YOUR LEGAL OBLIGATIONS8.1 When you sell a second hand car to a consumer you have certain legal

    obligations under the Sale of Goods Act 1979 (as amended). The key

    obligations are set out below.

    Before the sale

    A. Make sure that the car is of satisfactory quality

    8.2 'Satisfactory quality' means that the car you sell should be of a standardthat a reasonable person would expect from that car taking into account

    a number of factors including:

    age of the car price paid car's history car's mileage car's intended use the make of car durability safety any descriptions made about the car.

    8.3 Whether a car is of satisfactory quality will therefore depend on theparticular facts and on the extent to which the actual condition of the

    car matches the buyer's reasonable expectations. For example, in

    judging whether a recently bought seven-year-old car was of satisfactory

    quality it would be reasonable to take account of the price paid. This

    could be far less than for a new vehicle and so expectations should be

    lower. It would also be reasonable to assume that the performance

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    might not be as good and the quality of the finish could fall far short of

    A1 condition for example, there may be some scratches to the

    paintwork. However, it would still need to conform to any description

    given to it and should be judged in accordance with the standard and

    performance that was reasonable to expect in a similar car of that age,

    mileage and model.

    Examples:

    A three-year old car with 10,000 miles on the clock was purchasedfor 12,000 and was described as being in 'very good condition'. If

    after four months the car starts over-heating and stalling it is unlikely

    to have been of satisfactory quality when purchased.

    A 10-year old car with 120,000 miles on the clock was purchasedfor 250. After six months the clutch needs replacing. Given the low

    price paid, and the very high mileage travelled, a reasonable person

    might expect that the clutch might need replacing after a few

    months.

    8.4 It is not sufficient that the car is merely roadworthy and safe under theRoad Traffic Act 1988 the requirement of satisfactory quality extends

    to other matters besides safety and roadworthiness.

    8.5

    Even where a car has a minor defect, it may still be of unsatisfactoryquality if that defect has a serious knock on effect - for example, the

    defect causes extensive damage so that the car can never be restored to

    its previous condition, or the defect (for example, an oil leak) renders it

    dangerous to drive the car.

    8.6 You are liable for faults with the car that are present at the time you soldit, even though it may only become apparent later on so called 'latent'

    or 'inherent' faults. The fault may not become apparent immediately but

    it was there at the time of sale and so the car was not of satisfactory

    standard.

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    8.7 You are not liable however: for fair wear and tear, where the car broke down through normal use for misuse or accidental damage by the consumer if you specifically draw to the consumer's attention the full extent of

    any fault or defect before they buy the car for example, if you

    draw to the buyer's attention that a car has a specific worn part

    before they decide to buy it

    if the consumer examined the car before buying it and should havenoticed the fault. Where the car is examined by the consumer rather

    than an expert, this mainly applies to cosmetic defects such as

    scratches or dents that are obvious. You will not be able to evade

    responsibility for defects if they were not apparent on examination.

    Also, it only applies where a buyer actually examined the car not

    to a buyer who has declined an opportunity to do so.

    B. Make sure that the car is fit for purpose

    8.8 The consumer must be able to use the car for the purposes that youwould normally expect from a car. This means not only driving the car

    from one place to another but doing so with the appropriate degree of

    comfort, ease of handling and reliability that a reasonable person wouldexpect from that car. If a car keeps breaking down then it is not fit for

    purpose.

    8.9 Where the consumer makes known to you a particular purpose for whichthe car is required, there is an implied condition that the car will be fit

    for that purpose. If it is not fit for that purpose you will have breached

    the Sale of Goods Act (as amended).

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    Example:

    A consumer explains to your salesman that he wants a car that issuitable for towing his caravan and is assured by the salesman that

    the particular make of car is suitable. You will be subsequently liable

    if the car you sold him was not sufficiently powerful to tow thecaravan as the consumer relied on the expertise of the salesman and

    the car was not fit for the purpose he made known to the dealer at

    the time of sale.

