CMA unfair contract terms guidance: what CMA37 means for online terms
In short: The CMA unfair contract terms guidance (CMA37) was reissued on 22 July 2026, the first substantive revision since 2015. Part 2 of the Consumer Rights Act 2015 is unchanged and applies to consumer contracts generally, alongside any sector rules. Since 6 April 2025 the CMA can fine a trader up to £300,000 or ten per cent of global turnover without recourse to the courts.
The unfair terms rules in Part 2 of the Consumer Rights Act 2015 apply to contracts with consumers generally, and for many businesses they are the only rules that govern their standard terms. In regulated sectors, additional sector rules apply on top. For telecoms, Ofcom’s General Conditions of Entitlement prescribe what a contract must say and how a provider may change it. For payments, the Payment Services Regulations 2017 and the FCA’s Consumer Duty do the same for framework contracts. A term can meet the sector rules and still be unfair under the CRA 2015, and a term the Act exempts from the fairness assessment can still breach a sector rule. The Competition and Markets Authority reissued its guidance on the general regime on 22 July 2026.
Key findings (CMA37, July 2026 edition)
- The revised guidance runs to 134 pages in a single consolidated document, replacing the July 2015 edition and its separate annexes. Source: CMA37, Unfair contract terms.
- Part 2 of the Consumer Rights Act 2015 is relevant to contracts entered into, and notices issued, on or after 1 October 2015 in any part of the United Kingdom. Source: CMA37 paragraph 1.1.
- The CMA will have regard to the guidance when exercising its direct consumer enforcement powers under Chapter 4 of Part 3 of the Digital Markets, Competition and Consumers Act 2024. Source: CMA37 paragraph 1.5.
- Ofcom, the Financial Conduct Authority and the Information Commissioner’s Office can all enforce unfair contract terms law under Schedule 3 to the Act. Source: CMA37 paragraph 7.13.
- A court may order a penalty of up to £300,000 or, if higher, ten per cent of global turnover. Source: CMA37 paragraph 7.18; DMCC Act 2024 section 158(5).
- Using an unfair term may also be a misleading action under Chapter 1 of Part 4 of the DMCC Act. Source: CMA37 paragraph 7.2.
What Part 2 of the Consumer Rights Act 2015 controls
Section 62(4) of the Consumer Rights Act 2015 (CRA 2015) makes a term unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations to the detriment of the consumer. An unfair term does not bind the consumer, the consumer may still rely on it under section 62(3), and under section 67 the rest of the contract continues in force. The CMA records at paragraph 4.1 that the test is cumulative: a term causing a significant imbalance is not unfair if that imbalance is not contrary to good faith, the point the Supreme Court decided in Cavendish Square Holding BV v Talal El Makdessi; ParkingEye Ltd v Beavis [2015] UKSC 67 under the predecessor regime.
The section 64 exemption for terms specifying the main subject matter or setting the price is narrower than it looks. Section 64(2) makes it available only where the term is both transparent and prominent, section 64(4) sets prominence by reference to what an average consumer would be aware of, and section 64(6) removes it altogether for any term corresponding to one in Part 1 of Schedule 2. The Court of Appeal read section 64 narrowly in Glaser KC v Atay [2024] EWCA Civ 1111, holding that a term keeping a fixed fee payable in full if a hearing did not go ahead was an incidental term surrounding the bargain rather than the bargain itself, and so was fully assessable.
Part 1 of Schedule 2 lists twenty terms that may be regarded as unfair, which the CMA calls the Grey List. Listing carries no presumption under section 63(1), but it does secure that the term is always assessable. Part 2 of that Schedule, paragraphs 21 to 25, qualifies the scope of several Part 1 paragraphs in defined contexts: financial services contracts, contracts of indeterminate duration, dealings in securities and foreign currency, and price-indexation clauses. Those carve-outs are where the sector overlays do most of their work.
What the CMA unfair contract terms guidance changed in July 2026
The CMA reorganised the guidance around the themes a reviewer actually works through. Chapter 6 now runs by subject rather than by Grey List paragraph: hidden terms, exclusion and limitation, variation, termination and breach by consumers, termination and breach by traders, automatic renewal, and dispute resolution. The paired examples of wording the CMA considers unlikely to be fair, and wording more likely to be fair, are what a reviewer will work from.
