Consumer Rights Bill

Debate between Baroness Jolly and Baroness Hayter of Kentish Town

Wednesday 19th November 2014 Lords Chamber

[Baroness Jolly (LD)]

My Lords, the Bill’s provisions on consumer contracts for goods build on existing legislation, such as the Sale of Goods Act, and on court- developed common law. Government Amendments 2, 4 and 6 are to ensure that the greater clarity the Bill provides does not override an existing common-law distinction between severable and entire contracts. A severable contract is divisible into parts, which are intended to be independent of each other, so different parts of the payment can be assigned to different parts of the trader’s performance. The amendments make it clear that, where a contract is severable, the consumer may have the right to reject those faulty goods or they may have the right to terminate the whole contract. That will depend on the nature of the goods and the fault and the details of the contract. In some cases, it will be quite right for a consumer to reject all the goods under a contract, even if it is severable. The existing common law recognises that and the amendments are to make it clear that the common law on this applies.

The noble Baroness, Lady Hayter, asked in Grand Committee whether these amendments could create a new incentive for traders to try to make their contracts severable. I hope I have given reassurance that the amendments refer to an existing concept. A contract will not be severable simply because it is described as such but will depend on the genuine agreement and arrangement between the parties in the circumstances. The guidance to the Bill will cover when a contract is severable and when a consumer might be entitled to terminate the whole contract. As I have explained, these amendments are to ensure that the consumer’s clearer rights in Clause 20 should not override the common-law position for severable contracts.

Clause 20 reflects the equivalent provision for Scotland in the Sale of Goods Act—that is, Section 15B—and in related legislation. Therefore, for Scots law, Clause 20 is intended to restate the existing provisions without altering the common law. I beg to move.

[Baroness Hayter of Kentish Town (Lab)]

I thank the Minister for agreeing to give us some extra time to look at these amendments, which of course were not seen in the Commons or in the Select Committee. Having had time to consider them, and in particular with the reassurance that has now been given by the Minister and the clarity that will be in the forthcoming guidance on the Bill, we are content with the amendments.

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[Baroness Hayter of Kentish Town]

If we are allowed to have a small word of congratulation, I congratulate the noble Lord, Lord Moynihan.

My Lords, this House, as we know, has had some major achievements in tackling high-cost and exploitative credit. Amendment 14 concerns a new, effectively unregulated and exploitative form of loan that has sprung up on our high streets. Along with other high-cost credit, it is found in low-income and deprived areas. It is known as rent to own. It works by consumers theoretically renting household goods—washing machines, fridges, TVs, beds—but with the rent eventually being used to purchase the product.

However, because it is deemed rent, there are few of the safeguards which would cover, for example, a bank loan, if that had been taken out to buy the same product. So there are no checks on affordability for a product aimed at consumers who are “credit constrained”—those are the words of the person who runs one of these big companies. There are no safeguards against the property being repossessed for missing a payment, because, until the final payment, the product is only rented, not owned. While the consumer is theoretically renting the product, though in their mind they are in the process of buying, a missed payment can lead to repossession.

Some of these stores show little forbearance over a missed payment, despite the fact that the consumer may have already paid well over the true value of the goods by the time they come to miss a payment. Furthermore, the prices charged are pretty exorbitant, far exceeding normal retail prices, even including any interest had a bank loan been used to pay for the item. I found a washing machine priced from £400 to £600, depending on which outlet I went to, but it was £1,560 at one of the rent-to-buy stores—up to four times the price. A table which was £200 at Argos was £468 at BrightHouse, one of the rent-to-buy stores. The APR, which admittedly it prints in some of its brochures, is between 60% and 90%. Adding up all these so-called rents amounts to far more than the list price, plus what interest would be paid if the item was bought with a bank loan.

Furthermore, the companies add in compulsory and expensive insurance, even though the goods still belong to the shop, so probably do not even need insuring. BrightHouse told me that the insurance on a £600 product would be £150 over three years. That is far higher than any of us would be able to get for a normal contents insurance. And the insurance is with its wholly owned, Malta-based insurance company or via its Isle of Man company. To add insult to injury, its marketing uses that favourite trick to tempt the buyer, highlighting the price per week rather than the total cost. So the price of a Samsung gold laptop is splashed as £13 a week, albeit that the full cost is £1,392, which includes 94.7% APR. It is little wonder that more than a quarter return their goods within the first 13 weeks of purchase, by which time they will have paid quite a chunk of money for just three months’ use of the item. In the case I mentioned, £170 would have been paid for something that might retail for only £500.

It is also little wonder that there is money to be made in this way. One of BrightHouse’s companies, Caversham Finance Ltd, made £30 million profit before tax, despite its trading company’s annual report stating:

“2014 was … challenging … with customers under pressure from continued high inflation, low wage growth and … the government’s much heralded changes to the welfare system have increased uncertainty for a significant portion of BrightHouse customers who are completely or partially reliant on benefits”.

We have it even from the companies themselves that they are targeting these products at customers who are completely or partially reliant on benefits. Is anyone surprised that I question the business model of a firm that profits from selling high-end goods at over-the-odds prices with compulsory expensive insurance to some of the most vulnerable in society?

Amendment 14 requires a company to set out the total price of the goods including the cost of the credit agreement. It bans making insurance compulsory and it requires the Government to set out guidelines both on checks on affordability and on possible repossession. This is not an attack on any weekly payment system, which can help those on lower incomes with their household budgeting. However, the business model used by companies like BrightHouse is so stacked against the consumer that it is little short of exploitation. I therefore hope that the Government will accept this measured approach, which does not ban this form of credit; it simply introduces greater transparency along with some safeguards. I beg to move.

[Baroness Jolly]

My Lords, the Government share the noble Baroness’s concerns about the risk of consumer detriment in the hire-purchase credit market, particularly to the vulnerable consumers that she has described to the House. I wrote to the noble Baroness on this subject recently and want to take this opportunity to underline that this does include rent to own and we are talking about the same issue.

We have stated before in Committee that consumer credit regulation transferred to the Financial Conduct Authority on 1 April this year. The rules for the consumer credit market, put in place by the FCA, were made with the stated aim of: ensuring that firms lend only to borrowers who can afford it; increasing borrowers’ awareness of the costs and risks of borrowing unaffordably; and ensuring that consumers have access to support if they have financial difficulties.

Accordingly, the FCA rules for hire purchase and conditional sale agreements, including rent-to-own agreements, specifically require firms to provide pre-contractual explanations and information to a consumer before a contract is made. These rules are in line with European requirements, including setting out the total amount payable, the cash price of an item and the total cash price if there is more than one.

Firms must also adhere to debt collection rules, including treating customers in default or arrears difficulties with forbearance and due consideration; and assess creditworthiness and affordability, including the potential to impact adversely on the consumer’s financial situation, and the consumer’s ability to make repayments as they fall due. Where firms sell insurance products, they must do so in line with the FCA’s requirements around assessing consumers’ eligibility to claim on a product, and the high-level principle of “treating customers fairly”. Firms must also give a separate price for the insurance product and explain whether it is compulsory.

These rules are in force now, and the FCA can enforce breaches of its rules— there is no limit on the fines it can levy and, crucially, it can force firms to provide redress to consumers. The FCA keeps all its rules under review and continually considers whether further interventions are needed in the consumer credit market. It will set out further thinking early in the new year.

Regarding the noble Baroness’s specific points about contract enforceability, lenders are already required to serve a statutory notice under the Consumer Credit Act before enforcing the agreement or repossessing goods. Goods cannot be repossessed without a court order if the consumer has paid at least a third of the total amount payable. The FCA also sets out how firms must undertake affordability assessments before entering into an agreement, including taking reasonable steps to assess the customer’s ability to meet repayments in a sustainable manner, without undue difficulties.

To underline that point, the FCA has had full use of these powers since 1 April and can make use its broad enforcement toolkit to punish breaches of its rules. The FCA also has flexible rule-making powers to take further action where it deems it necessary in the protection of consumers. The Government believe that this, alongside the existing protections set out in legislation, provides robust protections for consumers in the conditional sale and hire purchase markets. I therefore ask the noble Baroness to withdraw her amendment.

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[Baroness Hayter of Kentish Town]

My Lords, the Minister said that not all traders are rogues. She obviously meets a different lot from those whom the noble Baroness, Lady Oppenheim-Barnes, comes across. The noble Baroness knows very well that some of them are rogues.

[Baroness Jolly]

But not all.

[Baroness Hayter of Kentish Town]

Some of them are. However, the Bill throughout is very much about the ones who are not good. If all traders were good, we could throw the Bill away. Frankly, we do not need it for John Lewis. It does not need this Bill in order to be good to us. The Bill is about bringing everyone up to the standards that we expect from all traders. It is fine to say that a good trader will come back. If it is a good trader, the customer will trust it and have it back. That is fine. However, what we are after here are the cases where there is something dangerous in the house or where the householder feels at risk from the trader being back.

If I understood the Minister properly, she said that customers have some choices. They can phone Citizens Advice, which of course will give them only advice—it cannot negotiate—or it will give them a template for a letter, which in the circumstances I do not think would be a lot of help. Alternatively, they can go to a website, although I think that a lot of consumers would not find that very helpful at that moment either.