    C. Make sure that the car corresponds with any description you

    give to it

    8.10 Any description of the car must be accurate, for example when givenverbally over the telephone or in the course of discussions prior to thesale of the vehicle, in writing in advertising on the car, in the showroom,

    in a newspaper, website, email or text, or in documentation provided to

    the prospective buyer. If the car does not correspond with the

    description, you will be in breach of contract.

    Example:

    If you sell a car which you describe as '2003 registered, Full ServiceHistory,' you must ensure that it has been registered in that year and

    has a Full Service History.

    D. Make sure you have the right to sell the car

    8.11 You must ensure that you have the right to sell the car and in the caseof an agreement to sell, that you will have such a right when the car is

    sold. If you do not have the right to sell the car the buyer has the right

    to reject the car and recover the purchase price.

    8.12 You should therefore check that the car is not still subject to a financeagreement. If the loan remains unpaid when you purchase the vehicle,

    you will not acquire title to it and the lender may have the right to take

    possession of the car.

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    Example:

    You purchase a car - for example as a part-exchange which has anoutstanding hire purchase agreement on it. You then sell the car to a

    customer. You will not have acquired good title to the car and your

    customer is entitled to reject the car and reclaim the purchase pricefrom you.

    After the sale

    A. Your customer's rights

    8.13 If you fail to fulfil your obligations under the Sale of Goods Act (asamended) in respect of either satisfactory quality, fitness for purpose,

    description or the right to sell the car - you will be in breach of contract

    and the consumer will be entitled to a number of remedies against you.

    What remedy the consumer is entitled to will depend on a number of

    factors, including:

    how long ago you sold the car to the consumer the remedy the consumer is asking for the seriousness of any fault or defect whether the fault or defect keeps recurring the cost of carrying out repairs or replacing the car.Full refund

    8.14 The consumer can request a full refund if this is within a reasonable timeof the sale. 'Reasonable time' is not defined in law and will depend on

    the facts of each case - it can vary from a few weeks to a number of

    months. The customer is not obliged to return the car to you but mustmake it available for collection.

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    8.15 If you dispute the consumer's request for a full refund, it is for theconsumer to prove that the car was not of satisfactory quality, fit for

    purpose or as described by you at the time of purchase.5 For example, if

    the car has a serious fault the consumer may need to provide evidence

    to you such as an independent report from a garage showing the fault

    was present at the time of sale to support their claim. If the consumer's

    complaint is valid you must accept the car back and provide a full refund

    - in such circumstances the consumer is also entitled to claim for

    reasonable losses suffered, including the cost of any independent report

    they have paid for to prove their case.

    Example:

    A consumer discovers that a one year old car he bought from adealer for 10,000 a few days ago has a major engine fault. Hetakes it to a garage and they confirm that the engine was in a very

    poor condition. The consumer provides the dealer with a written

    report of the garage's findings and asks you for his money back. In

    these circumstances the dealer must accept the car back and provide

    a full refund, as well as paying for any reasonable losses suffered by

    the consumer such as the cost of the written report.

    8.16 Within the reasonable period after the sale, buyers do not lose their rightto reject the car and require their money back merely because they ask

    for or agree to let you try to repair the car. Where a consumer agrees toallow you to repair the faulty car (within the reasonable period after the

    sale) he is still entitled to a refund if the repair turns out to be

    unsatisfactory or was not done promptly enough.

    5 The position is different when a consumer requests that you repair or replace a faulty car

    within the first six months of purchase from you.

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    Examples:

    A consumer discovers that a three-year old car he bought from adealer for 5,000 two weeks ago is faulty and hence not of

    satisfactory quality. He allows the dealer to try to repair the car. The

    car still has the same faults despite the repairs. The consumer will inthese circumstances still be entitled to reject the car for a full refund.

    A consumer discovers that a one year old car he bought from adealer for 10,000 a week ago is faulty and hence not of

    satisfactory quality. He allows the dealer to try to repair the car. The

    car is off the road for a considerable time whilst the dealer tries

    unsuccessfully to fix the defects. The consumer will in these

    circumstances still be entitled to reject the car for a full refund.