The CMA also drew on the case law decided since 2015. That includes Green v Petfre (Gibraltar) Ltd [2021] EWHC 842 (QB), where an online operator could not rely on a malfunction exclusion buried in layered terms; Eternity Sky Investments Ltd v Zhang [2024] EWCA Civ 630, where the Court of Appeal held that consumer status under section 2(3) turns objectively on the sphere of activity in which the transaction took place; and Durber v PPB Entertainment Ltd [2025] EWHC 498 (KB), cited at footnote 130 for the proposition that only a small percentage of customers read standard terms in part or in full.
Chapter 7 was rewritten. Before April 2025 a regulator that wanted to stop a trader using an unfair term applied to a court for an injunction under Schedule 3, or accepted an undertaking under paragraph 6 of that Schedule. What it could not do was determine the breach itself or impose a penalty. The CMA can now do both. Chapter 7 is where the exposure changed; the drafting advice in the earlier chapters is unaffected.
Telecoms: where General Condition C1 and the Consumer Rights Act diverge
Ofcom’s General Conditions of Entitlement, Condition C1 (Contract requirements), regulates the same clauses the CRA 2015 assesses, but by prescription rather than by a fairness test. Condition C1.3 requires the Core Subscription Price and any Core Subscription Price Change Information to be drawn prominently to the customer’s attention in a clear and comprehensible manner before they are bound. Condition C1.5 requires a free Contract Summary, and C1.6 makes the contract effective only on Express Consent given after the customer has received it. Condition C1.11 caps a Commitment Period at 24 months other than for an Instalment Contract for a Physical Connection, and C1.10 prohibits renewal for a further Commitment Period without Express Consent obtained for each new period. Conditions C1.14 and C1.15 require notice not shorter than one month of any contractual modification and a right to terminate within one month of notification, and C1.17 removes Early Termination Charges on that exit. The same condition covers mobile: there is no separate mobile contracts condition. The Annex to Condition C1 differentiates by service, and Table B adds items for internet access and number-based services, including estimated maximum download and upload speeds on mobile networks and any restrictions on the use of terminal equipment supplied, such as handset locking. The genuinely mobile-specific rules sit in other conditions: roaming notifications under Condition C3, in force from 1 October 2024, and switching information under Condition C7, which also governs fixed and broadband switching.
On inflation-linked pricing the sector rule is the stricter one. Paragraph 25 of Part 2 of Schedule 2 to the CRA 2015 disapplies Grey List paragraphs 14 and 15 for a price-indexation clause where the method by which prices vary is explicitly described. Describing the method satisfies the CRA 2015, but does not satisfy Ofcom. The definition of Core Subscription Price Change Information requires a changed price to be expressed in pounds and pence or units of a different currency, which an inflation-linked increase cannot be, and Ofcom’s statement prohibiting inflation-linked price rises gave that effect from 17 January 2025 for contracts entered into on or after that date. A term which is compliant with the CRA paragraph 25 could still be non-compliant with Condition C1.
On contract variation, under C1.14 and C1.15 the provider must give a month’s notice and allow an exit free of Early Termination Charges, which the CRA does not require, and three categories of modification are outside the obligation altogether: those exclusively to the customer’s benefit, those of a purely administrative nature with no negative effect, and those directly imposed by law. But nothing in the General Conditions requires the provider to have a reason for the variation, and paragraph 11 of Part 1 of Schedule 2 lists a term enabling the trader to alter the contract unilaterally without a valid reason which is specified in the contract. Ofcom’s own guidance under Condition C1 (January 2025) records at paragraph 1.29 that where a provider uses a bare term stating that prices may vary, with no value or frequency specified, no Core Subscription Price Change Information is required at all. The vaguest variation right attracts the fewest sector requirements, and it is the one Chapter 6 of CMA37 treats at length.
