Consumer Rights Bill

Baroness Drake Excerpts

Monday 13th October 2014 Grand Committee

The Minister in the Commons also cited research done by the National Consumer Council from 2007—not a time when the noble Baroness, Lady Wilcox, was there but a time when I was there—which showed that consumers do not take in too much information. However, in our view and in the view of the NCC at the time, the full price of a purchase is not too much information and is of such significance that it really cannot be classed as “too much information”. We also know that that is excluded from being assessed for fairness elsewhere in the legislation, so it is even more important that the price is known in full and up front not just before the purchase is actually made—the moment when you click—but when you are contemplating and getting very close to saying, “That’s the one I want”. This amendment is really to make sure that the total costs are clearly signalled at the stage when the consumer is entering into that process of purchase. I beg to move.

[Baroness Drake (Lab)]

My Lords, I support my noble friend Lady Hayter on Amendment 8 to Clause 11. As we all know, consumer markets are becoming increasingly complex and more and more transactions are conducted online, but we still have the asymmetry of understanding between the trader and the consumer and the consumer’s behavioural bias—both of which we are all familiar with—which can create real incentives for traders to frame and present price information in a way that enhances their chances of a sale rather than enhancing transparency or the protection of the consumer.

For markets and trading to be fair, consumers need to have full and easily accessible knowledge of the real costs of what they are purchasing. I am sure that most people in this Room, including myself, have been attracted into purchasing a bargain only later to discover that it comes with many catches. My husband dines out on humiliating me on my inability to see some of these catches when I am swayed by the attraction of the bargain. These additional costs may be things that we did not see or realise until we were just about to pay or had just paid—or, even worse, did not see until after the event when the receipt has come in and we start noticing these little items that we did not realise were there.

I do a great deal of my purchasing online and there are three things in particular that irritate me. The first is when, just before clicking “OK” to the purchase, the purchaser is asked to confirm that they have read the associated terms and conditions, which are lengthy and dense and may require one to disengage from completing the purchase in order to go back and find them. As we know, the closer that the consumer gets to confirming the purchase, the less likely they are to walk away from it and to come out of the purchase and start again in order to read these dense and lengthy terms and conditions. I and others like me are unlikely to do so and, because we do not, we subsequently find that we have agreed to additional costs. Secondly, as one proceeds through these websites to make the purchase, the default setting may be to add extra items and charges to the purchase of the goods, and this is not made clear—one has to see and recognise that this is happening before one can even negate or delete the additional costs from the default setting. Thirdly, the headline price that attracted the purchaser to contemplate or initiate the purchase can be significantly different to the final cost, when all the extras are added.

My noble friend mentioned a government reference to a previous National Consumer Council publication. We all know that consumers do not take in too much information when they make a purchase, but the price is so significant and so at the heart of that purchase that it is all the more reason why the trader should be required to provide full details of the total costs. It is incomprehensible that, because the consumer cannot take in too much information, that should become an argument for limiting the obligation on the trader to make sure that the full extent of the costs that can be incurred in making that purchase are made clear before it is made. In fact, the fact that people cannot take on too much information is a compelling reason for making sure that our legislation requires the party who is the trader to make clear what charges the consumer can be expected to be exposed to when they make a purchase.

I am sure that the Government will argue that requiring the visibility of such information may be burdensome to business because of the frequent price changes that they may have to incur. However, given that much of the bad practice takes place online, it is difficult to see how such a requirement can be burdensome. When a price is altered, the trader will have to change their internal processes and internal systems, so having to go that bit further to update a website to make clear what the prices are hardly seems a compelling reason why the consumer should not be protected from not knowing the exposure on costs that they can incur when they make a purchase. Presumably one has the infrastructure of the information set out regarding the additional charges; it is a question of putting the new figure in.

[Baroness Jolly]

I am sure that noble Lords will be happy to know that, under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, traders are already required to make the consumer fully aware of total costs before a sale is made. The regulations require traders to give, or make available to the consumer, information about costs—and this includes online sales; it is any sales at all—before the consumer is bound by a contract. From on an online point of view, it is before they have pressed the return button. The information must be clear and comprehensible. The regulations came into force on 13 June 2014 and the main body of this amendment is therefore not required.

However, the Government believe that the additional requirement in the amendment for this information to be included in all public communication could place an enormous burden on business. The trader would need to alter all associated communications every time a price was altered, upwards or downwards. In some instances, that might put traders off lowering prices or offering special deals. In other instances, the price change might have been decided by the manufacturer or supplier, but the trader would have to bear the costs of the change.

Where the trader uses television or radio adverts, the additional costs could be significant. Already, radio adverts for financial services end with a lengthy and sometimes almost incomprehensible declaration of terms and conditions—the audio equivalent of small print. How much worse will this become if they must also detail every possible charge that may apply to every type of goods?

The important point is that the consumer is provided with the necessary information before they enter into the contract so that they can decide whether to continue. The consumer contracts regulations already require this. It might help Members of the Committee if I give a quick breakdown of the two sets of regulations that are independent of, but are referred to in, the Bill. The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 implement the consumer rights directive. They set out the information that the trader should provide to the consumer, and this will form part of the contract. It will also include cancellation rights for consumers buying away from trader premises, such as a trader visiting their home, on the phone or, of course, online. It will also include measures to avoid hidden costs to consumers. As these regulations implement the consumer rights directive, the same basic rules apply across Europe and came into force on 4 June this year.

The second set of regulations came into force on 1 October, the Consumer Protection (Amendment) Regulations 2014. These give consumers new rights to get their money back and seek damages through the civil courts where they have been victims of misleading or aggressive practices. The regulations make the processes clearer and simpler for consumers, and consumers will have 90 days to cancel a contract and receive a full refund if they have been misled or bullied into agreeing it. They had previously only limited rights in this area.

To recap, the important point about the amendment is that the consumer is provided with the necessary information before they enter into the contract so that they can decide whether or not to continue. The consumer contract regulations that I have just outlined already require this. I therefore ask the noble Baroness to withdraw her amendment.