Consumer Rights Bill
Debate between Baroness Crawley and Baroness Jolly
Lord Stevenson of Balmacara (Lab)
My Lords, I thank all noble Lords for speaking in the debate, and give special thanks to the right reverend Prelate the Bishop of Birmingham for taking on the amendment tabled by the right reverend Prelate the Bishop of Truro. He spoke extremely well—in borrowed shoes, perhaps, but he obviously felt the same as the right reverend Prelate did in his introductory remarks earlier. I declare my interest as the retiring chair of StepChange, the debt charity, which has a lot of experience in this area.
As we found in Committee, there is clearly an all-party consensus for action. It all boils down to the question of why, if it is right to have advertising restrictions on certain items viewed as harmful or inappropriate for children such as violence, junk food, gambling and alcohol, it is not right to do the same to prevent the harm caused by payday loans. We have clear evidence that there is significant pressure from parents and many campaign groups to place payday loans in the same category as the items that are already restricted, and we need to listen to that.
It is up to the Government to defend their position and explain why on earth they feel that they can resist this amendment. When it was debated in Grand Committee the noble Baroness, Lady Jolly, said:
“The Government share the concerns of noble Lords that this market has caused serious problems for consumers, with unscrupulous lenders taking advantage of vulnerable consumers”.
I could not have put it better myself. She added that the Government were,
“committed to tackling abuse in the payday market wherever it occurs, including in the marketing of these loans. The Government strongly agree with noble Lords that it is unacceptable for payday lenders deliberately to target vulnerable consumers with their advertising material”.
Game over, it seems to me. So far, so good—but it went downhill from there. The Minister’s argument boiled down to the tired old saw that regulation, not legislation was the right answer, and that,
“a robust set of measures are now in place to protect the vulnerable from such practices”.—[Official Report, 3/11/14, col. GC 618.]
But they do not.
What do we want? We want legislation now. What are we being offered? Wishy-washy regulations that do not stop children seeing payday lenders’ advertisements, causing irreparable harm. The Government accept that these products, like alcohol and gambling, which I have already mentioned, are unsuitable for children. They agree that advertisements for those should not be targeted at children, but they are happy to let this go forward for payday lenders. This is not good policy-making.
The Government have a chance today to give the noble Lord, Lord Mitchell, an early Christmas present and allow him to say that the job on payday lenders has been well done. This is a good thing to do. The time for reviews and evidence gathering is surely over, and I hope that the right reverend Prelate will not be dissuaded from testing the opinion of the House at the end of this debate. The noble Lord, Lord Higgins, may be right that that wording of the amendment is not exact enough, but that, of course, can be tidied up at Third Reading. We should not desist from testing the principle here simply because of difficulties with the wording. Sometimes you just have to do the right thing—and I hope we will.
Baroness Jolly (LD)
My Lords, I am grateful to noble Lords for raising the important issue of the payday lending industry again. I repeat what I said in Committee—that the strong feeling in the House on this matter is clear, and the Government share the concern that payday lenders’ advertising can encourage irresponsible borrowing and cause consumers real harm.
The Government have worked hard on this issue to listen to as many views as possible, both within this House and beyond. As was noted earlier, I have met and spoken to the right reverend Prelate the Bishop of Truro several times, and just this morning the Minister and I met the right reverend Prelate the Bishop of Birmingham—who is an excellent understudy in this matter—and other noble Lords, to discuss their concerns.
It is worth reiterating all the action the Government have taken to protect consumers in this industry, because in Committee we were a very select bunch whereas on Report there is a wider audience. First, the Government have fundamentally reformed the regulation of the payday market. The Financial Conduct Authority’s new, more robust regulatory system is already having a significant impact: the FCA has found that the volume of payday loans has fallen by 35% since it took over regulation in April; that has happened in just seven months.
The Government have also legislated to require the FCA to introduce a cap on the cost of payday loans, to protect consumers from unfair costs. This cap, which will be in place from the turn of the year, will ensure that no customer ever has to pay back more than double the amount they have borrowed. The FCA has estimated that as a result of the cap, perhaps as few as three or four firms will be able to continue in the market. The Government remain committed to tackling abuse in the payday loan market wherever it occurs, including in the marketing of these loans.
