Consumer Rights Bill

Debate between Lord Clement-Jones and Baroness King of Bow

Monday 20th October 2014 Grand Committee

[Lord Clement-Jones]

My Lords, I am very pleased to have the support of the noble Lord, Lord Sugar, for Amendment 34A. I do not know whether he is going to make a personal appearance today, which would excite us all, but let us see. I see that his name is on other amendments so you never know.

Traders often use third-party software in their digital content products. This software is usually provided to the trader on a no-warranty basis, meaning that the third party will not guarantee that the software works or is free from bugs. However, Clause 34 inserts a term into the contract between the trader and the consumer that the digital content is of satisfactory quality. This means that in effect the trader has to guarantee the first party’s content even when it does not have the same guarantee from the third party whose content it is. This creates a liability for the trader which is beyond its control. The clause risks stifling innovation as it would prejudice SMEs which have less negotiating power with third parties and may have to stop using third-party software that is provided without warranty.

Let me provide an example. An app provider creates a consumer-facing app using software that it has licensed in from a third party. The software licensor provides its software on standard terms which state that no warranty is given. The app provider must then make its app available to consumers subject to the provision in the Bill that the app is of satisfactory quality, even though it does not have that warranty upstream and even though it has no control over the software licensor’s portion of the app. If the app does not work because of the software licensor’s software which the app provider has no control over, and for which it has no recourse against the software licensor, the app provider will still be liable to the consumer. That is an illustration of the impact and I hope very much that my noble friend will take it into account when considering the merits of this amendment. I beg to move.

[Baroness King of Bow]

My Lords, this amendment would provide further exemptions to the providers of digital content, freeing them from the need to guarantee the third-party software they use. I understand the argument put forward by the noble Lord, Lord Clement-Jones; namely, that the trader may not have a warranty from the third party, and I am sorry that my contribution will be a disappointment to him. It appears to me none the less that it would reduce consumer protection, but after all, this legislation is called the Consumer Rights Bill. Again, this is a question of balance. The key point is that if the trader benefits financially from the use of the third-party software, surely it is inappropriate to load the risk on to the consumer. It is the trader’s decision to buy and use third-party software, so if that trader is unsure of its quality, it must be a risk that it undertakes and consequently should be liable for, not the consumer. The consumer cannot control the trader’s relationship with its suppliers; third-party software is very much the responsibility of the trader, and therefore we cannot support the amendment.

As I have already mentioned, if a business is selling digital content for profit, it is up to that business to ensure that all elements of the final product are of a reasonable quality. I hope to hear that the Minister shares this view.

Consumer Rights Bill

Debate between Lord Clement-Jones and Baroness King of Bow

Wednesday 15th October 2014 Grand Committee

[Baroness King of Bow (Lab)]

My Lords, Amendment 19 allows the period within which a consumer can exercise the short-term right to reject to be extended beyond 30 days when necessary to give the consumer sufficient time to assess the goods. In other words, the amendment is about limited flexibility and maintaining rights available to consumers under current law.

When the Law Commission recommended a 30-day period for a consumer to exercise the initial right to reject, it was on the basis that 30 days would be the “normal period” but that there would be flexibility in appropriate circumstances. The Bill recognises that some goods will typically perish within 30 days, and in those cases a 30-day right-to-reject period clearly is not appropriate. However, the Bill does not recognise that a longer period may be needed in some circumstances. Under current law, a consumer has a “reasonable” period within which to exercise the initial right to reject. The Law Commission recognised that for many purchases a court may consider a reasonable time to be longer than 30 days. We have some of the current case law, including the court finding it reasonable for a consumer to reject a new car after seven months. Presumably without this amendment a consumer would not have that protection from the courts. A more obvious example is a pregnant woman buying a pram before her baby’s birth or goods bought out of season—skis during the summer, lawnmowers in the winter, or the obvious Christmas present scenario.

Without the ability to extend the right to reject in such circumstances, consumers might be worse off under the Bill than under the current law, which allows that reasonable period. That is obviously our concern—and not just ours: apart from the Law Commission, the BIS Select Committee recommended that,

“the Government reconsider an exception to the time limit for the early right to reject where it is reasonably foreseeable that the consumer would need a longer period to inspect the goods and to try them out in practice”.

Amendment 19 would implement that recommendation. I beg to move.

[Lord Clement-Jones]

My Lords, I am intervening rather unfairly on this amendment to say that I do not support it and that, as the Bill’s passage carries on, a number of sectors will have their voices represented. I want to raise issues that have been raised with me by the motor sector, particularly the Finance and Leasing Association, which represents a wide range of those who finance the purchase of motor cars by consumers.

As we heard, Clause 22 introduces this 30-day right to reject goods if they are of unsatisfactory quality, however minor the defect. Sellers are unable to deduct the costs incurred—for example, depreciations—while the goods have been used by the consumer. As a result, the right to reject could have a particular cost implication in the world of motor finance, where 75% of private new car sales are bought on finance. New cars, as my noble friend may know, typically lose 15% to 20% of their value in the first 30 days, and in the event of a defect the car dealer will have to offer to repair the car, although the customer is not obliged to accept that and can simply opt to hand back the vehicle. In a worst-case scenario, as the FLA says, the customer might have had the car for a month and driven it extensively, clocking up thousands of miles, only to hand it back because of a very minor defect—for example, the windscreen wipers failing to work properly. That is the case that the FLA makes.

I am very happy for my noble friend to write, since this is a rather unexpected intervention. There is clearly a balance to be struck between ensuring that customers are able to return faulty goods and preventing potential abuse. I therefore ask my noble friend whether the department will clarify, in the accompanying guidance to the Bill and in any associated publicity, that this new short-term right to reject should be invoked only if the quality of the goods is genuinely unsatisfactory—that is, the defects are not simply minor mechanical or cosmetic ones—and ideally it should be done as soon as possible within the 30-day period.

Secondly, could my noble friend confirm how this new short-term right to reject fits with Section 75 of the Consumer Credit Act, which already allows the customer to make a claim against a supplier or lender for breach of contract? This Consumer Rights Bill gives the consumer a right to challenge the supplier, whereas Section 75 of the CCA establishes an additional right to pursue the creditor for breach by the supplier. Will the Government be making clear in the guidance that the customer must obtain recourse from the supplier first, and that the supplier must not renounce responsibility on the grounds of Section 75?