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Public Consultation On The Consumer Protection (Fair Trading) Act And Subsidiary Legislation
Posted on Friday, September 28, 2007 - 10:00 PM

The Ministry of Trade and Industry (MTI) has released a consultation paper on proposed amendments to the Consumer Protection (Fair Trading) Act (CPFTA) and its subsidiary legislation to enhance the consumer protection framework in Singapore. The amendments arose from the recommendations made by a taskforce, jointly led by the Consumers Association of Singapore and MTI, that reviewed the CPFTA.

Introduction

1. The Consumer Protection (Fair Trading) Act (CPFTA) came into force on 1 March 2004. The CPFTA provides the legislative

framework to allow consumers aggrieved by unfair practices to have recourse to civil remedies before the courts.

2. In 2005, a taskforce<A href="#_ftn1" name=_ftnref1>[1], jointly led by the Consumers Association of Singapore (CASE)

and the Ministry of Trade and Industry (MTI), was formed to review the CPFTA. Amendments to the CPFTA and subsidiary

legislation, as well as new regulations will be needed to implement the recommendations arising from the review. To ensure

that the views of the public and various interested parties are considered before the amendments are finalised, MTI is

holding a two-week public consultation exercise, starting on 28 September 2007, to gather feedback on:

a. The proposed inclusion of financial products and services under the CPFTA and the draft Consumer Protection (Fair Trading)

(Regulated Financial Products and Services) Regulations;

b. The proposed amendments to the Consumer Protection (Fair Trading) (Cancellation of Contracts) Regulations;
c. The draft Consumer Protection (Fair Trading) (Motor Vehicle Dealer Deposits) Regulations; and
d. The draft Consumer Protection (Fair Trading) (Opt-out Practices) Regulations.

3. The principle of “caveat emptor” or “buyers beware” remains the cornerstone of the consumer protection framework in

Singapore. In preparing the amendments, MTI is mindful that there should be a good balance between regulatory action and

consumer responsibility. This paper summarises and outlines the rationale for the key amendments to the CPFTA and the

subsidiary legislation.

Key Amendments

Inclusion of financial products and services under the CPFTA

4. Financial products and services regulated under certain Acts are currently excluded from the CPFTA (please see

Annex for the list of Acts). It is proposed to amend the CPFTA to extend the application of the Act to the majority

of these financial products and services<A href="#_ftn2" name=_ftnref2>[2]. Of the 10 financial products and

services-related Acts currently excluded, eight of them, administered by either the Monetary Authority of Singapore (MAS) or

International Enterprise, are proposed to be brought under the CPFTA. These are listed below:
a. Banking Act
b. Finance Companies Act
c. Financial Advisers Act
d. Insurance Act
e. Section 28 of the Monetary Authority of Singapore Act
f. Money-changing and Remittance Businesses Act
g. Securities and Futures Act
h. Commodity Trading Act

5. The inclusion of the above financial products and services under the CPFTA would be beneficial to consumers, as consumers

will now have the option to seek redress and civil remedies under the CPFTA for unfair practices by financial institutions.

The CPFTA also covers aspects of unconscionable conduct (such as exerting undue pressure or undue influence on a consumer)

that are not covered by existing MAS legislation.

6. Moneylending and pawnbroking regulated under the Moneylenders Act and Pawnbrokers Act will remain excluded from the CPFTA.

These Acts already provide protection for consumers using these specialised services, which have distinct features from the

general services that the CPFTA is meant to cover. Nevertheless, the Ministry of Law will include additional provisions in

the two Acts to address any new unfair practices that may arise from moneylender and pawnbroking activities, including those

covered under the CPFTA.

7. The proposed Consumer Protection (Fair Trading) (Regulated Financial Products and Services) Regulations clarify the

following issues, which pertain to the extension of the CPFTA to financial products and services:
a. Unfair practice in relation to financial products and servicesIt is proposed that the inherent risks of

financial investments be taken into account when considering the reasonableness of the supplier’s actions. Section 5(3)

(a) of the CPFTA requires that the reasonableness of the supplier’s actions be considered in determining whether the supplier

has engaged in an unfair practice. As most financial investments carry a degree of risk and volatility (with the resultant

gains or losses dependent on market price movements), a supplier of financial products and services should not be considered

to have engaged in an unfair practice by reason only that the financial investment has not performed as expected.

