Aggressive sales tactics: Call for mandatory cooling-off period for gyms and beauty parlours

Introduction

In 2018 alone, the Consumer Council received a total of 3,718 consumer complaints relating to sales malpractices – a record high in recent years. Further, Customs received a total of 1,124 complaints in 2018 involving suspected aggressive commercial sales practices, of which 77%, related to beauty and fitness services.

There is currently no universal or statutory cooling-off regime in Hong Kong although some industries and retailers such as insurance companies and mobile network operators offer cooling-off periods of different durations for certain goods and services on a voluntary or self-regulated basis.

Even though change has been slow in comparison to many other jurisdictions such as the UK, Australia or even our Mainland counterpart, where they already have established mandatory cooling-off regimes for specific types of consumer contracts, change in Hong Kong is forthcoming.

On 15 January 2019, the Commerce, Industry and Tourism Branch of the Commerce and Economic Development Bureau issued a consultation paper seeking public views on the introduction of a statutory cooling-off period for consumer contracts relating to fitness and beauty services and the consultation period expired on 16 April 2019.

Proposed Key Operational Arrangements

• Scope – a statutory cooling-off period applicable only to certain fitness and beauty service consumer contracts (e.g. beauty parlours providing procedures for the face or body for amongst others (a) beautifying purposes; (b) hair removal; (c) cosmetic surgery, etc. and fitness centres with exercise equipment and providing fitness services for amongst others (a) personal training; (b) yoga and dance classes; (c) martial arts training, etc.

• Value of pre-payment of contract – the consumer’s total potential payment obligation under the contract is valued at HK$3,000 or above and all or part of the services are to be provided in the future.

• Cooling-off and Refund Periods – there are 2 options: (a) three working day cooling-off measure with a seven working day refund policy; or (b) seven calendar day cooling-off measure with a 14 calendar day refund policy.

• Notification – traders are required to inform customers in writing of their right to cancel the contract within the cooling-off period, otherwise the cooling-off period will be deemed a maximum of three months after the contract has been concluded. Traders are also required to provide certain prescribed information such as cancellation procedures, price to be paid for consumed service and cancellation fee.

• Contract cancellation forms – forms as provided in the legislation or by traders.

• Contracting-out/waiver – any form of curtailment or waiver of the cooling-off period is not permitted.

• Arrangement on refunds – Traders are required to give a refund by the same means as that used for payment.

• Deduction from refund – Traders are allowed to deduct from the refund sum charges of services provided on a pro-rata basis, administrative fee of up to 3% of the transaction amount for non-cash refunds and administrative fees of up to 5% of the transaction amount for non-cash instalment payment plans.

• Ancillary contracts – Where there are ancillary contracts in place such as credit card instalment payment plans, these are automatically cancelled when the main contract is cancelled within the cooling-off period.

• Enforcement – there would be civil but not criminal sanctions. Customs may conduct investigations and issue enforcement notices. Contravention of such enforcement notices would be a criminal offence. Appeals may be made to the Administrative Appeal Board.

Comment

We would imagine that consumers would applaud to this mandatory cooling-off period for certain types of consumer contracts, given that it will further enhance consumer protection and deter against unethical trade practices. However, a step further may be to implement a universal cooling-off period for Hong Kong, applicable not just to beauty and fitness services as proposed, but also to the existing self-regulating industries (such as insurance companies and mobile network operators) as different durations can cause confusion to consumers.