In fact, the Minister has said the same as I have said: the only route you can take is to seek damages in court, which is what our amendment was trying to avoid. We were trying to say that where someone has been in your house and they have done something so badly that you feel at risk, you should be able to get your money back without that person coming back into your house. Clearly, that is where we and the Government have a different view. In those circumstances, I think that we leave consumers as vulnerable as they are now. They are in no worse a position but, at the same time, their position is no better. That is regrettable but it is clearly the decision that the Government have taken. I beg leave to withdraw the amendment.

Consumer Rights Bill

Debate between Baroness Jolly and Baroness Hayter of Kentish Town

Wednesday 5th November 2014 Grand Committee

[Baroness Hayter of Kentish Town]

My Lords, this House has done much important work in tackling high cost and exploitative credit, thanks largely to the most reverend Primate the Archbishop of Canterbury and my noble friends Lord Mitchell, Lord Stevenson and Lord Kennedy of Southwark.

Amendment 105L concerns a new, unregulated and somewhat exploitative form of loan that has sprung up in the high street—along with other high-cost credit, mostly in low-income or deprived areas. It is known as rent to own: one well known example being BrightHouse. It works by having consumers rent products, which can be from household essentials, such as washing machines and beds, to games consoles, with the rent being eventually used to pay for the product. However, because it is deemed to be rent, there are none of the safeguards that would cover a loan to buy the product—for example, hire purchase or a straight bank loan. There are no checks on the ability to repay. There are no rights over the property. There are no safeguards against the property being repossessed because, until the final payment is made, it is only being rented, not owned by the people in the house. So, although the consumer is theoretically renting the product—in their minds, they are of course in the process of buying it—any failure to meet a payment can lead to it being immediately repossessed. There is evidence that such stores show little forbearance over mispayment and are unwilling to accept a breathing space or to negotiate payments where personal circumstances change. That is despite the fact that the consumer may have already paid well over the true value of the goods—sometimes, several times over.

There also appears to be a degree of heavy-handedness when it comes to repossession, with customers rarely informed of their rights and, in some cases, intimidated. There is no protection for the consumer, who is legally neither the owner of the product nor a borrower of a loan, so none of the normal protections associated with hire purchase apply. Protections apart, let us look at the prices. They far exceed the normal purchase price, even including any interest from a bank, which, if one were buying it with a bank loan, would then be added on to the price. The products include a washing machine. If you bought a washing machine from BrightHouse, a not unrepresentative example would leave you paying £1,404 for the machine, which could be bought somewhere else for £535.70—by monthly instalments in both cases, so I am comparing like with like. That means you are paying almost three times the price. However, if you get the games console rather than the washing machine, you end up paying more than three times the initial price. Buying an Xbox console bundle—I admit that I do not know what that is but I am assured that people buy them—elsewhere would cost you about £400. At BrightHouse it is £1,500 over a 130-week period. The APRs are between 60% and 90%. These are not my calculations; they are from BrightHouse’s own catalogue, where buying an HP Platinum Pavilion touch screen laptop would cost you £1,560, paying an APR of 94.7%. So adding up these so-called rents amounts to far more than the full list price, even adding on the interest if you bought it with a bank loan.

Furthermore, the company—I mention this one because it is the only one that I have found time to go and visit—often stocks absolutely top-of-the-range products, despite its shops being in deprived areas and its business model being aimed at those who want to pay weekly. On top of that, BrightHouse adds in compulsory and expensive insurance, even though the goods still belong to the company as they are being rented, so insurance is probably not needed. Then, just to add insult to injury, the marketing of the goods uses every trick of behavioural economics to tempt in the buyer, highlighting the price per week rather than the total cost or the length of repayment. The laptop that I just mentioned costs £15 per week but the catalogue does not tell you how many weeks you will need to pay off the price of £1,560. As we discussed in Committee last week, this is “drip pricing”, where the first number you see—in this case, the weekly amount—gives little indication of the full price. We know from research that consumers tend to overvalue a benefit that they will receive now, which in this case is a small weekly payment and immediate possession, while underestimating the impact of deferred costs.

Amendment 105L would require such a company to include information about the price of the good; an indication of the price the customer might pay elsewhere; the cost of the credit agreement, which should be in money terms, not percentage terms; and clarity about possible repossession, including any allowance for a breathing space or renegotiation of payment. It would ban making insurance compulsory, as I am sure the insurance itself adds more in cost than it does in value, and you have to pay the interest on it because it is part of the weekly charge. The amendment would also require the lender to check on the consumer’s ability to pay the full price.

This is not an attack on any weekly payments system, which can help those on lower incomes with their household budgeting. However, the business model used by companies like BrightHouse is so stacked against the customer that it is little short of exploitation. I therefore hope that the Government will accept this measured approach, which does not ban this form of credit but introduces greater transparency alongside adequate safeguards. I beg to move.

[Baroness Jolly]

My Lords, I hope that I shall be able to shed some light on this. Again, we share the noble Baroness’s concern about the risk of consumer detriment in the hire purchase credit market. The rules for the consumer credit market, put in place by the FCA from 1 April this year, were made with the stated aims of, first, ensuring that firms lend only to borrowers who can afford it; secondly, increasing borrowers’ awareness of the costs and the risks of borrowing unaffordably; and, thirdly, ensuring that consumers have access to support if they have financial difficulties.

The noble Baroness suggests that some organisations show little forbearance and are heavy-handed. The FCA specifically requires firms to adhere to debt collection rules, including in treating customers in default or arrears difficulties with forbearance and due consideration; provide pre-contractual explanations and information in line with European requirements, including the total amount payable; assess creditworthiness and affordability, including the potential to impact adversely on the consumer’s financial situation and their ability to make repayments as they fall due; and, where firms sell insurance products, do so in line with the FCA’s requirements around assessing consumers’ eligibility to claim on a product, and the high-level principle of “treating customers fairly”.

The Government believe that the tough and decisive action being taken by the FCA, following its detailed rule-making process, will ensure that consumers are far better protected under the new regime. The Government also recognise the importance of affordable credit, which is why they are supporting the credit union movement, including through investing £38 million through the expansion project. Given the new regime, I wonder whether the noble Baroness would feel her way to withdrawing the amendment.

[Baroness Hayter of Kentish Town]

I think that the Minister has completely misunderstood. This is not about a loan—this is about credit, not debt. The proposal is completely outwith that regime because it is not a loan. It does not come under the FCA, it is rent. These people are renting the television—if they rent it for three years, they will then be given it and own it. It is not covered by the affordability test, by forbearance or by anything that she is talking about.

[Baroness Jolly]

I apologise for the misunderstanding. I think that we will probably need to have a conversation fairly urgently.

[Baroness Hayter of Kentish Town]

That will be helpful. It is called “rent to buy”. You rent the item and own it only at the end, when it is given to you. You are renting it, and there is absolutely no hire purchase agreement or anything like that. In the light of that, and assuming that it will be possible to discuss this to clarify the issue, I beg leave to withdraw this amendment.

Consumer Rights Bill

Debate between Baroness Jolly and Baroness Hayter of Kentish Town

Monday 3rd November 2014 Grand Committee

[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.

[Baroness Hayter of Kentish Town]

Perhaps I may ask the Minister a question on one bit of that—two now. I think she will accept that 180 is a very small number. She seemed to think that there was a risk to companies that are eventually found to have done nothing wrong, if they face civil action. But surely she must accept that they face that with criminal action. There can still be criminal action and they will face all of that and they will have to pay their own and the other side’s costs. Perhaps the Minister could explain why it is a greater problem for a company to have to face a trading standards officer taking civil action than to face the same trading standards officer taking criminal action.

[Baroness Jolly]

My Lords, on the number of cases per year, those which I quoted were actually civil cases, but there are around 1,800 criminal cases each year. Criminal costs are taken out of central funds, and it is civil costs that the loser pays.

[Baroness Hayter of Kentish Town]

My Lords, on the first question, the Minister has made my point: there are far more criminal cases than civil cases. However, they still have to pay their own costs. If they are defending a case in the criminal court, the company has to pay its own costs whether the case is a civil or a criminal one. As she quite rightly said, these costs can be high.

[Baroness Jolly]

I have been advised that the criminal system and the civil system are significantly different. Probably the easiest thing to do would be to write to noble Lords who have taken part in this debate.

Consumer Rights Bill

Debate between Baroness Jolly and Baroness Hayter of Kentish Town

Wednesday 29th October 2014 Grand Committee

[Baroness Jolly]

My Lords, this is the first amendment to Part 2 of the Bill covering unfair terms, so allow me to set the scene. Part 2 responds to the Law Commission’s recommendations to the Government on how to improve the rules around contracts between a business and a consumer. The aim of this part is to provide clarity for business and consumers, resolve uncertainties and avoid lengthy court disputes in the future. The basic framework remains the same: terms in a consumer contract must be fair and they must be plain and intelligible. A court can decide whether a term is fair or not, but the “core bargain”, what you pay for and how much it costs, is exempt from that assessment in certain circumstances. The legislation also lists certain terms as examples which the court may look at, known as the “grey list”.

What are we changing in this Bill? I would draw the attention of noble Lords to two particular changes. First, we are making the “small print bigger”: price and subject-matter terms must be transparent and prominent to avoid a court being able to consider whether they are fair. That requirement for prominence to avoid assessment is new. Secondly, we are adding three new types of term to the grey list. These are the types of term which are always assessable for fairness. We are adding terms which permit the trader to claim disproportionately high sums in compensation or for services which have not been supplied where the consumer has attempted to cancel the contract. These are also known as early-termination clauses. We are adding terms which give the trader discretion to decide the subject matter or price after the consumer has become bound by the contract. These additions were recommended by the Law Commission and based on evidence of consumer detriment and case law.