Noble Lords raised specific concerns about the potential for payday loan advertising to target children. Members of the Consumer Finance Association, the main payday loan trade body, and Wonga, which is represented separately, all have explicit policies not to advertise on children’s TV. Ofcom has found that payday loan adverts comprise a relatively small 0.6% of TV adverts seen by children aged between four and 15, which is just over one a week. This is across all channels and time slots. Ofcom has also found that over a quarter of TV watched by four to 15 year-olds is after 9 pm, after the watershed. Therefore the key to protecting children must be to ensure that all adverts seen at any time of day—and this is the point that the noble Lord was making earlier—have appropriate content and are not targeted at children in any way.
Let me be clear. There are already robust content rules in place to protect children from payday loan advertisements. The Advertising Standards Authority enforces the rules set out in the UK Code of Broadcast Advertising, or the BCAP code. The BCAP code requires that all adverts are socially responsible and ensure that young people are protected from harm.
Baroness Crawley
I am grateful to the noble Baroness and I apologise for interrupting. If Wonga and other payday loan companies are saying that they do not directly target children, why do they use the creative powers of advertising that are particularly attractive to children, such as the granny and grandpa puppets in one of the ads?
Baroness Jolly
I am not sure that those ads are attractive solely to children. The point is that they perhaps attract us all. I am not sure. I have not seen a Wonga advert for a very long time but I understood that the old grannies disappeared some considerable time ago. I will come back to the noble Baroness on that issue.
I want to proceed because I have a few things I would like to say. The rules specifically prohibit payday loan adverts from encouraging under-18s to either take out a loan or pester others to do so for them. The noble Baroness, Lady Drake, brought up the point about pester power. Existing ASA rules prohibit the payday loan adverts from encouraging under-18s to take out loans. BCAP is undertaking a review to ensure that these rules are effective, and I will come back to that in a moment.
The social responsibility requirement prohibits lenders from deliberately targeting vulnerable people more generally. That was referred to earlier as well. The ASA has powers to ban adverts which do not meet its rules and has a strong track record of so doing. Since May 2014 it has banned 12 payday loan adverts as being inappropriate. In addition to the ASA’s role, the FCA has introduced tough new rules for payday loan adverts, including mandatory risk warnings and a requirement to signpost to free debt advice. To ensure that protections remain effective, the Broadcast Committee of Advertising Practice is currently reviewing how its content rules relating to the protection of children are applied to payday loan advertising on TV.
The Government recognise the strong feeling on the issue in the House, as well as the important research that has been published since the inception of the BCAP review, including that produced by the Children’s Society. Here I pay credit to the society for its tireless work and for bringing this issue very much into our inboxes and to our attention. As a result, I can today announce that Treasury Ministers have asked BCAP to broaden the remit of its review, to ensure that it also considers the appropriateness of its scheduling rules, as well as those around content. Treasury Ministers are writing to BCAP formally to set out this request and this letter will be placed in the Library of the House. BCAP has agreed to this and will expand its review with a view to publication of its findings, in full, in the new year.
During the review, BCAP will of course be very keen to engage with noble Lords on their concerns. When meeting noble Lords at lunchtime today we talked about what might happen within the House. A debate on BCAP’s findings would be more that welcome in the House. I am happy to take the request for a debate back to the business managers. I hope noble Lords will understand that I cannot commit to a timetable for a debate before discussing it with colleagues and with the usual channels.
Consumer Rights Bill
Debate between Baroness Crawley and Baroness Jolly
Baroness Crawley (Lab)
My Lords, I remind noble Lords of my trading standards entry in the register of interests. I support the amendment proposed by my noble friend Lady Drake and I shall speak in particular to Amendment 63B in the name of my noble friend Lady Hayter and the noble Lord, Lord Best.
This amendment would amend the Enterprise Act 2002 so that an enforcer would be the subject of an order to pay the costs of and incidental to enforcement proceedings only if they had acted improperly, unreasonably or negligently. In the criminal courts, trading standards officers or enforcers can be liable for the defendant’s costs only in limited circumstances. However, in the civil courts, under the Enterprise Act, the loser generally pays the winner’s costs. As my noble friend said, this could act as a disincentive for enforcers such as trading standards who are acting in the public interest.
