UK Government consults on the implementation of the new subscription contract regime

As outlined in our article on the DMCCA earlier this year, and in our article on the new subscription contract regime when the DMCC Bill was first published in 2023, one of the aims behind the DMCCA is to protect consumers from being trapped in unwanted subscription contracts, which the Government estimates makes up 5.8% of all active subscriptions, at a value of £9.7 million.

In this regard, the DMCCA requires traders to provide clear pre-contract information before a consumer enters a subscription contract (to ensure the consumer knows what they are signing up to), send reminders at certain key points of the contract (to alert the consumer that they are about to become liable for another payment, unless they take steps to avoid that payment), provide straightforward exit routes and offer a 14-day cooling-off period, i.e. a right to cancel the contract, when the contract is entered into as well as when a contract renews after an initial trial period or period of 12 months or more.

While the DMCCA sets out the broader framework, several aspects of the subscription contract regime will be implemented by way of secondary legislation. To inform the content of these regulations, as well as forthcoming guidance on the new rules, the Government has launched a consultation seeking views from businesses impacted by the new requirements and other key stakeholders.

Within the consultation, the most detailed proposals relate to the circumstances in which a consumer is entitled to a refund if they cancel a subscription contract during a cooling-off period. In developing the new rules, the consultation notes that the Government has sought to ensure that the existing level of rights under the Consumer Contracts (Information, Cancellation and Additional Charges) and Cancellation Regulations 2013 is maintained, but extended to take account of the recurring nature of subscription contracts. 

At a high level, the Government's proposals for refunds and returns of goods, services and digital content that have been supplied in a cooling-off period are as follows:

•    Goods: If goods have not been supplied (or dispatched in case of perishable or bespoke goods), the consumer is entitled to a full refund. If they have been supplied (or dispatched, if applicable), consumers will generally have a right to a full refund for returnable products. If products are not returnable due to their characteristics (e.g. perishable or bespoke goods) or the circumstances (e.g. because they have been unsealed after delivery), traders will be permitted to reduce the refund by the price of the non-returnable goods. This is provided the trader has provided the required pre-contract information (in the case of the initial cooling-off period) or cooling-off notice (in the case of any renewal cooling-off period). In addition, in the case of perishable and bespoke goods supplied in the initial cooling-off period, the trader must also obtain the consumer’s express request that goods will be dispatched during that period. Interestingly, the Government has taken the position that this will not be required in the case of a renewal cooling-off period, on the basis of impracticality. 

•    Services: If the service has not been supplied, the consumer is entitled to a full refund. If the service (or part of it) has been supplied, the consumer is liable to pay a proportion of the price for the part of the contract performed in the cooling-off period, subject to the trader having provided the required pre-contract information or cooling-off notice, as applicable. Before commencing the supply of services in the initial cooling-off period, the trader must also obtain the consumer’s express request to receive services in that period. As with perishable and bespoke goods, this will not be required in case of a renewal period.

•    Digital content: The Government is seeking views on three potential options which could apply to the cancellation of contracts for digital content during a cooling-off period. Each takes account of the fact that digital content is not returnable and that consumers should not be able to receive digital content for free, e.g. in the context of digital streaming, by “binge watching” content and then cancelling for a full refund (a welcome position for businesses providing such digital content). 

•    Under option 1, if digital content has not been supplied, the consumer is entitled to a full refund. If digital content has been supplied, the consumer remains liable to pay a proportion of the price for the part of the contract performed in any cooling-off period (e.g. if the contract was "live" for 7 days, a pro rata fee reflecting such period). This is subject to the trader having provided the required pre-contract information or cooling-off notice, as applicable. In addition, before the trader begins the supply of digital content in the initial cooling-off period, the trader must obtain the consumer’s express consent to receive the digital content. This will not be required before a renewal cooling-off period. Option 1, therefore, mirrors the process proposed in respect of services. 

•    Under option 2, the consumer would be asked to waive their initial cooling-off right during the sign-up process, i.e. provide their express consent for the supply to begin in the cooling-off period and acknowledge that they will lose their cooling-off right to cancel. No waiver would be required for a renewal cooling-off period; instead, if the consumer cancels during a renewal cooling-off period, they would receive a proportionate refund as proposed under option 1, provided the trader has provided the required cooling-off notice.

•    Under option 3, the consumer’s express waiver of their cooling-off right would be required for supply of content during both the initial cooling-off period and renewal cooling-off period. Notably, the Government considers this option impractical, as traders would have to delay the supply of digital content at the start of each renewal period, until the end of such period, if the consumer does not give their express consent. 

Other proposals included in the consultation cover:

•    proposed regulations for the remedies the consumer is entitled to after cancelling a contract for breach of implied terms;

•    proposed regulations on repayment of refunds, i.e. when and how refunds must be made;

•    proposed regulations for when a consumer can be made liable for a renewal payment, to ensure that traders do not make consumers liable for such payment before the contract renews;

•    proposed regulations for when a consumer can end a contract, to prevent traders from setting unreasonable limits on when the consumer can exercise their right to bring the subscription contract to an end;

•    proposed regulations setting out further requirements for reminder notices, end-of-contract notices and cooling-off notices;

•    proposals for guidance clarifying the requirements to enable consumers to easily exit subscription contracts; and

•    proposals for guidance on how to comply with the pre-contract information requirements.

Next steps

The consultation can be accessed here and the last day to respond is 10 February 2025. The Government will then consider the responses received when formulating regulations and guidance ahead of the new rules taking effect in Spring 2026, at the earliest. For any clients wishing to respond to this consultation or receive advice on the potential impact of the subscription contract regime (or other aspects of the DMCCA) on their operations, we have a specialist team of advisors who would be happy to support.