I turn to the amendments specifically and, first, Amendment 55A. As I am sure the Committee is aware, one of the other ways in which this part of the Bill increases consumer protection is by bringing consumer notices into the scope of the fairness test and transparency requirement which currently apply only to consumer contracts. We based our explanation of what constitutes a “notice” on the current regime, specifically the Unfair Contract Terms Act 1977. We make clear in Clause 61(8) that a consumer notice,

“includes an announcement, whether or not in writing, and any other communication or purported communication”.

I can therefore reassure the Committee that “notice” has this broad definition, meaning more protection for consumers.

We have been asked whether the provisions in Part 2 include general statements such as adverts which are not made to a particular consumer but to all consumers. Such notices are covered by the unfair terms part of this Bill where they relate,

“to rights or obligations as between a trader and a consumer, or … purports to exclude or restrict a trader’s liability to a consumer”—

as stated in Clause 61(4).

I also remind the Committee that Part 2 complements other protections. First, this Bill makes clear that certain information the trader gives the consumer forms part of a contract for the supply of goods, service or digital content. For example, in relation to a contract for a service, Clause 50 provides that where a trader gives a consumer information about a service they are offering, and the consumer relies on that information in deciding to enter the contract, the trader must comply with that information. Secondly, the Consumer Protection from Unfair Trading Regulations 2008 are already in place to protect consumers from being misled by a trader. I can therefore reassure noble Lords that the definition of “notice” has a very broad scope and that a wide range of notices are covered by Part 2 of the Bill. Both Part 2 and the other provisions and regulations will protect consumers from being misled.

On Amendment 56FA, concerns have been raised today that our drafting of the exemption will allow traders to surprise a consumer with additional charges after a contract has been agreed, without those charges being assessable for fairness. I do not like these surprises any more than noble Lords do. I would rather know about them upfront so I can shop around to avoid them. That is what the new requirement for “prominence” will allow. Traders should make such charges prominent when they enter into a contract. There should be no surprises. If there are, the consumer or a regulator can challenge them in court. Through that new requirement, consumers will for the first time have significant protection from unfair terms in the small print.

The noble Baroness, Lady Hayter, mentioned drip-pricing. The Bill will help protect consumers from drip-pricing, alongside the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 which say that these extra charges must be clear and comprehensible before the consumer buys. In contrast, were we to allow only the main price to be exempt from assessment for fairness, traders might just bundle all their charges under the headline price. That is not beneficial for consumers or creating a competitive marketplace. The Law Commission recommended to us in 2013 what you see in the Bill now. It considered this a careful balance between protecting consumers and allowing the market to operate. The Government agree with that view; we need an unfair terms regime that works in practice.

On Amendment 56FB, which would change the requirement for prominence under Clause 64, concerns have been raised that our current definition allows terms to be “hidden in plain sight”, where a consumer could see and read a term because of its prominence but still not appreciate its significance. We recognise that consumers rarely read terms and conditions and that those who do may not fully appreciate how they will impact them. After thorough consultation we agreed with the Law Commission’s recommendations that the way to tackle this was through transparency, prominence and the maintenance of the grey list—that is, the list of terms which are always assessable for fairness. In answer to the concern of the noble Baroness, Lady Hayter, about customers being irrational, I understand that the Minister has responded by letter to the University of Warwick academics on this particular point. I am not sure whether the noble Baroness has seen a copy of that letter.

The grey list is key to protecting consumers from terms which they may not fully appreciate when agreeing to a contract because it covers such a very wide range of such terms. We are therefore making clear in the Bill that terms on this list are always assessable for fairness. We are also adding three terms to the list, again on the recommendation of the Law Commission, thereby protecting consumers from three additional types of term that they may not fully appreciate when they agree to a contract. Finally, we are taking a power in the Bill to allow us, after parliamentary scrutiny, to update the grey list. That means that were consumer or trader behaviour to change, we could add terms to the grey list to accommodate that.

I agree with noble Lords that consumers might not appreciate all the terms when agreeing a contract, but I think that we have already addressed this in the Bill as drafted. I hope that I have explained our reasoning for accepting the Law Commission’s recommendations for the construction of Clause 64 and I therefore ask that this amendment be withdrawn.

[Baroness Hayter of Kentish Town]

My Lords, I thank the Minister for that response. As she says, this is the first time that we have discussed this provision. I also thank my noble friend Lady Drake for her professional and expert intervention; this is her area. Among the details which she so rightly raised, she used the phrase “transparency alone is not enough”. I think that that is the problem that we still have—that transparency and prominence are highly welcome but, by themselves, are not enough.

I very much welcome the expansion of the grey list. I think that there was a half-offer there that we could see the letter that was sent in reply to the Warwick University Business School, so I thank the Minister. I particularly welcome something that I am not sure I had noticed—it is confession time—which is the ability to update the grey list. We might return to this on Report after we have read those words carefully to see whether we would still like to tweak it at that stage, although it may be that we will want to do it later. I think that some points are still not sufficiently well covered. For the moment, I beg leave to withdraw the amendment.

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[Baroness Jolly]

Perhaps I may reassure noble Lords that where conflict of interest is an issue in particular sectors, the Government have taken action. As I am sure noble Lords are aware, in November 2008 the then Master of the Rolls, Sir Anthony Clarke, appointed Lord Justice Jackson to lead a fundamental review of the rules and principles governing the costs of civil litigation and to make recommendations in order to promote access to justice at proportionate cost. Lord Justice Jackson published his final report in January 2010 and the recommendations are being taken forward in a variety of ways. A number of measures required primary legislation, and some of the major reforms are in the Legal Aid, Sentencing and Punishment of Offenders Act 2012. Other reforms will be implemented through rule or policy changes.

Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act implements recommendations made in Lord Justice Jackson’s review. No-win no-fee conditional fee arrangements have been reformed, but remain available. They provide a means of funding legal cases for those who could not otherwise afford them. That part also provides that for personal injury cases, referral fees are prohibited. This ban covers both the payment and receipt of such fees, which means that a firm cannot benefit through referring a customer to a particular third party. In effect, this removes the incentive on the trader to refer a consumer to a particular third party, just as this amendment would do. The ban captures all of the main businesses involved: solicitors, claims management companies and insurers. Any breaches of the ban will be subject to appropriate regulatory action by the relevant regulators, which are the Solicitors Regulation Authority, the FCA and the Claims Management Regulator. This regime has been in force since April last year.

Provision is also made in the Act for a power to extend the prohibition to other types of claim and legal services beyond personal injury claims. However, the Government do not intend to use this. There is no evidence that such a ban is needed in other sectors. I hope that that reassures the noble Baroness and I would ask her to withdraw the amendment.

[Baroness Hayter of Kentish Town]

I thank the Minister for her reply. I have worked on referral fees a lot and of course this is not quite the same. It is not about the payment of referral fees, but about a law firm which is dependent for the volume of its work on being referred by an insurance company. I made no allegation whatever that a referral fee was being paid. The problem is that if the insurer is putting all its cases to one or more lawyers on its panel, that sets up a potential conflict of interest for the law firm which wants to remain on the panel.

I know that the Minister will not be able to answer my next point now, but she has talked about claims management companies. She will not be aware, because she was not the Minister at the time, that another amendment I did get through was that complaints against claims management firms should be able to be made to the Legal Services Ombudsman. I think that that happened around 18 months ago, but the SI has still not come before your Lordships’ House. Despite this House having taken the decision—a very wise decision, I have to say—that complaints against claims management firms can be made to the Legal Ombudsman, the MoJ has been so tardy that we still do not have the SI. I am sorry to get that in as a dig, but we are still waiting for it. It is really important in these sorts of issues.

As I say, it is not referral fees that we were touching on in this. It is about being absolutely certain that when you pay for insurance to cover legal representation if anything happens, that legal representation should be absolutely non-conflicted and should act for the driver concerned. For the moment, I beg leave to withdraw the amendment, but if the Minister could talk to her colleagues in other departments, and if they could move on the complaints against claims management firms going to the Legal Services Ombudsman, many people would be very grateful.

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[Baroness Jolly]

My Lords, I want the requirement for letting agents to publicise their fees to come into effect in both England and Wales as soon as possible to ensure that tenants have some certainty over the payments they have to make. This is why I have laid an amendment putting the enforcement details into the Bill rather than subsequently using secondary legislation. This amendment simply uses the process described in the existing clause but makes it clear that the duty in England and Wales will be enforced by county councils, county borough councils, unitary authorities and London boroughs.

These authorities will be able to fine agents who fail to publicise their fees up to £5,000 for each office and website. Agents will be able to appeal to a tribunal. I recognise that enforcing the requirements for agents to publicise their fees will entail a new burden for English local authorities, so we will make additional funding available for this. Furthermore, authorities will be able to retain the fine, potentially enabling the proceeds from agents who are opaque on their fees to be used to tackle rogue agents where they exist, thus continually driving up standards in the industry. I beg to move.

[Baroness Hayter of Kentish Town]

I rise to say “well done”. I should warn the Minister that we will have other amendments on letting agents next week. However, we are very pleased that this will be in the legislation and that it will happen early, by the extra resources, and by the incentive for local authorities to take action, given that they will be able to retain any fines levied. I realise that that is the end of her political career, having had praise from me, but so be it.