    8.17 If the consumer is not entitled to a full refund, for example because a'reasonable time' has elapsed, or if they chose not to request this, they

    can instead claim a reasonable amount of compensation (damages). This

    is designed to compensate the consumer for the actual losses and so

    normally amounts to the cost of repair or replacement of the car with

    one of a similar age, specification and price or the difference in value in

    the case of misdescribed goods. Any direct and predictable expense

    arising as a result of being supplied with faulty goods can also be

    claimed by the customer (Consequential Loss).

    Repair or replacement

    8.18 A consumer can - if they do not wish (or are not entitled) to reject thecar or claim compensation - specifically request either a repair to the car

    or a replacement car.

    8.19 If a consumer seeks a repair or replacement (or when these are notpracticable, a partial or full refund) in the first six months after the sale,

    and you dispute their claim, it will be for you to prove that the fault or

    defect was not present at the time of sale. Where a fault or defect

    emerges with a car in the first six months after purchase, it will be

    presumed that the fault was present at the time of the sale.

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    8.20 If you dispute the claim you will need to refute the presumption byproviding reasonable evidence. It is not sufficient to rely on a pre-sale

    'tick box' check of the mechanical condition of the vehicle as evidence

    that the fault was not present at the time of sale. You will need a moredetailed report of the specific check you had carried out on the part. The

    consumer does not need to provide any proof of the cause of the fault or

    defect to be entitled to the repair or replacement it is sufficient that a

    complaint has been made to you.

    Example:

    A consumer complains to a dealer that a one year old car he boughtfrom them for 8,000 three months ago has a faulty gearbox. He

    asks the dealer to repair the car. It will be presumed that the car had

    a faulty gearbox at the time of sale and the dealer must carry out the

    repair to the gearbox at no cost to the consumer unless they can

    prove otherwise.

    8.21 It is important that the repair or replacement is carried out within areasonable time and without causing significant inconvenience to the

    consumer. You must also bear any costs associated with doing so such

    as transporting the car to a garage for repairs. Any repairs must also be

    carried out with reasonable care and skill.

    8.22 You may offer a repair if a replacement car is not possible, significantlycostlier, or vice versa. A decision on whether the cost is disproportionate

    should take account of the value of the car if it had conformed to the

    contract, the significance of the problem (such as the nature of the fault)

    and whether the alternative remedy could be completed without

    significant inconvenience to the consumer.

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    Partial and full refund

    8.23 If neither a repair nor replacement is realistically possible, the consumercan request a partial or full refund depending on what is reasonable in

    the circumstances. It may be the case that a full refund is not the

    reasonable option because the consumer will have used the car for some

    time before the problem appeared.

    8.24 Where faults or defects with the car only become apparent after sixmonths, it is for the consumer to provide evidence that the fault or

    defect existed at the time of the sale.

    8.25 Consumers can switch between certain remedies if they find they aregetting nowhere. However the consumer would have to give you a

    reasonable time to honour a request before they tried to switch and they

    could never pursue two remedies at the same time.

    Example:

    A consumer discovers that a one year old car he bought for 10,000three months ago is faulty. He takes it to the dealer who agrees to

    repair the car. The dealer takes over two months to repair the car but

    the fault persists. The consumer in these circumstances may request

    a replacement car or a refund instead because the repairs have not

    remedied the fault, were not carried out within a reasonable time andhave caused significant inconvenience to the consumer.

    B. Time Limit to bring a claim

    8.26 A consumer can take legal action up to six years from the date theybought the vehicle (five years in Scotland). This does not mean that the

    car has to last or be fault free for six years; it is the time limit for making

    a claim in respect of a fault that was present at the time of sale. It will

    also be unrealistic for a consumer to take legal action for a fault in a

    second hand car, especially an older vehicle, once the consumer has

    been using it for a reasonable length of time.

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    Has the consumer accepted the car, for example because

    the reasonable time for examining the car has passed?

    No Yes

    The consumer can choose between

    the two sets of remedies below:

    Is it within 6 months of purchase?

    Is it within 5 years

    (Scotland) or 6 years

    (England and Wales) ofpurchase?

    Faults with the car emerge in first 6

    months after purchase - presumed tohave been present at time of sale.