On prominence the divergence is harder to see. Condition C1.4 requires contract information on a durable medium, or where that is not feasible in an easily downloadable document to which the provider expressly draws attention. Section 64(2) requires a price term to be transparent and prominent before the exemption is available at all, and the CMA states at paragraphs 5.18 and 5.19 that the more onerous or surprising a term, the greater the prominence it needs, adding at 5.20 that making a term prominent in a merely formalistic way is not enough. Providing the information in the prescribed form satisfies Ofcom without taking the price term outside the fairness assessment. In Office of Fair Trading v Foxtons Ltd [2009] EWHC 1681 (Ch), decided under the Unfair Terms in Consumer Contracts Regulations 1999, Mann J held that a term in very small print, with nothing to distinguish it from the initial commission and no prior flagging, notice or discussion, was not a fair way to bring the point to the consumer’s attention. The CMA cites that passage at footnote 130.
On early termination charges the General Conditions control when a charge may be levied rather than how much it may be. Annex Table A item 5(c) requires disclosure at the point of sale, C1.17 removes the charge on a modification exit, and C1.8 requires that termination conditions do not act as disincentives against changing provider, but no condition caps the amount. Ofcom’s costs-saved principle for the level of an ETC, that a provider may fairly recover no more than the outstanding contractual payments less the costs it saves and the losses it can mitigate, comes from its guidance on unfair terms in contracts for communications services, published in 2008 and re-issued in November 2010. That guidance was written for the Unfair Terms in Consumer Contracts Regulations 1999 and applies only to contracts entered into before 1 October 2015, so for current contracts the constraints are C1.8, its January 2025 guidance, and the fairness assessment under the Act. A disproportionately high sum falls within Grey List paragraphs 5 and 6. In Office of Fair Trading v Ashbourne Management Services Ltd [2011] EWHC 1237 (Ch), also a 1999 Regulations case, Kitchin J held that a clause requiring a member to pay the subscriptions falling due over the balance of a minimum period, regardless of whether the breach was repudiatory, was a penalty and not fair.
Payments: framework contracts, the Consumer Duty and the Schedule 2 carve-outs
For a payment service provider or an e-money institution the general regime applies alongside the Payment Services Regulations 2017, the Consumer Duty and the Schedule 2 carve-outs. Regulation 50(1) of the Payment Services Regulations 2017 requires two months’ notice of a proposed change to framework contract terms, and where the contract uses the deemed-acceptance mechanism in regulation 50(2) the provider must also tell the user of the right to terminate without charge before the change takes effect, under regulation 50(3)(b). Two qualifications matter. Regulation 50(4) permits changes to interest or exchange rates to apply immediately and without notice where the contract agrees them and they are based on reference rates, or where the change is more favourable to the user. And regulation 40(7) allows the two-month rule to be disapplied where the payment service user is not a consumer, a micro-enterprise or a charity. The CRA 2015 imposes no notice period at all.
Paragraph 22 of Part 2 of Schedule 2 to the CRA 2015 exempts a financial services supplier’s right to alter an interest rate or other charges without notice, provided there is a valid reason, the supplier informs the consumer at the earliest opportunity, and the consumer is free to dissolve the contract immediately. A term drafted to that exemption falls outside Grey List paragraph 11. For changes to contract terms generally the sector rule remains the operative constraint, since regulation 50 requires two months’ notice where the CRA 2015 requires none. For the reference-rate changes paragraph 22 covers, regulation 50(4) also permits immediate effect, so on that clause the two regimes broadly converge.
The FCA’s own guide on this is UNFCOG, the Unfair Contract Terms and Consumer Notices Regulatory Guide. UNFCOG 1.1.4 G provides that the Guide applies to firms, appointed representatives, other persons who use or recommend the use of contracts to carry on regulated activities, electronic money issuers, and payment service providers, and UNFCOG 1.1.5 G then uses “firm” to refer to all of them. UNFCOG 1.4.5 G records that the use of an unfair term might involve a breach of a Principle or of a rule in BCOBS, COBS, CONC, MCOB or ICOBS. UNFCOG 1.1.2 G sets the demarcation with the CMA by reference to the memorandum of understanding on concurrent consumer protection powers, and UNFCOG 1.2.4 G(2) records the FCA’s duty under paragraphs 4(1) and 6(3) of Schedule 3 to pass case details to the CMA. UNFCOG states who the Guide covers; the CRA applies to a contract between a trader and a consumer of its own force.