Consumer Rights Bill

Debate between Baroness Jolly and Baroness Hayter of Kentish Town

Monday 27th October 2014 Grand Committee

[Baroness Hayter of Kentish Town (Lab)]

My Lords, Amendment 50A is about transparency of charges. This is something we know that the Government support. They are very much in favour of transparency, particularly given their very welcome provision elsewhere in the Bill to make letting agents disclose their charges. However, other groups of home owners and tenants have a similar need to know what they are being asked to pay, whether it is insurance in respect of a holiday or an add-on to a main product. I hope that the example I am about to give will help the Minister to respond to the amendment. It concerns leasehold management where there is leasehold ownership of a block of flats and either the managing agent or the ground landlord takes out an insurance policy or has building work done, but then, because of the contract, the leaseholders have to pay up although they are not shown the details of the cover, if it is insurance, or, indeed, of the price and bids for the work if it is, for example, building or gardening. These details are available to the freeholder, and probably to the managing agent, but not to the leaseholder. When they ask for this, the insurance company or, indeed, the contractor in the case of buildings often says that their agreement is with the freeholder and therefore they will not give the leaseholder the information, even though the leaseholder is paying.

We have had an example of this from my colleague in the other place. It will be obvious who it is when I say that this was about some leaseholders in Walthamstow. They managed to get their hands on their insurance policy and discovered that there was an extra premium covering terrorism. We were slightly surprised that Walthamstow should be high on that agenda. When they inquired, they discovered that it was because a newspaper article had once reported that somebody involved in a plot to blow up a plane lived in the area. That may be an extreme example but I think that we all know of cases where the person who actually pays is not the contractor or is not the person who is party to the contract; they have to pay via a different contract. Therefore, Amendment 50A says basically that when somebody has to pay via a third party, they should have the right to obtain the information relating to the charge to which they are contributing. I beg to move.

[Baroness Jolly (LD)]

My Lords, like other noble Lords, I, too, have looked carefully at the discussions on this issue which took place in the other place and I am aware of the circumstances and purpose which has given rise to the amendment. As I understand it, the purpose of the amendment is to assist leaseholders in establishing whether the insurance cover and the contributions paid towards the insurance premium are reasonable. I entirely agree that transparency is important and that leaseholders should have access to information about insurance and, indeed, other service charges.

Having carefully considered the amendment, its purpose and effect, I am happy to reassure noble Lords that the law already provides leaseholders with the right to obtain the information that this amendment seeks to provide. Leaseholders contributing towards the cost of building insurance and service charges more generally have for some years had the right to access and obtain copies of this information. This includes being able to request in writing a copy of the insurance policy or the landlord/managing agent providing reasonable facilities to inspect the policy and all other supporting documents, for example. This is in addition to the ability to request a summary of service charges in general, which would include the costs of insurance, and to inspect the invoices, receipts and other supporting documents that make up the costs.

If a landlord or, indeed, a managing agent on their behalf, fails to comply with a request for information without reasonable excuse, they commit a summary offence, which is subject on conviction to a level 4 fine on the standard scale of up to £2,500. Ultimately, as noble Lords will be aware, leaseholders can apply to the First-tier Tribunal Property Chamber for a determination about the reasonableness of the costs of insurance that they contribute towards and other service charge payments. Grounds could include, for example, that the level or type of insurance is not appropriate, in addition to the reasonableness of the premium.

It is, of course, in the interests of parties to try to resolve concerns or disputes amicably, by discussion or alternative dispute resolution where possible, before resorting to the tribunal system. Noble Lords will also be aware of the requirement for letting and managing agents now to belong to one of three redress schemes approved by the Government. This requirement came into force on 1 October 2014, and is something that the noble Baroness, Lady Hayter, inspired through the Enterprise and Regulatory Reform Act. It is also important that we avoid creating a situation in which changes to legislation result in confusion or doubt about how existing legislation operates, or in weakening that legislation. This could potentially act to the detriment of the very leaseholders whose interests noble Lords are looking out for.

Guidance about leaseholders’ rights, including acquiring information about insurance, can be found on the GOV.UK website. Free, independent, initial legal advice about leasehold law and the rights available, including accessing information is also available from the government-sponsored body, the Leasehold Advisory Service. I hope, therefore, that I have been able to reassure the Committee that the law already provides leaseholders with the protections and rights the amendment seeks to introduce, and on why the Government are not convinced that noble Lords’ amendments will achieve their goals. For those reasons and the reassurance I have provided, I ask the noble Baroness to withdraw the amendment.

[Baroness Hayter of Kentish Town]

I particularly thank the Government for giving serious consideration to this. It is interesting that the Minister said, quite rightly, that we do not want conflicting laws. Part of the problem is that what she quoted about the right of leaseholders to take the freeholder to the leasehold tribunal to get this information does not enable them to get it from the insurance company. It seems to be the insurance companies that do not seem to know that they should be providing residents with information on their cover. Residents can obviously get a copy of the insurance but it will not cover all these small points. What we were trying to write into the Act was to make sure that everyone knows their responsibility, including insurance companies, who should not wriggle out of giving this information. I think that the noble Baroness is going to give me some more helpful comments.

[Baroness Jolly]

Certainly. The landlord or freeholder has to get the information from the insurer in the first place in order to show it to the resident.

[Baroness Hayter of Kentish Town]

I thank the noble Baroness for that clarification. The point was that leaseholders were hoping to get the information directly from the insurer because that is where their money went. I will withdraw the amendment because there is another issue that we shall come to about the amount of risk that is covered. That is for the next amendment. I beg leave to withdraw the amendment.

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[Baroness Jolly]

I will come back to the noble Baroness with chapter and verse on the remedies, but they will not be available until the Bill has been passed.

The remedies consumers retain under common law are the right to damages or, in some cases, the right to treat the contract as at an end, rather than being limited to the statutory remedies in the Bill, as long as they do not claim for the same loss twice. I am sure that no noble Lord would do that.

I recognise that consumers and traders will not want to go to court in most cases. That can, in some cases, be expensive and time-consuming. However, knowing that they retain the right to go to court is intended to empower the consumer to ask for their money back. It should also encourage the trader to agree with the consumer to do this. The consumer’s rights under this chapter of the Bill are not the only legislation ensuring that services are performed safely. For example, building regulations require that building work does not compromise the safety of people in and around the building.

Many service providers rely on their reputation and word-of-mouth recommendations. If they have made a mistake, they will want the opportunity to return to fix it. It would not be fair on those traders to take away that opportunity. Many consumers would also want the trader to rectify a problem with a service rather than have the inconvenience of finding another provider. There is also nothing to stop the trader volunteering to give the consumer a price reduction without a re-performance. The trader and the consumer are free to come to an arrangement separate to the statutory remedies in the Bill. Reputable traders will negotiate a remedy with the consumer, taking into account what the consumer has asked for. Given that consumers will be able to access compensation where re-performance is not desired and that our consultation showed broad support for our approach, I ask the noble Baroness to withdraw the amendment.

[Baroness Hayter of Kentish Town]

The noble Baroness, Lady Oppenheim-Barnes, asked a wonderful question. It was short and acute and went to the heart of the issue because the other remedies, the common-law remedies, are expensive and take a long time and any trader will know that no one is going to take them to court for £200 or £300—even my good and noble friend Lord Harris of Haringey. I am tempted to offer to come and help.

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[Baroness Jolly]

My Lords, this has been a fascinating debate. Some really interesting questions have been posed, not least by the noble Lords, Lord Knight and Lord Whitty. I reassure noble Lords that I will write to all noble Lords who I have not answered by the end of my response and place a copy in the Library.

We all care passionately about the provision of public services. I am sure I do not need to remind noble Lords that our reason for not including improvements to our public services explicitly in the Bill is not that we do not consider them important. They are vital, and I am proud to say that this Government have done much to change and improve public services.

This Bill will benefit all consumers by setting out in one place consumer rights. This Bill will empower consumers. To maintain that clarity and consolidation, we have not included specific provisions for public services in the Bill. When asked in the other place, the Office of Fair Trading said:

“If you want to deal with consumer rights and the public sector, there is probably a different way to go. This is a simplification and consolidation Bill that is trying to ensure that consumer rights are clear and in one place”.—[Official Report, Commons, Consumer Rights Bill Committee, 11/2/14; col. 49.]

While there are no explicit provisions in the Bill on public services, some public services will attract the rights and remedies under the Bill. Services will attract these rights and remedies if they are supplied under a contract between the consumer and a public body. That is the test. This is because the definition of “trader” is wide enough to capture the activities of any government department or local or public authority. Consumers of public services provided under a contract with the provider will therefore benefit from the Bill with clearer rights, clearer remedies and ultimately better outcomes. That is a good thing. We will make it clear in our guidance to consumers and traders that this is the case.

Turning to those public services that are not covered by the provisions in the Bill, let me be very clear that these consumers are nevertheless protected—and in a way that often provides more tailored, specific and appropriate safeguards, designed to fit the particular service. Many of these tailored regimes already incorporate just the sorts of protections that these amendments discuss: independent advocacy, regular reporting and established ombudsman schemes.

Several sectors have well established alternative dispute resolution services. For example, the role of the Parliamentary and Health Service Ombudsman is to investigate complaints that individuals have been treated unfairly or received poor service from government departments, other public organisations or the NHS in England. The ombudsman’s powers are set out in law and the service is free for everyone. In 2012-13, the Parliamentary and Health Service Ombudsman resolved 26,358 inquiries for consumers. In 2012-13, the Local Government Ombudsman responded to more than 90,000 contacts from the public.

