Professional diligence
In addition to the more specific rules referred to above, it is worth noting that consumer law also contains a more general prohibition against commercial practices which contravene the requirements of professional diligence.1Consumer Protection from Unfair Trading Regulations 2008, regulation 3.
Professional diligence is an objective standard of special skill and care which you/your firm are expected to exercise towards consumers and which is commensurate with honest market practices2Note, however, that for there to be a breach you do not need to be acting dishonestly – the legal test is less strict. or the general principle of good faith in the sector. It is an intentionally broad and flexible test and is intended to reflect what consumers would reasonably expect of you.
Example. While you have a published complaints procedure, in practice you fail to follow it adequately or your complaints procedure does not adhere to the CLSB’s guidance. In both cases, in addition to any potential regulatory action, you may be contravening the requirements of professional diligence and so be in breach of consumer law.
While compliance with your obligations under the Code of Conduct is a good place to start, this will not guarantee compliance with your professional diligence obligations under consumer law. They are distinct obligations and should be considered separately. In this regard, it is important to note the following.
- You may infringe the rules on professional diligence either before, during or after you have been formally instructed by a consumer.
- As is the case for other potential consumer law infringements referred to above, you may contravene the professional diligence requirements in relation to consumers who do not formally become your clients.3For example, due to the way in which you solicit new customers.
- It is not a defence that other firms engage in the same practices. If it is poor practice, it will not meet the objective standard of professional diligence as this is not what a reasonable consumer would expect of a firm acting in accordance with honest market practices or good faith, even though others are doing the same thing.
- There is an enhanced risk of a breach where you are engaged in a practice that is taking advantage of, or may take advantage of, consumers. This may be because, for example, consumers are particularly vulnerable, are not familiar with the services you are providing, feel pressured into making decisions that they do not fully understand, or only receive pertinent information late in the day.
Example. You have noticed that consumers who complain to your firm are less likely to complain to the Legal Ombudsman if the complaints process takes a long time. As a result, you decide that you will seek to string out consumer complaints as much as possible. This is likely to mean you are contravening the requirements of professional diligence and so will be in breach of consumer law.
- 1Consumer Protection from Unfair Trading Regulations 2008, regulation 3.
- 2Note, however, that for there to be a breach you do not need to be acting dishonestly – the legal test is less strict.
- 3For example, due to the way in which you solicit new customers.