The Consumer Duty applies to payments firms on their retail market business, by a three-step route. PRIN 3.1.1A R brings an electronic money institution, an authorised payment institution, a small payment institution and a registered account information service provider within the Principles. PRIN 3.2.6 R applies Principle 12 and PRIN 2A to a firm’s retail market business, and the Handbook definition of that term includes payment services and issuing electronic money where a retail customer is involved. PRIN 3.2.8 R then limits the Duty to activities within the retail-protections scope of a listed sourcebook, which for payment services and electronic money is BCOBS. The cross-cutting rule in PRIN 2A.2.1 R requires firms to act in good faith, a standard of conduct characterised at PRIN 2A.2.2 R by honesty, fair and open dealing and acting consistently with the reasonable expectations of retail customers. PRIN 2A.4 sets the price and value outcome and PRIN 2A.5 the consumer understanding outcome. PRIN 1.1.9 G records that the FCA’s other rules do not exhaust the implications of the Principles themselves, so a term failing the CRA fairness test can be a Consumer Duty breach in its own right, enforced by a different regulator on a different timetable, subject to PRIN 3.1.8 G, under which the Principles do not impose obligations inconsistent with requirements deriving from the Payment Services and Electronic Money Directives.
BCOBS applies under BCOBS 1.1.1 R to a firm accepting deposits from banking customers, but it is not confined to deposits. BCOBS 1.1.4 R applies most of its conduct chapters to payment services where Parts 6 and 7 of the PSRs 2017 apply, and BCOBS 1.1.1A R applies its communications chapter directly to an electronic money institution, a payment institution and a registered account information service provider. CONC applies under CONC 1.2.1 R to credit-related regulated activities. A payments firm reviewing its consumer terms is working with the CRA 2015, the PSRs 2017, PRIN, BCOBS 2 and UNFCOG.
The general regime and the sector rulebooks compared
The table below draws together the telecoms and payments sections. For each clause type it sets out what the CRA 2015 requires, what the sector rulebook requires, and which regime imposes the stricter constraint. Neither regime is stricter across the board.
| Clause | What the Consumer Rights Act 2015 requires | What the sector rulebook requires | Which is stricter |
|---|---|---|---|
| Inflation-linked price rise | Paragraphs 14 and 15 disapplied where the method of variation is explicitly described (Sch 2 Pt 2 para 25) | Telecoms: price change must be stated in pounds and pence, so an index-linked rise cannot comply (definition of Core Subscription Price Change Information, read with C1.3 and C1.5, from 17 January 2025) | Ofcom |
| Unilateral variation of terms | Grey-listed where there is no valid reason specified in the contract (Sch 2 Pt 1 para 11) | Telecoms: notice not shorter than one month and an exit free of termination charges, with no reason required (GC C1.14, C1.15, C1.17) | Consumer Rights Act |
| Change to a framework contract | Exempt where there is a valid reason, earliest-opportunity notice and freedom to dissolve (Sch 2 Pt 2 para 22) | Payments: two months’ notice for changes to terms; agreed reference-rate changes may apply immediately (PSRs 2017 reg 50(1), 50(4)) | Payment Services Regulations for terms changes; the regimes converge on rate changes |
| Automatic renewal | Grey-listed where the deadline to opt out is unreasonably early (Sch 2 Pt 1 para 9) | Telecoms: Express Consent for each new Commitment Period; 24-month cap (GC C1.10, C1.11) | Ofcom |
| Prominence of a price term | Exemption unavailable unless transparent and prominent to the average consumer (s 64(2), s 64(4)) | Telecoms: contract information on a durable medium (GC C1.4) | Consumer Rights Act |
| Early termination charge | Grey-listed if a disproportionately high sum (Sch 2 Pt 1 paras 5 and 6) | Telecoms: disclosure required and no charge on a modification exit, but the amount is not capped (GC C1.17, C1.8, Annex Table A) | Consumer Rights Act |
Three enforcement routes and a ten per cent cap
Under Schedule 3 to the CRA 2015 an enforcement authority may seek an injunction or accept undertakings, and paragraph 4 requires an authority other than the CMA to notify the CMA and either obtain its consent or wait fourteen days. Under Chapter 3 of Part 3 of the DMCC Act 2024, in force since 6 April 2025, a court may order a trader to stop and rectify its conduct, including by compensating consumers, and impose a penalty of up to £300,000 or ten per cent of global turnover under section 158(5). Under Chapter 4 the CMA alone may investigate, determine and impose that penalty administratively under section 182(6), subject to appeal to the High Court under section 202.