We all share the vision of public services provided to a high standard, where consumer feedback and consumer choice work to push up standards. The noble Baroness, Lady Hayter, mentioned the issues of signposting to ombudsmen. As my honourable friend Jenny Willott explained in the other place, the Minister for Government Policy, my right honourable friend Oliver Letwin MP, commissioned Robert Gordon to review the ombudsman landscape, thus considering the case for a single public sector ombudsman. He will report to the Minister before Christmas and we are committed to considering his recommendations. It would be premature to take action in this Bill before the review is completed.

I turning to the specific amendments tabled. The first is Amendment 50K. I am sure that all noble Lords are aware of the Open Public Services agenda. It is based on five principles for reform: decentralisation; choice; diversity of provision; fair access; and accountability. To achieve these objectives, we want to ensure that consumers of public services are empowered to raise concerns and that service providers learn from those complaints. In March, the Public Administration Select Committee published a report following its inquiries into complaint handling across government and the role of the Parliamentary and Health Service Ombudsman. As my right honourable friend the Minister for Government Policy made clear at the time, we agree that the ombudsman can play an important role in improving complaints handling and we are committed to working collaboratively with the Parliamentary and Health Service Ombudsman and other public service ombudsmen to deliver an accessible and effective complaint-handling process from first contact with a service to final resolution by an ombudsman.

There is now a set of choice frameworks covering NHS care, social housing, schools, funded early education and adult social care. These documents clearly set out the choices available to service users, as well as instructions for seeking redress if those choices are not satisfied. To offer clarity to the noble Baroness, Lady Hayter, these frameworks tell the consumer who is responsible and who to complain to. We are now looking at new digital channels for the public to register complaints about public services. This is in response to the Public Administration Select Committee’s report on complaint handling in the public sector. By way of example, we are working with the Department for Work and Pensions and the Land Registry on initial trials during the autumn.

On independent advocacy, as we said before in Grand Committee, we also prioritise making sure that consumers know their rights. Consumers of public services have access to advice, information and advocacy from government-funded channels such as Citizens Advice or GOV.UK. In addition, other bodies such as Age UK act as consumer advocates, especially for more vulnerable consumers.

Citizens Advice provides much of this advocacy. A spokesman was asked in the other place about including reforms to public services within the Bill. He said:

“I am not sure about that, if I am honest. It is not something that we have thought through sufficiently to get to a yes or no answer to that question. There are other ways of dealing with public sector services problems than a consumer rights Bill”.

When asked the same question, Which? said that,

“there are so many things that could fall within the scope of the Bill or could be added to it, and it could become unwieldy. So it is a question of priorities”.—[Official Report, Commons, Consumer Rights Bill Committee, 11/2/14; col. 7.]

I agree with those views. Public services are indeed important. We are committed to their improvement, but that is ongoing—outside this Bill.

Moving to the regulated sectors and Amendment 105A, it is important that consumer rights in regulated sectors are protected and that they are given sufficient information to make informed decisions. Regulators already have a statutory duty to look after consumer interests and must report annually on how they do this. Also, consumers within the sectors regulated are represented by relevant consumer bodies: for example, the Consumer Council for Water, Passenger Focus and Consumer Futures, which is now part of Citizens Advice.

There is also a lot happening to ensure consumers are able to get the best possible information across the board. In 2012-13, Citizens Advice helped 2.1 million clients through its bureaux with free advice. There were nearly 1 million contacts through its consumer helpline and also 14 million hits to its website. Some 91% of consumers reported that they would use the service again. This service reports to Government twice yearly on its performance against agreed standards.

Noble Lords can therefore feel reassured that regulators indeed do a lot for consumers already. With regard to the provision of advice and information, Citizens Advice reports twice annually on its performance. There is also much being done both by regulators and government to help consumers. Therefore, the amendment proposed is an unnecessary duplication of effort. I ask noble Lords not to press their amendments and to withdraw Amendment 50K.

[Baroness Hayter of Kentish Town]

My Lords, I thank my noble friends Lord Knight and Lord Whitty for the questions they raised and for their support. The public service issue is really interesting. It is no secret that now that universities have realised that it will affect them, one or two are getting a little jumpy. That shows what a very good Bill we have here. There is an interesting thing between those students who would pay a fee—the word in the Bill is “consideration”—and those who would not, where the latter would not be in as good a position as regards their rights. We will come back to this when we move an amendment on higher education. It might be useful at that stage—I give a bit of notice—to tease out some of those things. There was a lot of interest in this from colleagues around the House, many of them chancellors of universities, who I think have already been in touch with the Minister. Certainly, those of us interested in consumer rights are very happy that it will cover this, but I know that some clarity will be needed.

Working backwards, I am very sorry about the comment on regulators. As someone who chaired one of the consumer panels, was vice-chair of another panel and sat on another, it was not the same as being embedded in and a member of the regulator. Partly, you do not get things until they are more or less in the public domain, by which time of course decision-making is a long way down its route. Actually, it is in getting questions asked at the beginning, and the beginning of the formulation of policy and decision, where we want to embed a real consumer voice.

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[Baroness Hayter of Kentish Town]

I think that I have made the point that the difficulty, even with consumer panels, is that they are not included at the beginning of policy development. That is even more the case as regards external bodies such as Citizens Advice, which see something only once it has been published and are therefore always in the negative position of trying to take action afterwards. As my noble friend Lord Whitty said, the whole point is to get the voice of the consumer absolutely embedded into the way in which the regulator defines the problem, what it looks for and how it does its research.

I want to make only one other point in response to the Minister on the issue of signposting to an ombudsman. She mentioned that Robert Gordon is looking at—and I welcome the report he is preparing—the possibility of there being a single ombudsman. The Minister said that it might be premature to require signposting but it seems to me that whatever we come out with, the issue of signposting will still be key.

[Baroness Jolly]

I think that the noble Baroness may have misheard me. What I actually said was not that it would be premature to signpost but that it would be premature to take action in the Bill before the review was completed.

[Baroness Hayter of Kentish Town]

While I understand that, the only action that we want is on signposting. If anything were to be commissioned, signposting would have to take place, and whatever Robert Gordon comes out with, that requirement should still be there. Indeed, if there were to be a single ombudsman, there would have to be a new name and, no doubt, a new location and website. It would be even more important to signpost.

As I said, we will come back later to the issue of public services, in which I know there will be a lot of interest. However, I hope that the Government will look at the regulators. Even if it is not in this Bill, they could still take action with each regulator because the issue represents the other side of the Bill. It is not simply about providing consumer rights but about making sure that those rights are looked after by every regulator. I beg leave to withdraw the amendment.

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[Baroness Hayter of Kentish Town]

I was about to thank the noble Baroness, Lady Oppenheim-Barnes, for this amendment but, having seen all the troops she has on her side, it might be better for Labour to say, “We think this is dreadful”. It might make it easier for the Minister to accept it. However, I shall resist that temptation because I think that it is a brilliant amendment, and we are happy to support it. Earlier today we clearly failed to persuade the Government to embed the consumer voice right in the top echelons of regulators—that has been the tone of the debate—but this is another way to achieve the same end. The examples given by the noble Baroness, Lady Maddock, as well as those from the noble Lords, Lord Blencathra and Lord Whitty, about different regulators show how often, without that consumer voice, they fail to protect the consumer. The question from the noble Baroness, Lady Wilcox, about who regulates the regulators is very interesting because the answer ought to be, “the consumers”. The more that it is open to them, the better it will be.

The amendment is excellent. It would put in place the possibility of redress without consumers necessarily having to take their individual case to an ombudsman. It would ensure a proper complaints procedure for mistakes and poor service, falling short of a breach of rights, that nevertheless lead to substantial losses to the consumers. As has been said, it is extraordinary that regulators, which are supposedly in existence because a particular market has failed consumers, still often fail to put consumers first. They have allowed users to be muddled by confusing prices, ripped off by poor deals and ignored when making complaints. Consumers are often made to feel like the least important part of the food chain. As my noble friend Lord Berkeley says, it is often without their long-term interests being placed at the centre of regulators’ thoughts.

I look forward with interest to how the Minister is going to accept this amendment—because I am sure that she will.

[Baroness Jolly]

This has been a very interesting debate, interwoven with sorry tales about regulators. Of course, the noble Lord, Lord Blencathra, as an MP, regularly heard these tales from constituents coming into his constituency surgery. One of the regulator’s primary objectives is to take account of consumer interests. They must report annually on how they fulfil their functions, and they have done much good work for consumers. Water companies have agreed to return £1 billion to consumers after negotiating with Ofwat and the Consumer Council for Water. All but two water companies agreed in their plans to keep prices at inflation levels. Ofcom has capped second class mail prices, while Ofgem has made npower pay £55 million to consumers due to incorrect billing. However, it is also important to know that Citizens Advice does a lot of advice in this area.

