In the late 1990's the Office of Fair Trading ("OFT") contacted a number of home improvement companies regarding the use of standard terms and conditions in agreements which required full payment in advance of installation.
In its 2005 guidance document 'Guidance on unfair terms in home improvement contracts' The Office of Fair Trading states its belief that to compel a consumer to pay in full in advance of an installation is potentially unfair in light of the Unfair Terms in Consumer Contracts Regulations 1999, although only a court could determine such a matter in an individual case.
To charge 100% up front may remove the consumer's right of 'set off'. In its guidance, the OFT states "consumers who have a claim arising out of the supply of goods and/or services, and have not already paid for them, are legally entitled to withhold part of the price, so long as the claim is genuine, and the amount withheld is proportionate to the fault. This avoids unnecessary legal proceedings - first one party going to court to force the other to pay a sum of money, and then the other going back to court to recover what he should not have had to pay in the first place."
The OFT had considered applying for an injunction to prevent a number of home improvement retailers from charging consumers 100% in advance of an installation. Before formal enforcement action commenced, discussions took place between the OFT, TFO and the retailers concerned during which a proposal was made to establish a Payment Protection Scheme.
The OFT's stated objective with the Scheme, was to ensure that potentially illegal terms were replaced with provisions that are consistent with the legitimate interests of both business and consumers. It was the intention that this occurred across the home improvement sector as a whole (wherever similar terms were used), not just in any one particular company's agreements.
As a result The Furniture Ombudsman Payment Protection Scheme was established and endorsed by the Office of Fair Trading.
In practice therefore, any home improvement retailer that requests full payment in advance within the scope of this document, must deposit an adequate amount with The Furniture Ombudsman. This amount has been agreed to be 20% of the cumulative contract price for all cases that are in dispute with The Furniture Ombudsman.
The effect of the Payment Protection Scheme is to redress the balance of interests between the business and the consumer before completion of the works and reintroduces an approved 'set off' provision. During the first 10 years of its operation, the Payment Protection Scheme has acted as a powerful tool to protect thousands of consumers.