In relation to insurance contracts, it is proposed that a supplier of an insurance contract should not be taken to have

engaged in an unfair practice by reason only that the contract includes: (a) terms that clearly define or circumscribe the

insured risk; and (b) terms that clearly define or circumscribe the insurer’s liability. Such terms are necessary in

insurance contracts because the price of the insurance policy is determined by the scope of the insured risk and the

insurer’s liability<A href="#_ftn3" name=_ftnref3>[3]. Thus, for action to be taken under the CPFTA, there needs to be

reasons other than that cited above.

b. Multiple actions arising from the same unfair practice. It is proposed that in cases where separate actions

involving the same unfair practice in financial products and services are commenced, the amount of the claim for each of

these actions should be aggregated for the purpose of applying the prescribed claim limit<A href="#_ftn4" name=_ftnref4>

[4] if the unfair practice is based on substantially the same facts. This proposal is made in consideration of the

unique nature of financial services and transactions, as it is possible that a consumer may have entered into multiple

transactions because of the same unfair practice<A href="#_ftn5" name=_ftnref5> [5].

c. Dispute resolution scheme for financial products and services. It is proposed to specify the dispute resolution

scheme provided by the Financial Industry Disputes Resolution Centre Limited (FIDReC) as the dispute resolution scheme for

cases involving suppliers of MAS-regulated financial products and services that are FIDReC subscribers. The Small Claims

Tribunal (SCT) currently handles some of the cases relating to unfair practices under the CPFTA. However, it would be more

appropriate to appoint FIDReC to hear cases involving MAS-regulated financial products and services given its expertise in

handling such cases<A href="#_ftn6" name=_ftnref6> [6]. While it will not be made mandatory for consumers to use FIDReC,

if an action is brought in court, the court will, when making its order, consider whether a consumer had sought to resolve

the case through FIDReC<A href="#_ftn7" name=_ftnref7> [7]. As suppliers providing stored value facilities, money-

changing and remittance services do not fall under FIDReC’s purview, the avenue of recourse for cases involving these

financial products and services would be the SCT.

d. Voluntary Compliance Agreement (VCA), declaration and injunction provisions . It is proposed to exclude MAS-

regulated financial institutions from the provisions of the CPFTA that empower CASE and Singapore Tourism Board to seek VCAs,

declarations and injunctions against suppliers. This is because MAS already monitors the financial services industry

closely in its capacity as the regulator. Furthermore, MAS has regulatory and enforcement powers against financial

institutions and their representatives if they breach MAS-administered laws.

e. Cancellation period It is proposed that the Consumer Protection (Fair Trading) (Cancellation of Contracts)

Regulations should not apply to direct sales contracts involving MAS-regulated financial products and services if the

cancellation period provided under MAS-administered laws is longer. This is to ensure that consumers are not prejudiced

by the inclusion of such financial products and services under the CPFTA as they will continue to enjoy the longer

cancellation periods available under MAS-administered laws<A href="#_ftn8" name=_ftnref8> [8].

Cancellation periods for direct sales contracts

8. The Consumer Protection (Fair Trading) (Cancellation of Contracts) Regulations allows consumers to cancel their timeshare

and direct sales contract within a three-day cancellation period<A href="#_ftn9" name=_ftnref9> [9]. Direct sales

contracts are essentially contracts entered into during an unsolicited visit. Currently, an “unsolicited visit” extends to a

visit by a supplier (not expressly requested by the consumer) that takes place after the supplier telephones or visits the

consumer indicating his willingness to visit the consumer.

9. There has been feedback that some direct sales suppliers are now circumventing the Regulations by making their initial

contact other than by telephone or a visit<A href="#_ftn10" name=_ftnref10> [10]. It is proposed to amend the

Regulations to clarify that the cancellation period applies where the initial contact occurs at any place other than the

supplier’s permanent place of business or by telephone or any electronic means. This would include a meeting at the

supplier’s exhibition booth at a trade fair or communication via the supplier’s website, where the supplier indicates his

willingness to visit the consumer.

Collection of deposits by motor vehicle dealers

10. Motor vehicle dealers often package the purchase and financing of a motor vehicle together, collecting a deposit (which

comprises the down-payment, Certificate of Entitlement bid and financing package) from the consumer. In some cases, the

deposit is not refundable if the purchase falls through, upon a failed loan application. There has been feedback that some

dealers have been confiscating the deposits, citing a failed loan application as the reason but without providing any

documentary proof of the fact. The proposed Consumer Protection (Fair Trading) (Motor Vehicle Dealer Deposits) Regulations

addresses this issue.

11. To enable a consumer to make an informed decision whether to agree to the motor vehicle dealer’s terms, it is proposed

that dealers should be required to disclose their deposit refund policies clearly in their sales contracts. Where the

sales contract involves financing, the dealer will not be permitted to retain the deposit unless he has given the consumer a

written statement to prove that he has applied for the financing and inform the consumer of the application’s outcome.