Amendment 63B would ensure that protections for enforcers in civil courts were equal to those in criminal courts. Unless such protections are in place, there will be a significant disincentive for enforcers to use the new legislation. As we all know, local government has very little spare cash these days to pay out for court costs, and trading standards officers will be hesitant, as my noble friend said, to bring important cases to court under the Bill in case things go against them and their authority is left with a hefty bill to pay.
While trading standards very much supports the new provisions in the Bill to give consumers redress and to help them make better choices, there is genuine concern among the enforcement community that there will be little take-up of such provision due to the complexity of the process—as set out by my noble friend—the costs and the risks to the enforcer.
There is also concern that the legislation places the onus on the enforcer in proving that the costs of redress measures do not exceed the cost of the harm. This adds an area of potential challenge and uncertainty, and could encourage enforcers to use the more reliable criminal route instead of the Enterprise Act. Enforcers would prefer a more balanced approach whereby the businesses bringing the case propose a package of measures to the enforcer or to the court, with this being negotiated as necessary. I call on the Minister to look favourably on these amendments.
Baroness Jolly (LD)
My Lords, our debate on enhanced consumer measures has been really interesting. As noble Lords have said, the measures are limited to public enforcers only. The Government have included a power in the Bill to enable private enforcers such as Which?—which at the moment is the only private enforcer—to use the measures subject to certain safeguards. These safeguards are extremely important and it is two of them that the first two of these amendments seek to remove.
Amendment 63AB would remove the requirement for the Government to ensure that the private enforcer is subject to the Regulators’ Code. The code ensures targeted, transparent enforcement that is based on risk. It encourages regulators to carry out their activities in a way that supports business to comply and grow.
On Amendment 63AC, the primary authority scheme delivers assured advice to businesses, thereby delivering better regulation. Amendment 63AC would remove the requirement for the private enforcer to act consistently with advice or guidance given by a primary authority to a business. This safeguard ensures that we do not end up in a situation where a business is subject to the measures even though it has been advised by its primary authority that it is compliant with consumer law.
The Government’s Better Regulation Delivery Office administers both the Regulators’ Code and the primary authority scheme. The noble Baroness, Lady Hayter, asked what would happen if a private enforcer disagreed with advice issued by a primary authority but wished to enforce anyway. The scheme has been in operation since 2009 and the process has never been used. Disputes have been resolved informally through negotiation. But if a private enforcer wished to take enforcement action that was inconsistent with primary authority advice, they should discuss that with the primary authority. It will be a matter for the consultation as to whether a formal dispute resolution process would be suitable as a last resort measure in the event that a private enforcer disagreed with advice from a primary authority.
The Better Regulation Delivery Office has already opened a dialogue with Which? on these matters to reassure it that these safeguards will not prevent it from using the new measures. It has agreed to provide written reassurance to Which? that adherence to the Regulators’ Code will not impact on its non-statutory functions. In addition, it has agreed to provide practical support to Which? to enable it to access primary authority advice.
The noble Baroness, Lady Drake, asked when the use of the measures would be reviewed. The Government will review the use of the measures three to five years after they come into force. If we are presented with evidence that the measures are not being used or that consumers are not receiving redress, we will look at whether it is necessary to extend the use of the measures. In addition—to answer the query about advice received from the primary authority—before the power in the Bill is used, there will have to be a consultation. It will be during this consultation that the Government can ensure that there is a robust mechanism in place to enable the private enforcer to access primary authority advice.
Turning to the amendment in the name of the noble Lord, Lord Best, we want to encourage enforcers to take action where appropriate, but we do not believe that it is right to alter the costs rules in the way that is proposed in the amendment. As we have already heard in Committee, it is a fundamental principle of civil litigation that one side is generally at risk of having to pay the other side’s costs if they lose. This deters unmeritorious, weak and poorly prepared cases, and ensures that the winning party is not unfairly affected by the case.
Amendment 63B breaches that principle, shifting costs on to businesses even when they have been found to have done nothing wrong. Those legal costs can be significant. In some circumstances they could be thousands of pounds—enough to put a small firm out of business. The risk of not being able to recover its own costs could lead to a business choosing not to fight a case, even if it honestly believed that it had acted within the law.
Finally, it is important to note that the risk of adverse costs being awarded against an enforcer actually exists now. This has not stopped trading standards from using civil enforcement around 180 times every year. With these explanations, I hope the noble Baroness feels able to withdraw her amendment.