    Burden of proof is with the dealer to

    prove fault not present at time of sale

    SUMMARY OF CONSUMER REMEDIES FOR THE SALE OF FAULTY

    SECOND HAND CARS

    Full Refund

    (Rejection): If carhas a serious fault,

    the consumer canrequest a full refund.

    Burden of Proof is

    with the consumer to

    prove that the faultwas present at time of

    sale

    Can the consumerprove that the fault

    existed at the time of

    purchase?

    If repair and replacement are disproportionate or impossible, or ifthe dealer fails to act in reasonable time and without causing

    unreasonable inconvenience: full or partial refund.

    The consumer can request a partial or full refund depending on

    what is reasonable in the circumstances. It may be that a full refund

    is not reasonable because the consumer will have used the car for

    some time before the problem appeared

    Damages: For any other losses suffered (such loss being within the reasonable contemplation

    of the parties at the time of entering the contract) as a result of the faulty car, the consumer

    may claim a reasonable amount of compensation.

    Repair or replacement: The

    consumer can demand either

    a repair or replacement from

    the dealer, who can onlyrefuse if the remedy is

    impossible or

    disproportionate.

    No legal remedy

    No

    No

    No

    2

    Yes

    1

    Yes

    Yes

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    9 WARRANTIES9.1 Any warranty you sell or provide for free with the car is in addition to

    the consumer's legal rights under the Sale of Goods Act (as amended).

    You cannot, for instance, refuse to deal with a customer's complaint

    about a fault or defect with a car simply on the grounds that (i) the

    consumer's warranty has expired or (ii) the type of fault is specifically

    excluded from the warranty coverage.

    9.2 The warranty document should include a statement advising theconsumer that the warranty is in addition to his statutory rights.

    Examples:

    A consumer buys a four-year old car from a dealer at cost of9,000. The dealer provides the consumer with a free three-month

    warranty with the car. The engine seizes up after four months due to

    a fault it will be presumed to have been present at the time of

    purchase in the absence of any proof from the dealer to the contrary.

    The dealer cannot then refuse to repair or replace the car simply

    because it is out of warranty. The consumer is entitled to a repair or

    replacement as the car was not of satisfactory quality at the time of

    purchase.

    A consumer buys a five-year old car from a dealer at cost of 7,000.The dealer also sells the consumer a 12-month warranty with the

    car. The clutch breaks after four months due to a fault - it will be

    presumed to have been present at the time of purchase in the

    absence of any proof from the dealer to the contrary. The warranty

    cover specifically excludes problems with the clutch. The dealer

    cannot refuse to replace the clutch because it is not covered by the

    warranty. The consumer is entitled to a repair or replacement as the

    car was not of satisfactory quality at the time of purchase.

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    10 ATTEMPTING TO LIMIT YOUR LIABILITY UNDER THE SALEOF GOODS ACT (AS AMENDED)

    10.1 A consumer's legal rights under the Sale of Goods Act (as amended)cannot be taken away or restricted, and any attempt by you to do so by

    using an exclusion clause or similar notice will be void and therefore

    unenforceable. You will also be committing an offence under the

    Consumer Protection from Unfair Trading Regulations 2008.

    Examples:

    Stating that all cars are 'sold as seen', or writing 'unroadworthy','Trade Sale Only' or 'No Refund' on the invoice for the car, even if

    the statement this does not affect your statutory rights is included.

    Including terms in a contract that require the consumer to makedeclarations about what had or had not been said about a car's

    mileage and defects and/or affirming that they had examined the car

    and had any faults pointed out to them. Such terms could be used to

    exclude liability arising under the Sale of Goods Act. If untrue, such

    'declarations' are ineffective and may mislead buyers with legitimate

    grievances that they have signed away their rights. Where they are

    true, such declarations are unnecessary.

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    11 WHAT ARE THE CONSEQUENCES OF NON-COMPLIANCE?11.1 If you do not honour your obligations under the Sale of Goods Act (as

    amended), the consumer may bring a claim against you in the County

    Court using the small claims track for claims of 5,000 and below in

    England and Wales and 3,000 in the Sheriff's court in Scotland.

