Subscription Contracts: Right to Cancel
Lord Moynihan
To ask His Majesty’s Government, in making regulations under section 267 of the Digital Markets, Competition and Consumers Act 2024, what plans they have to account for concerns raised by cultural and heritage organisations regarding the right of consumers to cancel subscription contracts.
Lord in Waiting/Government Whip (Lord Leong) (Lab)
My Lords, the Government have consulted on how the new subscription rules will work under the Digital Markets, Competition and Consumers Act—this includes what happens when a consumer uses their cooling-off right to cancel—and are carefully reviewing responses from cultural and heritage organisations. My officials have engaged directly with sector representatives and will continue to do so to ensure that the final regulations reflect their concerns and support both consumer protection and organisational sustainability.
Lord Moynihan (Con)
My Lords, I have had a number of exchanges with the Minister, for which I am very grateful. In considering next steps, will he take into account the worries expressed by charities, and arts and heritage organisations, about the inevitable decimation of their fundraising efforts? Would he agree that introducing the cooling-off period set out in the recently enacted DMCCA immediately on signing up would allow thousands of people to join, say, art galleries, take advantage of the membership benefits of reduced admission fees to exhibitions over, say, a weekend’s holiday in London, and then legally cancel their memberships under the cooling-off period set out in the new Act, which will cripple membership schemes as a fundraising model that are currently worth hundreds of millions of pounds to charities across the UK every year? Will the Government accelerate their consideration to exempt our charities, museums, galleries and national heritage homes, just as they have exempted gambling contracts and society lotteries under Schedule 22 in order to protect their fundraising efforts?
Lord Leong (Lab)
The noble Lord will know that, under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, consumers already have a cooling-off period for distance contracts, so this is not new for the sector. The digital content waiver is long established, and most charitable memberships are service contracts, not digital content. We consulted on extending the waiver, as that would reduce consumer rights. Having said that, gambling is excluded due to the existing specialist regulations. We recognise the concerns raised by charities and heritage organisations about potential misuse and will continue to work closely with charities as we finalise the secondary legislation.
Lord Clement-Jones (LD)
My Lords, Section 267 gives the Government the clear ability to use the regulation-making powers to recognise the specific circumstances of particular services, such as streaming, charitable memberships and, of course, the news media. Do the Government intend to make distinctions between those sectors? If so, will the Government make sure that streaming services, the charitable sector and, indeed, the news media are protected from early termination?
Lord Leong (Lab)
The noble Lord makes an interesting point. Let us look at the policy. We are talking about unwanted subscriptions, which account for some £1.6 billion a year. This Act will save consumers some £14 a month, which is about £147 million a year. As it stands, charities have to comply with consumer law irrespective of charitable status. Companies, especially digital service organisations, have the legislation that is currently in place, so that will stay as it is. The cooling-off period under the new Act is just an extension from distance contracts to in person.
The Earl of Devon (CB)
My Lords, how do the Government account for the concerns of privately owned heritage? The majority of members of Historic Houses, for example, are neither charities nor large heritage organisations, yet they are wholly dependent on subscriptions and membership for the preservation of our nationally significant heritage. I note my interest as a member of Historic Houses.
Lord Leong (Lab)
I thank the noble Earl for that. As far as heritage organisations are concerned, it is up to the individual organisation how its business model is structured. If it is a subscription model for contracts or services then it falls in scope of this legislation and the cooling-off period will apply.
Lord Waldegrave of North Hill (Con)
My Lords, I support my noble friend in his Question and welcome the tone of the Minister’s thoughtful reply. As a proud member of the British Museum scheme, I think there is a loophole and an unintended consequence of the good intention of the Act, which needs support. I assure the Minister that he will have widespread support in this House if he can find a way through this problem.
Lord Leong (Lab)
I thank the noble Lord for that. This is precisely why the Government are taking their time. We have consulted widely—the consultation finished at the end of February—and we are analysing the responses. There are various complexities. It also impacts on HMRC, as far as gift aid is concerned. We must ensure that we get this absolutely right, and we will make a decision in due course.
Lord Watts (Lab)
My Lords, while we are on this subject, is it not the case that our regulators and our consumer rights are letting Britain down, and that we are in what we call rip-off Britain? Do we not need to look at regulation and consumer rights as a whole and come forward with a package to address the problems?
Lord Leong (Lab)
My noble friend is absolutely right. As it stands, all consumers are protected under the consumer contracts regulations, which basically allow consumers to have that cooling-off period if they subscribe to a service online. The Act extends that to subscription in person so that consumers will be protected under this legislation.
Lord Grayling (Con)
My Lords, I declare an interest as a trustee of the National Portrait Gallery. This issue is particularly important as last week’s Red Book shows that the DCMS’s budget is going to fall in the latter part of this decade. This means that public institutions will be under greater financial pressure. The last thing they need, therefore, is an issue of this kind. I offer my support to my noble friend and urge the Minister to do everything he can to get rid of this anomaly.
Lord Leong (Lab)
I thank the noble Lord for that. It is precisely what we are doing. We are taking our time to consider the consultation and we are analysing the responses. We must get this right. As I said, charities have to comply with current consumer protection regulations. As it stands, most charities, perhaps because they do not understand the implications of the Act, have been claiming gift aid, even though their membership may be for a provision of services. We need to ensure that HMRC and the DCMS work through the technicalities so that we are not caught in the loophole that the noble Lord mentioned.
Lord Bird (CB)
Is the Minister actually asking for reluctant subscribers to stay with a service just because it is a charity? I find that really difficult to understand. We have to think of that person who goes in, looks at something, says, “I don’t really want to be a part of this”, and chooses to leave. They should have a right to do that.
Lord Leong (Lab)
Every consumer has a right to do that under current consumer protections. They have a cooling-off period of 14 days to cancel that subscription if it is a distance subscription. Under the new Act, if the subscription is taken up or renewed in person, the cooling-off period is extended to 14 days, so consumers will have the right to cancel or stay within the subscription.
Lord Parkinson of Whitley Bay (Con)
My Lords, the problem has been well set out by my noble friend Lord Moynihan and repeated admirably by the Minister. It is a problem that was identified when this Act was going through your Lordships’ House. At the time, my noble friend Lord Offord of Garvel committed to closing this loophole through secondary legislation. Of course, the election interceded, but that is now a year and a half ago. As we have heard, this is a pressing issue for organisations that are beset by cuts to the DCMS budget, the rising impact of national insurance contributions and much more. Will the Minister commit to working urgently to make sure that this loophole is not open in a way that will affect so many arts, cultural and heritage organisations that are loved across the country?
Lord Leong (Lab)
I thank the noble Lord for that. I assure him that my officials and I are working to ensure that we get this right. The new subscription regime will ensure that in particular situations, including after the contract automatically renews on to a 12-month term, consumers have a 14-day window in which to cancel. Should any changes be needed in secondary legislation that we publish, they will not commence until autumn 2026, so there is plenty of time for charities and heritage organisations to put their houses in order before this regime kicks in.
Lord Lansley (Con)
May I offer the Minister an opportunity to be popular by moving the regulations on online subscriptions further, so that all those who are subject to automatic renewals do not have to click more than twice in order to end a subscription that they do not want to retain?
Lord Leong (Lab)
I thank the noble Lord for that kind suggestion. I am sure my officials, who are sitting in the Box, have heard it.