The rather snappily titled Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013/3134), which I will now shorten down to “The Regulations” to save typing, came into force on 13 June and we received a little flurry of questions at the time. This is really an article pulling our thoughts together so that if you are dealing remotely with a client, a situation we would only imagine arising in an IVA, you can consider if something extra is needed.
R3 technical bulletin (para 107.4) dealt with the topic at the time. As far as we can tell, this is actually just updated legislation from some issued in 2000 about “distance selling” which required a “7 day letter” to be sent, and if it applies now, then it probably should have applied since then.
The first point to make is that there is no IP exemption, which would have made things a lot clearer. However, the Regulations only apply to “distance selling”. This raises at least two points to my mind. One is alluded to in the R3 bulletin, in that if the “selling” (see point 2) is done at your offices, then the Regulations just don’t apply. Point two is that the Regulations apply to sales and service contracts, and we are just not sure how much of any work that you do in an IVA fits within the Regulations. Although you issue the debtor with an engagement letter, that is really just setting out some of the technical points of insolvency and introducing the firm. I am not sure whether, with IVAs in mind, it creates a contract or whether an IVA could be considered a “sale”. Isn’t the whole point of the advice you have to give under SIP 3.1 designed to avoid you “selling” IVAs? You provide services, but although any payment may nominally be agreed by the debtor, it is usually only approved for payment by the creditors as part of a statutory insolvency solution, not as a “sale”.
The R3 technical bulletin only says that the regulations “may” apply to some IVAs and Trust Deeds, and we get the impression that they may not be wholly convinced that they are needed. We decided that the safest solution is probably build the 14 days’ cancellation notice or an appropriate signed waiver into the engagement letter or proposals signing pack and we’ve suggested some wording. We would recommend getting some formal legal advice on the wording and the appropriate place in the process if you are unsure. We will include it as optional wording in our next update to our IVA documents.
Subject to anything that your own lawyer says, you could try adding the following to the signature block wording that you use in your engagement letter for the debtor when they acknowledge your terms, or in the proposals pack, depending on when you consider that your “contract” starts:
“I understand that if I am provided with services remotely rather than face-to-face I may have the right to cancel my instructions without any cost as long as I do so within 14 days of the instruction. I also understand that I can waive that right if I want the firm to take action within the 14 days without waiting. For the avoidance of any doubt, by signing this engagement letter/signing these proposals/signing this notice to intended nominee (delete as appropriate), I formally waive my right to notice and instruct [IP name, IP Firm, address] to assist with my proposals on the terms contained in the engagement letter/proposals (delete as appropriate) without waiting for the 14 days to expire.”
Finally, the points above relate to those cases where you charge only as nominee and supervisor with creditor approval. If you provide advice before that and charge the debtor outside the arrangement, then the Regulations will apply and you will certainly have to give the debtor notice and wait for the full 14 days unless the debtor specifically waives their right to cancel.