I refer noble Lords back to my comments on Amendment 105A regarding the good work that Citizens Advice is doing. In addition to those comments, I shall expand on the benefits that that body provides to consumers. It promotes consumer rights and clear, intelligible information for consumers. Sixteen million people were helped through the Citizens Advice digital service, while 84% of clients said that their understanding of their rights had increased and 86% of clients reported a positive impact of advice on their lives. All this is a key port of call for consumers in the regulated sectors. I also mention that relevant consumer bodies play a vital role in this regard, especially in helping consumers on matters around redress, complaints and securing the best deals in issues such as utilities. The effect of this amendment would be to place extra requirements on regulators and increase bureaucracy when there is a drive to cut the costs of regulation and increase efficiency. The Government believe that in many cases it would also replicate protections that already exist and take away the discretion of regulators to decide what is appropriate in the circumstances.

On regulators levying fines for breach of any part of this amendment, the enhanced consumer measures set out in Clause 79 and Schedule 7 to the Bill would achieve a similar aim. In summary, there is a limited benefit in adding more duties on the regulators. Noble Lords can be reassured that much is being done for consumers by regulators, but of course we salute the wonderful work being done in the world of consumer rights as championed by my noble friend, and we will be happy to meet her to discuss the amendment. However, I ask her to withdraw it.

Consumer Rights Bill

Debate between Baroness Jolly and Baroness Hayter of Kentish Town

Wednesday 15th October 2014 Grand Committee

[Baroness Jolly]

My noble friend makes a very good point. I have extensive speaking notes on that part and we will come to it later in the afternoon.

[Baroness Hayter of Kentish Town (Lab)]

I thank the Minister for that. Perhaps it would be helpful if I put on the record what our questions are. I take very much the offer that she has made to withdraw and not move these amendments so that we can come back to them; with them being tabled at this stage, we obviously have not had all the time that we need. Neither have they been scrutinised by the BIS Select Committee or in the Public Bill Committee in the other place. That would give us a little more time and we are grateful for that.

The real question, which the Minister helpfully set out, is whether it is reasonable for a consumer to reject every part of what they think was bought under a single sales contract or only the faulty parts. With the example given, it may be that an entire bathroom suite has been ordered—all in the same pale blue or whatever one wants for a bathroom suite—but if the sink is faulty, that may have implications on the bundle and on whether the quality of the whole is affected by one part.

Though hearing and understanding the intention, we are worried that this proposal could have consequences for big, very expensive items, particularly whether the amendments would create an incentive for traders to supply related goods under separate orders or contracts to try to make the contract more severable. That could apply to a whole furniture suite, a music centre, a matching table, chairs and cupboards, and so on where the householder thinks that they are buying a complete look. Rather like the Minister, I have focused on kitchen equipment and those sorts of things. However, telecoms and media bundles, which can include phone, broadband and television, are increasingly purchased by consumers. Such purchases raise the same issues as to whether they are a single contract or severable.

I should like to lay two further issues on the table because we will, with the Minister’s generous offer, come back to this. Thinking of the whole area, it will at least be possible for the installer or the retailer to take out insurance against the whole or the parts, whereas an individual consumer cannot at the point of installation. The Minister has kindly offered further discussions on the point at which one pays and whether one simply pays at the end of a contract. If it is for something fairly small, that may be simple, but when I have had building work done, money quite rightly has been wanted up front to buy components. We have tended to pay in bits, which makes it sound as if each bit is separate, although it was really just to help a small trader. Again, we would like the time to look at that. If this amendment really is to clarify current law, we would have fewer worries. For the moment, we are grateful for the time and hope that we will be able to sort this out.

[Baroness Jolly]

I thank the noble Baroness for her comments and appreciate that she needs more time to consider the amendments more fully in the light of remarks on this issue. I am happy therefore to withdraw the amendment with a view to revisiting it on Report.

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[Baroness Hayter of Kentish Town]

For readers of Hansard, you would love my crimson chiffon, off-the-shoulder, diamante-encrusted gown. However, at that level, yes, I have made-to-measure clothes, but my grandchildren, called Poppy and Isaac, have “Poppy” and “Isaac” embroidered all over their swimming towels and things like that. I had a very nice hand-painted plate made for my godchild’s wedding. What I would not like to see is that, as a consumer of those made-to-measure or personalised goods, I would lose my rights to reject if they were faulty. If they are for a wedding I am afraid that a replacement probably would not arrive in time. I am not convinced that personalised, made-to-measure things should lose their rights. If it is bespoke it is probably something that has been made fairly specifically.

I understand that the wording used has probably been carried across from the distance contracts rules, where if one orders a personalised product then one obviously cannot reject it simply because one has changed one’s mind, because there is nothing else the supplier can do. We understand that completely, but that is obviously not the same as where a personalised product is faulty. Our worry is that the amendment from the noble Lord, Lord Hodgson, as worded would undermine the rights that a personalised order should have.

If we have read this correctly, the amendment would be not a clarification, but a change in the current law. Our understanding is that the current law has not produced any problems in the past. We have certainly heard no catalogue of complaints, although the Minister might know more than we do about that. Our worry therefore is, whether it is simply my dress or a tailor-made kitchen, that we would want consumers to retain their rights if such a kitchen was full of faults or badly installed. It is a bit like what my noble friend Lord Stevenson said on the previous amendment: I do not think good traders have anything to worry about, but it is the others that we are worried about, who would be the ones most likely to misuse something such as this. Many personalised goods are expensive and very much thought about. If they are in one’s own house it is not that easy to keep having them changed: one has to take more days off work to have that done. This is one’s home we are talking about.

We hope that the Government are not going to accept this amendment, which I am sure is well intentioned but perhaps unnecessary.

[Baroness Jolly]

I thank my noble friend Lord Hodgson of Astley Abbotts for the reasoning behind his amendment. I also welcome his general support for the principle of the Bill. My noble friend Lord Clement-Jones is absolutely correct in pointing out that the amendment’s application would be wider than double-glazing: spectacles are another really good example of something that is personalised. I am grateful to have the support of the noble Baroness opposite.

The Government disagree with the approach that the amendment takes. The rights to reject in the Bill—both the short-term and final right to reject—represent fundamental protections for consumers where goods do not meet the consumer’s rights under the Bill.

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[Baroness Hayter of Kentish Town]

Amendment 20, which stands in my name and that of my noble friend Lord Stevenson, aims to provide greater clarity on how long a repair should take and, therefore, how long a consumer must wait before they may be entitled to a refund or a price reduction. At Second Reading, the whole House was very supportive of the aim of the Bill to increase clarity. Under current law, and under the Bill, where a consumer asks for a faulty good to be repaired, the trader has to do so within a “reasonable time”. However, “reasonable” is not specified, which causes uncertainty for the consumer but probably for businesses as well.

We are very keen that the Government’s new remedies should work but they will do so only if customers feel confident about their rights, particularly about when they can exercise those rights. As we have just been discussing, elsewhere in the Bill there is a significant change that we welcome, where the 30 days replaces the reasonable period to reject. The Minister has just emphasised the clarity of that. Our concern is that in this area the word “reasonable” remains as regards how long it takes to complete a repair. Clearly, the range of goods covered goes from yo-yos to the double glazing referred to by the noble Lord, Lord Hodgson. It would apply to an enormous range of goods and therefore it is difficult to have a precise time for all repairs.

Amendment 20 therefore proposes a longstop, coupled with an obligation for traders to effect the repair sooner if possible. For most repairs, 14 days would be absolutely adequate, even if spare parts had to be sourced from overseas. But the amendment also would provide flexibility where the consumer could agree to a longer period where they are happy to do so. This may be in cases such as those raised by the Glass and Glazing Federation where on-site visits will have to take place before any repair could be ordered, let alone fitted. That flexibility obviously would be possible. For other goods, there is no reason why they should not be repaired in less than 14 days. In a Which? survey, more than half of the respondents said that traders should not have more than 14 days to effect a repair. After all, that would leave a customer without the goods for quite a long time.

The clarity that this amendment seeks is to empower consumers to exercise their rights. In other words, they will know that they can ask for a repair to be done in that time. We think that it will reduce unnecessary disputes as to what is reasonable because both sides will know what to expect. It will also deter poor practice. The problem that the consumer has is that, while they are awaiting a repair, they are caught: they do not have the good; they do not have the money, so they cannot replace it at another shop; and they cannot have it repaired by another trader because they would have to pay for it. At that time, they would be very vulnerable. We hope that this amendment will facilitate the clarity that the Government seek in this Bill. I beg to move.

[Baroness Jolly]

My Lords, first, I acknowledge that a minority of consumers may be frustrated by lengthy waiting times when they have asked for a repair or a replacement. We have found little evidence that the time taken for repairs is a common problem. The Consumer Engagement And Detriment Survey 2014 found that of those consumers who had experienced a problem with goods and services, only 5% had a problem with a failed or delayed repair and, of this group, delayed repair is likely to be a smaller problem.

BIS has considered a time limit with regard to repairs and replacements. There was a consultation in 2012 and we discussed the issue further with stakeholders, consumer organisations and traders. On the basis of that consultation and those discussions, we concluded that the best approach is a simple limit of one repair or replacement of goods that must be provided within a reasonable time and without significant inconvenience to the consumer. I am concerned that setting a longstop date for repairs or replacements lacks the necessary flexibility to deal with all types of goods in all circumstances. Attempting to apply such a broad rule would at the least be burdensome to some businesses, but may also lead to unwanted consequences.

The Bill provides flexibility because the time needed to carry out a repair will depend on the goods and the circumstances. In most cases of repairs there are a number of factors beyond the control of the trader, so a backstop period may impose a burden. If goods are faulty and the consumer wishes to reject them under the short-term right to reject, this is a simple process. The consumer need only notify the trader that they wish to do so. On the other hand, repair or replacement of goods is a more involved process which will vary according to the goods in question and the type of fault. The application of a specific time period for repair work cannot effectively take account of all the relevant factors that affect the trader’s ability to provide a repair or replacement.

