The CMA's New (Draft) Guidance On Unfair Terms: What You Need To Know

The Competition and Markets Authority has issued a comprehensive update to its guidance on unfair contract terms. This matters for all businesses selling to consumers in the UK. The document reshapes how fairness and transparency in consumer contracts are assessed, reinforces the CMA's new enforcement powers under the Digital Markets, Competition and Consumers Act 2024 (DMCC), and sets clearer expectations for how key terms should be presented during the purchase process.

The CMA is currently consulting on this draft guidance until 19 March 2026. Once finalised, it will replace the current guidance on unfair contract terms.

The headline changes

The draft, published on 22 January 2026, is a full refresh of the CMA's existing guidance on unfair contract terms, with new examples, clearer definitions and practical tools to help businesses comply with the Consumer Rights Act 2015 (CRA).

In practice, it also indicates greater scrutiny of terms and consumer notices, a wider lens on how they are presented, and a higher likelihood of direct CMA intervention where terms are prohibited, unfair or opaque.

Enforcement and penalties under the DMCC Act

The guidance now integrates the DMCC, which gives the CMA the ability to take direct enforcement action in relation to unfair contract terms. 

Where traders use prohibited, unfair or non‑transparent terms or consumer notices, they could face court proceedings and penalties of up to 10% of global turnover or £300,000 (whichever is higher) from the CMA. 

The guidance also explains how enforcement routes under the CRA work alongside the DMCC, including civil proceedings, undertakings, temporary orders, and expanded investigatory powers. Coordination with other UK regulators is emphasised, so multi-front scrutiny is a realistic prospect where practices cut across sectors. For example, the FCA might look at unfair terms in financial services contracts.

Scope and key concepts clarified

 The guidance confirms that Part 2 of the CRA applies broadly to all trader–consumer contracts entered into, and to consumer notices issued or published (whether written or oral) in the UK on or after 1 October 2015. 

It sharpens definitions of key concepts including "consumer", "average consumer", "trader", "consumer contract", "consumer notice", "fairness" and "transparency", and confirms the treatment of End User Licence Agreements (EULAs) as assessable consumer notices where appropriate.

It reiterates that while the "Grey List" (i.e. the list of terms in the CRA which may be considered unfair in certain circumstances) applies to terms, it can also illustrate the forms that unfairness can take in non-contractual notices, aligning the approach to terms and notices.

Prohibited terms and statutory rights

The guidance reiterates the "banned list" terms, which includes terms in contracts that:

• seek to exclude or restrict statutory rights and remedies for goods, digital content and services;
• terms or notices that exclude or restrict liability for death or personal injury due to negligence; and
• terms that shift the burden of proof onto the consumer for non-compliance with the distance financial services marketing rules. 

It pulls together a table of the key consumer rights and remedies, and highlights that any clause limiting those rights (including attempts to cap remedies to the price paid) will either be outright banned or subject to a strict assessment of fairness. The draft guidance also clarifies that any attempts to disapply binding pre‑contract information is prohibited. 

Fairness and transparency: higher expectations in practice

The fairness test is unpacked in the new draft guidance with more detail and practical insights provided, including in relation to consumer behaviour. For example, most consumers do not read standard terms thoroughly and design and timing can heavily affect consumer understanding. It also emphasises the duty on traders not to exploit biases. 

Transparency is also treated more robustly: terms must be clear and intelligible, logically structured, disclosed early, with headings/boxes/emphasis used where appropriate, and supported by summaries where contracts are lengthy or complex. Consumers should also be given reasonable time to read and understand terms, and mere highlighting is insufficient if the underlying wording is unclear.

The draft guidance also references the requirement to include cooling‑off rights where appropriate.

The "core exemption" – transparency and prominence are both needed

The draft guidance further clarifies the scope of the "core exemption", under which terms that define the contract's main subject matter or price payable are not assessed for fairness). In particular, the explicit focus is on how to comply with the dual requirements of transparency and prominence. However, whether the requirement of prominence is met, is ultimately a matter for the courts. Crucially, if a term operates like a Grey List term, the core exemption will not shield it from a fairness assessment. 

Expanded examples that set drafting expectations

The examples provided in the draft guidance are substantially expanded and have been updated to reflect common commercial practices.

Hidden terms or terms incorporated 'by reference' into the contract need to be properly highlighted and flagged during the purchase process. Consumers should not be pressured to conclude transactions without having the time to read all the terms, with the guidance specifically calling out the use of checkout timers shorter than the time required to read all the contractual information. 

Exclusion and limitation clauses should be narrowly drafted and come with clear qualifications. Broad or ambiguous disclaimers, for example, "as far as the law permits", may be treated as unfair. Particular care is needed with terms that seek to exclude liability for a trader's failure to perform their contractual obligations.

Formality requirements should be reasonable, not deprive the consumer of their rights, and be properly signposted. Warranties and guarantees should not reduce a consumer's statutory rights and must be transparent about their scope and effect. 

 Variation terms should be framed narrowly and tied to objective triggers such as legal/regulatory compliance or third‑party indices like the Bank of England base rate, and accompanied by genuine cancellation or refund rights where supply cannot be maintained. 

Regulators scrutinise price variation terms closely, and consumer expectations are a highly relevant consideration in the context of price increases. 

Consumer notices are firmly in scope

The draft guidance confirms that consumer notices are subject to fairness and transparency in the same way as terms. Non‑contractual announcements that have a term‑like effect will be assessed accordingly, even if styled as a notice rather than a clause. It also notes that only one type of notice is on the statutory banned list. Otherwise, the broader fairness assessment applies.
Unfair terms cannot be saved by "rewriting".

If a term or notice is unfair, it is not binding. It cannot be rewritten by a court or by a business to make it fair after the event. Sums paid under an unfair term should be repaid. Poor transparency can itself trigger enforcement and will be interpreted in favour of the consumer. 

What's the practical impact?

The draft guidance places a greater onus on proactively flagging key, onerous or surprising terms to consumers during marketing and pre‑contract stages, not referencing them only in the small print. Drafting should be clear, concise and designed for consumer understanding, with key information made visible early on in the sale and purchase process. 

Variation, exclusion/limitation and formality clauses should be tightened and narrowly drafted by reference to precisely‑defined grounds, with consumer cancellation or refund rights available where appropriate. Reliance on broad discretionary language is unlikely to withstand scrutiny. 

Finally, the draft guidance makes clear that the enforcement risk has materially increased under the DMCC, with direct enforcement action available to the CMA. Contracts, consumer notices and customer journeys should therefore be reviewed with these expectations in mind.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.