Consumer disputes: Alternative Dispute Resolution (ADR)

Consumer redress is a remedy for a wrong arising from a contract or other relationship between a consumer and trader. Consumers who have a complaint and wish to obtain redress must, as a first step, use the trader’s own internal complaints procedure. If, having exhausted this complaints procedure, the consumer remains dissatisfied, they may be able to refer the matter to an appropriate Alternative Dispute Resolution (ADR) scheme. ADR is usually a cheaper and quicker route for resolving a dispute than the alternative of beginning legal proceedings in court.

ADR is mandatory in certain regulated sectors where there is a high risk of consumer detriment (e.g., financial services, energy, aviation). In some sectors, the law requires traders to belong to an ADR scheme, but it gives them some choice about which scheme to join. This is the case, for example, for estate agents and telecommunication businesses.

In non-regulatory sectors, ADR is usually voluntary. However, membership of a trade association or a ‘trusted trader’ scheme may be dependent on the trader agreeing to use ADR in respect of genuine consumer complaints. Trade associations often provide or arrange the ADR scheme for their members. Alternatively, a trader’s written contract may state that in the event of a dispute, the parties must use a specified form of ADR, either before resorting to legal proceedings (i.e., non-binding ADR) or as an alternative to pursing a legal claim (i.e., binding ADR).

ADR processes can include direct negotiation, mediation, arbitration, ombudsman schemes, conciliation, or adjudication. For consumer disputes, ADR usually means settling a complaint with the assistance of an impartial dispute resolution body. It is an option whether the goods or services were bought online or in a shop, provided the trader is based in the UK and is willing to engage in ADR. Traders do not have to agree to use ADR for a consumer complaint (unless it is compulsory for them by law, by trade association membership or by contract). However, they are required to provide certain information about ADR to consumers.

The law seeks to promote the use of ADR by ensuring that suitable options are available in all consumer disputes. Under the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015, as amended by the Consumer Protection (Amendment etc.) (EU Exit) Regulations 2018, the provider of an ADR scheme must show that they meet certain minimum standards and must be approved by a ‘competent authority’.

Consumers are increasingly active online, particularly since the coronavirus pandemic, including making purchases across national boundaries. However, since leaving the EU, UK businesses and consumers are no longer able to use the Online Dispute Resolution (ODR) Platform. However, UK consumers can still access ADR entities in EU countries, just not through the ODR.

This Paper examines in detail the ADR landscape in the UK and the different types of ADR methods available to help resolve a consumer dispute. It also considers the impact of the UK having left the EU on consumer contracts and dispute resolution.