Repairs are often not carried out by the trader themselves, so the goods may need to be transported to and from the repairer. Further time is added if parts need to be ordered. For complex goods, time-consuming processes of diagnosing the fault and testing the repair may also be needed. The amount of control that the trader has over those factors is proportionate to the size of the trader. Small businesses have relatively little or no control over their suppliers and so would bear a larger burden. The British Retail Consortium gave the following evidence when this issue was discussed in the other place. It said that for small and medium businesses, setting a deadline for repairs is,

“more difficult … because they cannot have control over third parties that are perhaps coming in to do the repair … If that was regulated, clearly that would be one-size-fits-all, and would, I fear, penalise small, medium-sized and micro-businesses”.—[Official Report, Commons, Consumer Rights Bill Committee, 11/2/14; col. 33.]

The amendment would enable the consumer to agree to an alternative timescale. While this goes some way to providing flexibility we do not believe that it does enough, for two reasons. First, it opens up the possibility of the consumer simply refusing to agree an alternative timescale where it is impossible for the trader to provide a repair or replacement within 14 days. This creates an opportunity for the consumer to circumvent the first-tier remedies altogether, to the cost of the trader. Secondly, the amendment suggests that the alternative timescale should be agreed in advance. In many cases it will only become clear in the course of carrying out the repair that a longer period is necessary. If a repair takes a long time, of course, the consumer may well suffer inconvenience from being without the goods. The Bill already allows the consumer to move to the second-tier remedy if that happens. That protects the consumer, while still allowing the flexibility needed for the rules to work for different goods and circumstances.

The second main concern we have about this amendment is the risk of unwanted consequences. I underline the fact that we believe that repair is a vital remedy; it provides the trader with the opportunity to put right what has gone wrong, while enabling the consumer to have the goods they wanted. If done properly, it meets the needs of the consumer while reducing the burden on the trader and is more environmentally friendly as it is less wasteful than rejection. We are therefore concerned about any amendment, such as this one, that could shift the balance and lead to more rejections over repairs.

Imposing a backstop date may lead to a reduction in the quality of repairs. The trader may feel pressured to do a “rush job” to get it back in time rather than having the time needed to get it right. If consumers begin to lose faith in repairs, this could lead to an increase in rejected goods, which would be wasteful and costly. This is not just limited to repairs. Flexibility is also needed where a trader is to provide a replacement, as the necessary time will depend on factors such as stock, their source, and whether the goods were bespoke. Bespoke goods are a good example of where the amendment could be problematic. Many bespoke goods will take longer than 14 days to make, in the case of a replacement, or to repair.

Creating a backstop 14-day period, and requiring the consumer’s agreement for a longer period, means that the consumer would always have an automatic right to veto the repair or replacement and move directly to rejection or money off for these types of goods. This would be hugely detrimental to the whole industry, which is especially concerning when you consider that many of the businesses offering bespoke goods are small, specialist traders that would be hit hard by these costs. I therefore ask the noble Baroness to withdraw the amendment.

--- Later in debate ---

[Baroness Hayter of Kentish Town]

My Lords, we now move to a tricky and, from our point of view, rather serious amendment. The other amendments have been serious, but this is a significant amendment that we wish now to move. Amendment 21 stands in my name and that of my noble friend. I shall speak also to Amendment 22.

Clause 24 deals with the right of the consumer to receive a refund for faulty goods. It allows the seller to make a deduction from that refund to reflect the use that the consumer has had of the goods if it has been over some time. For example, if a sofa falls apart after a year—and, no, I do not have such a sofa—the seller can deduct a proportion of the price which reflects the use that has been made of it at that time. However, if the refund is sought within six months, there should be a full refund with no deduction for use.

However, the Bill creates an exception to that full refund within six months for items that it describes as having an “active second-hand market”. Our fear is that this could undermine the otherwise clear and final right to reject. Our amendment would remove that exception and retain the principle of a full refund in the first six months for all goods.

Our understanding of the background to the introduction of the “active second-hand market” let-out is that it addresses the particular issues of new cars, which it is estimated lose 40% of their value in their first year, about 10% in their first couple of yards as they are driven off the forecourt and up to 20% in the first 30 days. The argument is that a car dealer should not be required to provide a full refund in the first six months when, simply because of the way the car market works, the car has lost a significant amount of its value.

However, it seems to us that if the consumer, wanting a new car, has bought a faulty one, they should get a full refund. Otherwise they cannot replace what they thought they were buying—a new car—with another new car, because there will have been this deduction in value. They will not be put back in the position where they can buy a car and be the first registered owner, which is what makes it especially expensive to be the first owner of a car. The sums involved are quite considerable. I have it on good advice—since I have not bought a new car but, rather, have a newly bought car—that a new car could cost £35,000 but, if it was faulty, the dealer could reduce what they got back by £5,000. That leaves the consumer without a new car but with only £30,000 instead of £35,000 in their bank, and perhaps only 500 miles on the clock.

The other issue about the drafting of this clause is that it does not restrict the exemption from the deduction for use only to cars but covers every other sale of goods where the trader can demonstrate that there is an active second-hand market. The Government have argued that they have carefully drafted to cover only second-hand markets for sale “by traders to consumers”, to exclude the general eBay type of second-hand markets of individuals selling to individuals. There are a lot of other second-hand markets of traders to consumers, both online and on the high street, of furniture, second-hand clothing, vintage jewellery and—as I know better—bicycles, and so on, but if you buy a new one and that turns out to be faulty, you want the money back to buy another new product.

We are therefore worried that consumers will be denied a full refund for new furniture that collapses, clothing that is so damaged that you cannot even wear it, or broken jewellery, simply because there is an “active second-hand market” for these and the trader says, “I’ll deduct it for use because you had some use of it”, even if they could not wear it or carry it, or whatever the case may be. Another problem is that, as the clause currently stands, the seller determines how much should be deducted for use; it is not a negotiable price. That creates quite an escape clause for dodgy traders, who have the freedom to set that reduction-for-use amount without it being reviewable as an unfair term because it would count as priced.

The then Office of Fair Trading and the Law Commission have both opposed this exception. The OFT thought that the drafting on “trader to consumer” did not exclude eBay-type comparisons, as many traders operate on eBay. The Law Commission opposed the deduction for use for the first six months and has urged us in Parliament to consider removing it, citing how much ill-feeling was caused by such deductions. As it said:

“Consumers felt that where they had paid for new goods, they wanted new goods. If the first goods were faulty, they wanted to be able to start again, with enough money to buy other new goods, not second hand ones”.

Which? worries that the let-out,

“could leave consumers out of pocket”,

and,

“does not give consumers the certainty and protection they need”.

I understand that the Government have been focused on this let-out being for these very high-value goods, which lose their value very rapidly. The Minister in the other House said that the drafting had followed the recommendations of the BIS Select Committee. However, the Select Committee was critical of the drafting, pointing out that the lack of a definition of an “active second hand market” had been criticised in many submissions that it received. It also said that it would apply to most goods, which rather contradicts what the Government said about there “normally” being no deduction for use. The committee felt that the drafting would cover a lot of goods, and pointed again to the advice of the Law Commission that the deduction for use was “inflammatory” for consumers. According to the Select Committee, the Law Commission also said that it was rarely employed, so it may be an unnecessary complication.

The Select Committee concluded that,

“neither the policy … nor the drafting … on deduction for use is clear”.

It did not believe that the exemption from the six-month refund rule was workable, and recommended the deduction-for-use clause. It said that, should the provision be retained, the reference to a second-hand market comparison should be removed, with any deduction for use being based on the lifespan of the goods. In the case of the car I assume that this means that, if you had it for five months, the deduction would be based on five months’ use rather than on whether you could actually buy a five month-old car.

The clause may again be well intentioned and aimed at a particular problem with a particular product, but the catch-all is so wide now that it is probably misguided. It certainly seems unworkable, could be unfair and could undermine consumers’ rights on a much wider range of goods.

The British Vehicle Rental and Leasing Association supports our amendment. It pointed out that in certain industries, particularly electric cars, there has not yet been enough time to develop a second-hand market, which might make it less likely that people would buy a new type of car. They would know that if anything went wrong with it they might lose their rights and be less likely to get their money back, the second-hand market not being a deep one.

I urge the Government to rethink the clause. If it really is simply cars that they have in mind, it might be better to deal with them in a different way rather than risk a much wider range of goods being caught by this provision. I beg to move.

[Baroness Jolly]

I thank the noble Baroness for outlining the reasoning behind her amendments, and will look first at Amendment 21. The principle of deduction for use is fair. Where the consumer has enjoyed uninterrupted use of the goods, the consumer should be accountable for that use. For example, if a consumer has been driving a car around for three years of normal use and then a fault manifests, the trader should be able to reduce the refund to take account of those three years of unaffected use. Of course it is right that consumers should be able to exit the contract at that point, but it is unfair to require the trader to bear the costs of that use.

When the Government consulted on the issue, only a very small minority of respondents to BIS’s consultation favoured scrapping the deduction for use, and two-thirds of online respondents agreed that it was right to allow a deduction to be applied in some instances. However, it is frustrating for consumers to get a partial refund even though they have had little use of the goods. The irritation of having to deal with a fault often eclipses what little enjoyment the consumer may have had from the goods, so the Bill includes a new protection that prevents, in most cases, a deduction from being applied within the first six months. There is a limited exception to this rule and it is this exception that Amendment 21 would remove.

