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How Does the Consumer Protection Act Affect Businesses?

Businesses have to be aware of the many laws and legislation that protect both themselves and their customers. These help to create a fair and stable atmosphere for consumers and businesses to trade in.
How Does the Consumer Protection Act Affect Businesses?

The Consumer Protection Act is one of the first pieces of legislation to protect consumer rights. If you run your business honestly and fairly then you could not have any problems adhering to the Act. But it’s always crucial to have an understanding of the law and how it applies to your business, so here’s what you need to know.

What is the Consumer Protection Act?

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The Consumer Protection Act was first introduced in 1987. As indicated by the name, its main purpose is to protect consumers from unfair trading practices.

Several sections of the Consumer Protection Act have been repealed and replaced over time by different pieces of legislation.

The main function of the Consumer Protection Act now is to protect consumers against product liability.

Protection against product liability means that consumers are protected if the product they purchase from you is defective and causes further damage.

A product is classed as defective if, generally, it’s not as safe as you would expect it to be. The packaging, warning labels and instructions, and reasonable use will be taken into account to deem if a product is defective.

Damage is defined as death, injury, or damage to personal property.

The producer is legally classed as any person or company who puts their name, branding, trademark or other distinguishable feature on a product even if they did not produce it. This essentially means you are claiming the product as your own and are taking responsibility for it.

The Consumer Protection Act is a European Community Directive that was ratified by Parliament. This means that a producer is also classed as someone who imports goods from outside the European Union. So if you import goods from China, you could be held liable for damage.

A product is classed as anything that can be packaged and sold. This includes raw food (so meat from a butcher, fruit from a greengrocer) and materials for building too. Land and buildings aren’t covered.

Impact of the Consumer Protection Act on businesses

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The Consumer Protection Act is the primary piece of legislation that enables consumers to make personal injury claims. So if you’re held liable, you could be taken to court and faced with a hefty compensation bill.

However, claims against you can’t be made in certain circumstances. These include if the product was stolen or never intended for public sale, if the product wasn’t defective when you supplied it, or if scientific or technical knowledge wasn’t advanced enough to know of a defect at that time.

Some business insurers offer protection if you’re taken to court and will help you handle the finances if that’s the case.

Ultimately, if you make your own products from scratch then you are liable for any damage caused to customers. If you sell products made by someone else, they are liable for damage caused.

Check if you’re liable

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The impact of the Consumer Protection Act on businesses is clear: you’ll suffer financially. However what’s not always crystal clear is who the legislation applies to. If you’re unsure where your obligations sit, always seek professional advice and don’t make any assumptions that it doesn’t apply to your business.

How could Esme Loans help?

If you’re looking to cover legal fees or generally invest in your business, get in touch with Esme today. We offer business finance to SMEs looking to borrow between £10,000* and £250,000 over a 1 to 5 year period. Why not get an instant quote today to see how much your monthly repayment could be.

*£25,500 for sole traders