12. It is also proposed that motor vehicle dealers should have the burden of proving that they have complied with these

requirements. This is necessary because it is difficult for consumers to prove a negative fact (that is, the dealer did

not make the necessary disclosure or provide a written statement), whereas dealers would be in a better position to safeguard

their interests by keeping proper records. Such provisions can be found in other local and overseas legislation.

Unsolicited goods and services

13. Suppliers sometimes send goods or provide services to consumers without their prior consent, and subsequently demand

payment from them. As a result, consumers may mistakenly make payment for such goods or services. Goods or services may also

be provided on a free trial basis, with or without the consent of the consumers. This places a burden on the consumer to opt

-out from the arrangement.

14. Providing unsolicited goods and services and giving consumers free trials may be an effective marketing tool to raise

awareness and allow consumers to try out new products and services. However, this practice should not be used as a means to

take unfair advantage of consumers. It is proposed to introduce the Consumer Protection (Fair Trading) (Opt-out Practices)

Regulations to allow consumers to treat all unsolicited goods and services<A ref="#_ftn11" name=_ftnref11> [11] as

unconditional gifts from suppliers, unless the consumer has acknowledged in writing his willingness to accept and pay for

such goods and services. Consumers will also be allowed to claim a refund of payment made for such goods and services.

The refund claim will have to be made within 12 months after the payment, after which the suppliers will have 60 days to

effect the refund.

15. A consumer’s use of the unsolicited good or service will not be inferred as an intention to accept or pay for the good

or service. For example, if a consumer receives an unsolicited credit card, neither his use of the card or his signing of

the credit card payment slip will be taken as a request, or an acknowledgement to accept and pay, for the credit card or any

services supplied in relation to it. However, goods and services that are supplied on a continuing basis under a contract

between the consumer and the supplier<A href="#_ftn12" name=_ftnref12> [12] are excluded from the Regulations since the

obvious intention is that the supplier will continue to supply the goods or services to the consumer until the contract is

cancelled<A href="#_ftn13" name=_ftnref13>[13].

16. The Regulations will also require suppliers to give consumers a reminder notice not earlier than 14 days or later than

three days<A href="#_ftn14" name=_ftnref14> [14] before the end of the free trial period for goods and services

provided on a free trial basis. Consumers will be allowed to claim a refund of payment made for such goods and services if

they did not expressly acknowledge in writing their intention to accept or pay for the goods or services.

Mode of Consultation

17. MTI seeks feedback on the proposed amendments to the CPFTA and the subsidiary legislation. MTI will review the

submissions and make changes, where appropriate.

18. Submissions are to be sent to MTI via email, post/courier, or fax:

Email: mti_cpfta@mti.gov.sg

Post/Courier: Ministry of Trade and Industry
100 High Street #04-04
The Treasury
Singapore 179434
Attn: Chang Yi Chian

Fax: (65) 6334 0306

19. Parties who submit comments should organise their submissions as follows:

a. Cover page;
b. Table of contents;
c. Summary of major points;
d. Statement of interest;
e. Comments; and
f. Conclusion.

20. Supporting material may be placed in an annex. All submissions should be clear and concise, and should provide a reasoned

explanation for any proposed revision to the proposed amendments and/or consultation documents. Where feasible, parties

should identify the specific clause of the Draft Bill or Regulations, or specific paragraph of the consultation paper on

which they are commenting. Where parties choose to suggest revisions to the text of the Draft Bill, Regulations or

consultation paper, they should state clearly the specific changes to the text that they propose.

21. All submissions are to be made at or before noon, 12 October 2007. Parties submitting comments should

include their personal/company particulars as well as their correspondence address, contact numbers and email addresses on

the cover page of their submissions.

22. MTI reserves the right to make public all or parts of any submission and to disclose the identity of the author. Parties

may request that any part of the submission that they believe to be proprietary, confidential or commercially sensitive be

kept confidential. Any such information should be clearly marked and placed in a separate annex. Where MTI agrees with the

request, it will consider the information but will not publicly disclose it. If MTI rejects the request, it will not consider

the information and will return the information to the party. As far as possible, parties should limit any request for

confidential treatment of information submitted. MTI will not accept any submission that requests confidential treatment of

all, or a substantial part, of the submission.
Annex

FINANCIAL PRODUCTS AND SERVICES-RELATED ACTS EXCLUDED FROM THE CONSUMER PROTECTION (FAIR TRADING) ACT

The following financial products and services-related Acts are currently excluded from the CPFTA under its First Schedule:

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