Consumer Rights Bill

Debate between Baroness Jolly and Baroness Hayter of Kentish Town

Monday 13th October 2014 Grand Committee

[Baroness Hayter of Kentish Town]

Being Welsh, I would not intervene on an issue on which the Scots felt strongly.

Under the Bill, goods are satisfactory if they,

“meet the standard that a reasonable person would consider satisfactory, taking account of”,

how they have been described, their price, and all other relevant circumstances. Those “relevant circumstances” are specifically stated to include any public statement about the “specific characteristics of the goods”. That suggests to me and many others that any description is of the physical characteristics of the goods, rather than any claims made about the use of the goods—that is, what they will do. Therefore, for example, merely to describe a washing machine by size, colour, capacity, speed, energy efficiency et cetera, is probably rather less significant to a busy parent than whether it will get the football kit clean, or whatever it is that they want to use the washing machine for. That is probably what the machine has been sold as doing; it has been sold as being a certain size, and having so many revolutions per minute.

Our amendment aims to broaden the definition to include public statements about the outcome that goods are claimed to achieve. In the Commons, the then Minister said that the term “specific characteristics” would capture outcome claims, such as whether a washing-up liquid that claims to remove grease actually does so. She also said that advertising standards rules and consumer protection regulations provide additional protection. However, particularly as regards the ASA rules, I am not convinced that that would cover in-shop leaflets or posters. We therefore remain concerned that if those words are not in the Bill, it will not be clear to the retailer, and certainly not to the buyer, whether such claims about what the product is meant to do will be honoured.

If the Minister believes that such claims are covered, it is hard to see why that should not be included in the Bill, given that the objective is to have everything in one place and made clear. We would like to be sure that such claims are covered, and the best way would be to include them in the Bill. I beg to move.

[Baroness Jolly]

My Lords, claims made about the outcomes that goods will achieve can be vital in a consumer’s decision to choose certain goods over others, and the noble Baroness, Lady Hayter, has given us a nice example of how that might apply. Such claims in advertising can be a significant benchmark against which consumers measure the performance of goods. In many cases, it is absolutely right that a consumer is able to take a claim about a key outcome into account when assessing if the goods they bought are satisfactory. Clause 9 already provides appropriate protection. It provides that goods supplied by a trader to a consumer under a contract must be of a standard that a reasonable person would think was satisfactory. It is appropriate that this is a flexible concept in order to ensure that it can be applied to a variety of different goods. It takes into account factors such as the description and the price of goods. It also takes into account all other “relevant circumstances”. This is a broad and flexible category, and includes any public statements made about the “specific characteristics” of the goods.

“Specific characteristics” is an intentionally broad term which would capture specific aspects of goods referred to publicly, and that would include key outcomes. There is no collusion here, but I am staying with the washing. For example, an advertisement might state that a washing powder will remove tar from clothes and a consumer will get 50 washes from one box. These are characteristics specific to that product, so if the consumer found that they got only 30 washes from one box, the statement would prove to be inaccurate. Under the Bill the consumer could seek a remedy from the trader to put this right. This is a consolidation of current law. The tests and criteria I have described are already applicable and familiar to business.

Consumers are also protected from misleading selling under the Consumer Protection from Unfair Trading Regulations 2008. These regulations prohibit misleading actions by traders towards consumers. In addition, the Government have introduced the Consumer Protection (Amendment) Regulations 2014, effective from 1 October this year. These give consumers a new private right to redress if the regulations are breached. An example would be a trader who gives a consumer false information about a key factor, such as a mobile phone shop assistant telling a consumer that a network’s coverage is good in their area when in fact it is not. The new regulations allow the consumer remedies such as unwinding the contract where the consumer has been misled in this type of case. The combination of the Bill and the existing regulations, strengthened by the new private rights to redress, therefore provide strong consumer protection in relation to a claim made by the trader as to the outcome the goods will achieve. As such, the Government consider that the Bill provides the appropriate balance and flexibility in determining whether goods are satisfactory. The amendment would unnecessarily expand the scope of the clause and give potential for dispute, potentially covering a wide range of claims which may be made about outcomes, and therefore I hope that the noble Baroness will be prepared to withdraw the amendment.

[Baroness Hayter of Kentish Town]

I am slightly confused. If outcomes are covered by a combination of the Bill and the regulations, there would certainly be no harm in having these words in the Bill. It may be unnecessary, but it would do no harm. However, the Minister’s last words suggested the amendment would extend the clause further. I am therefore trying to think of what she thinks would be covered by these words that is not covered under either the misleading advertising regulations or the private right to redress. I need to think about what it is she thinks this would extend it to that is not already covered. If the view is that it is covered—that “specific characteristics” does cover a,

“claim made as to the outcome the goods will achieve”—

then it may be superfluous wording, but it is not adding anything.

I hope the Minister understands why I am wondering whether there is something there. I need to think about that and come back to it, because I am slightly worried about the comment that where we are at the moment is familiar to business. It may well be. My concern is that it is not familiar to consumers. They ought to be able to know very clearly whether the claims made are covered, preferably without having to go to another set of regulations. I will not ask for a particular promise, but it would be helpful, before we get to Report, to have either an exchange of letters or some idea of whether, if these words are covered, that means that it extends protection that is not currently there. That is what I have not got a handle on.

[Baroness Jolly]

To give a quick response, the Bill applies to “relevant circumstances”; my team has underlined “relevant”. However, some claims regarding outcomes might not be relevant.

[Baroness Hayter of Kentish Town]

I feel a new amendment coming up. Maybe we will return to this on Report. We will certainly give it some thought between now and then, but for the moment I thank the Minister for that helpful advice and beg leave to withdraw the amendment.

--- Later in debate ---

[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.

[Baroness Hayter of Kentish Town]

I thank my noble friend Lady Drake for her help on this. I cannot believe that she has ever fallen for one of these. In a sense, that is the point. It is at the very last moment, and so is technically before the contract but is not in all communications. I have been looking a lot at travel ads, which still use the construction of a price being “from” something, and you go a long way through buying it before you realise that there are some supplements at the end, or that if you want to go from a certain airport the price will change a lot. It is correct that that is all before contract, but it is certainly not happening on all the advertisements.

I am the consumer from hell, I am afraid; every time I see this, I complain. My last complaint to the ASA was before these regulations came in after the noble Lord, Lord Borrie, was looking after it. It was over a travel ad, and at that point the ASA was not dealing with travel advertisements for some reason. Holidays were still being advertised and at the very last moment some would add to their prices.

Clearly, some of these regulations are very new and it is therefore no good asking how many have yet been prosecuted under them. The other issue is how well consumers know them. One of the good things about the Bill and all the work that is being done on its implementation by BIS and its implementation group is that there is some really careful thought about how consumers will know about them. As with the earlier amendment, the main worry is that if some of the protections are elsewhere they will not be swept up in the advertising, promotion or education around the Bill. That will clearly be the case here, where some of these are covered by the Consumer Protection (Amendment) Regulations 2014. It is a shame that this will not be in the Bill, because we support what the Government are trying to do in putting all the rights in the same place. For the moment, however, I beg leave to withdraw the amendment.

--- Later in debate ---

[Baroness Jolly]

Of course, my Lords, consumers must have appropriate remedies if goods are not installed correctly, especially if this puts them at risk. The Bill provides that, if a consumer has a contract with a trader for goods to be both supplied and installed, the installation must be done correctly. If it is not done correctly, the consumer can ask the trader to rectify this by a repair or replacement. This would include a re-installation.

For example, a consumer buys a door and pays the seller to fit it, too. After a few days, a hinge is loose. In most cases it suits both parties for the trader to be given the chance to come back and refit the door. As a consumer, I would certainly want the goods that I had bought to be installed correctly, and I would take the opportunity for the installer to put this right had they not done so correctly initially. As a trader whose business is often based upon word of mouth and reputation, I would certainly want to be given the chance to correct a faulty installation.

However, we recognise that there may occasionally be cases in which a trader has done such a bad job that the consumer does not want them back on their property; the noble Baroness, Lady Hayter, has given us some examples of these occasions—indeed, of workmen from hell. However, the Bill does not prevent the consumer from seeking alternative remedies. For example, they have the alternative option of claiming damages for the loss they have suffered from shoddy or dangerous work carried out. In extreme and hopefully very limited cases such as this, damages may provide a more appropriate remedy.

Businesses also wish to avoid the cost and damage to their reputation of a court case. The consumer can use the right to damages as the basis for negotiation. For this reason, the Bill enables consumers to receive appropriate redress as a result of a poor installation in the various circumstances which may arise. As a result, the amendment is unnecessary. I therefore ask the noble Baroness to withdraw the amendment.

[Baroness Hayter of Kentish Town]

I thank the Minister. She has not actually answered the point that going for damages means going to court, which means a long time until you get your money back. There can be a great delay and if you have tried to have a new dishwasher or washing machine installed you could well have paid a few hundreds pounds for that, and it can be a long time before you get your damages back. I think we are going to have some clarification.

[Baroness Jolly]

The point I was trying to make is that there is the option of taking the whole thing to court, but you can negotiate for damages before you actually get to that stage. Your expenses would therefore be nowhere near as great.