    11.2 You may also face enforcement action. The OFT, local authority TradingStandards Services (TSS) and the Department of Enterprise, Trade and

    Investment in Northern Ireland can take civil enforcement action against

    you under Part 8 of the Enterprise Act 2002 in respect of breaches of

    the Sale of Goods Act (as amended) which harm the 'collective interests

    of consumers' in the United Kingdom. Enforcers can use a range of tools

    to ensure that businesses are complying with the law. This can include

    applying for a court order to prevent or stop breaches. Breach of anyorder could lead to up to two years imprisonment and/or an unlimited

    fine.

    11.3 Failure to meet your obligations under the Sale of Goods Act (asamended) may also constitute a breach of the Consumer Protection from

    Unfair Trading Regulations 2008.

    11.4 The OFT is committed to ensuring enforcement action is necessary andproportionate. The OFT follows the guiding principles set out in it's

    Statement of Consumer Protection Enforcement Principles, details ofwhich can be found at:

    www.oft.gov.uk/oft_at_work/enforcement_regulation/enforcement.

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    ANNEXES

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    A SUMMARY OF QUESTIONS FOR CONSULTEES

    Content

    A.1 Is the draft guidance sufficiently clear?

    A.2 Does the draft guidance have any significant omissions?

    A.3 Is the draft guidance in need of clarification and, if so, in what respect?

    A.4 Are there any parts of the draft guidance that are not needed?

    A.5 Are the illustrative examples useful?

    Format

    A.6 Is the draft guidance in the right format and length for the intended

    audience?

    A.7 Is the draft guidance sufficiently user friendly for the intended audience?

    Access to the guidance

    A.8 Do you have any suggestions on how the final guidance should be

    disseminated to those who need to see it?

    General

    A.9 Do you have any other suggestions for improvement of the draft

    guidance?

    A.10 Are there are further comments you wish to make?

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    B LIST OF CONSULTEES

    The following organisations are being consulted. We would welcome

    suggestions of others who may wish to be involved in this

    consultation process.

    Automobile Association

    British Vehicle Rental and Leasing Association

    Citizen's Advice Scotland

    Citizens Advice

    Consumer Focus

    Department for Business Innovation and Skills

    Department for Transport

    Driver and Vehicle Licensing Agency

    Experian

    Finance and Leasing Association

    Glass's Information Services Ltd

    Home Office

    HPI

    Local Authorities Coordinators of Regulatory Services

    RAC

    Retail Motor Industry Federation

    Scottish Motor Trade Association

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    Society of Motor Manufacturers and Traders Ltd

    Trading Standards Institute

    Trading Standards Northern Ireland

    Vehicle and Operator Services Agency

    What Car

    Which?

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    C CONSULTATION CRITERIA

    Public bodies are required to perform consultations in accordance

    with the following criteria wherever possible:

    A.1 When to consult formal consultation should take place at a stage whenthere is scope to influence the policy outcome.

    A.2 Duration of consultation exercises consultations should normally lastfor at least 12 weeks with consideration given to longer timescales

    where feasible and sensible.

    A.3 Clarity of scope and impact consultation documents should be clear4about the consultation process, what is being proposed, the scope to

    influence and the expected costs and benefits of the proposals.

    A.4 Accessibility of consultation exercises consultation exercises should bedesigned to be accessible to, and clearly targeted at, those people the

    exercise is intended to reach.

    A.5 The burden of consultation keeping the burden of consultation to aminimum is essential if consultations are to be effective and if

    consultees' buy-in to the process is to be obtained.

    A.6 Responsiveness of consultation exercises consultation responsesshould be analysed carefully and clear feedback should be provided to

    participants following the consultation.

    A.7 Capacity to consult officials running consultations should seekguidance in how to run effective consultation exercises and share what

    they have learned from the experience.

    A.8 The full Code of Practice on Consultation can be found on the website ofthe Department for Business, Innovation and Skills:

    www.berr.gov.uk/whatwedo/bre/consultation-guidance/page44420.html.


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