Enforcement under Part 3 is available against a trader outside the United Kingdom that has a place of business here, carries on business here, or directs activities at UK consumers, under section 149 of the DMCC Act. The CMA records at paragraph 7.2 that using an unfair term may also be a misleading action under the unfair commercial practices provisions in Chapter 1 of Part 4, so a single clause can carry two heads of liability. Ofcom and the FCA appear on the CMA’s list of enforcement authorities at paragraph 7.13 and are public designated enforcers under section 151(1) of the DMCC Act, so a term can be pursued by a sector regulator that already knows the business.
A buyer of a consumer-facing business should treat the target’s standard terms as a diligence item rather than a post-completion tidy-up. A ten per cent turnover exposure that a regulator can impose without a court is a different risk profile from an injunction. Our regulatory due diligence page sets out the usual scope.
Viewpoint
The CMA will have regard to this document when it exercises its direct enforcement powers. The drafting advice is a better-organised version of what the CMA said in 2015. Guidance that used to inform how a regulator would argue a case in court now informs how it will decide one.
In my experience, the problem is rarely a clause anyone would defend as fair. It is that the terms were built to satisfy a sector checklist, and no sector checklist covers whether a variation right has a reason attached to it. Under C1.14 the question is how much notice the provider gave. Under paragraph 11 the question is why the contract permitted the change at all. A term reviewed only against the first question can fail the second indefinitely, and the market-wide cases the CMA says at paragraph 7.10 it prioritises are how that surfaces.
What I would watch is the subscription contracts regime in the DMCC Act, which the CMA says in its accompanying guide is expected in force in Spring 2027. Both regimes will then apply to automatic renewal terms, and the telecoms rule requiring Express Consent for each new Commitment Period is a reasonable guide to where the general standard is likely to settle.
Frequently asked questions
Did the CMA unfair contract terms guidance change the law?
No. Part 2 of the Consumer Rights Act 2015 is unchanged, and the CMA records at paragraph 1.1 that it is relevant to contracts entered into on or after 1 October 2015. Traders’ obligations are the same as they were before 22 July 2026. What changed is the structure of the guidance and its account of how the regime is now enforced.
Can Ofcom or the FCA enforce unfair contract terms law directly?
Yes. Both appear on the CMA’s list of enforcement authorities at paragraph 7.13 of CMA37, and both are public designated enforcers under section 151(1) of the DMCC Act 2024. Under Schedule 3 to the Consumer Rights Act 2015 an authority other than the CMA must notify the CMA before applying for a court order and either obtain its consent or wait fourteen days.
Does complying with General Condition C1 mean the terms are fair?
No. Condition C1 prescribes what information a provider gives and when, and what notice a modification requires. Nothing in it requires a variation right to have a valid reason specified in the contract, which is what paragraph 11 of Part 1 of Schedule 2 to the Consumer Rights Act 2015 addresses. The two regimes address different features of the same clause.
What penalty can the CMA impose for an unfair term?
Up to £300,000 or, if higher, ten per cent of global turnover. Under Chapter 4 of Part 3 of the DMCC Act 2024 the CMA may impose that administratively under section 182(6), subject to appeal to the High Court under section 202. Section 204(1) measures turnover to include turnover both inside and outside the United Kingdom.
Does UNFCOG apply to payment service providers and e-money issuers?
Yes. UNFCOG 1.1.4 G provides that the Guide applies to firms, appointed representatives, other persons who use or recommend the use of contracts to carry on regulated activities, electronic money issuers and payment service providers. CONC does not: CONC 1.2.1 R applies it to credit-related regulated activities only. BCOBS partly does: BCOBS 1.1.1A R applies its communications chapter to electronic money institutions, payment institutions and registered account information service providers, and BCOBS 1.1.4 R applies most of its conduct chapters to payment services.
For advice on whether your consumer terms satisfy both the general unfair terms regime and your sector rulebook, contact Rob Bratby at Bratby Law, which advises communications providers and payment service providers on telecoms regulation and payments regulation.
