Baroness Hayter of Kentish Town
Main Page: Baroness Hayter of Kentish Town (Labour - Life peer)Consumer Rights Bill
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“( ) Businesses with fewer than ten employees and which are purchasing goods or services for use within their commercial activities will be considered consumers.”
Baroness Hayter of Kentish Town (Lab)
My Lords, maybe I could just take the opportunity of welcoming everyone back after the summer. In particular, I welcome the noble Baroness, Lady Wilcox, who first announced that the Bill would happen—it is all down to her, perhaps, that we are here. In his absence, I thank the noble Viscount, Lord Younger of Leckie, for having got us through the Second Reading, and I have great pleasure in welcoming the noble Baroness, Lady Neville-Rolfe, in her new and elevated role. As with her predecessors, she has already shown her willingness to meet with us and to understand our point of view, even if either she or those around or above her do not always agree with it. We look forward to working with her as the winter nights draw in.
Amendment 1, which stands in the names of my noble friend Lord Stevenson and myself, is really about what we can do to help small businesses, three quarters of which are one-man bands—or occasionally one-woman bands—be they hairdressers, builders, plumbers, farmers, publicans or web designers. Such small businesses really have very little bargaining power because they are not making large-scale purchases. They do not have any more time or specialist knowledge than any of us as individual consumers have to do any shopping around; they do not have in-house legal advice or a specialist procurement function.
Amendment 1 tries to give such micro-businesses the protections that are being introduced in the Bill. Without the amendment, they will not have the right to refunds, repairs or replacements for faulty goods or products or services simply because they are a business. For example, we might expect a small hairdresser to know what they are doing when they are purchasing shampoo or hair-dryers, but they are not in any stronger position than any other individual consumer when they are getting a window cleaner in or buying a type of floor cleaner or purchasing electricity. Similarly, a small café that happens to offer wi-fi to its customers may be as vulnerable as the rest of us to poor service or being fobbed off by a wi-fi supplier. Similarly, small landlords may let out perhaps only one or two properties but some of those landlords will be classed as business and will not be able to enforce their rights when they are dealing with utility suppliers, or indeed the Post Office or anyone else, that they may deal with as a business.
Along with Citizens Advice and others, we are keen that the protections in the Bill, which we welcome, should be afforded to smaller businesses. We also know, from the work for Consumer Futures on The Experience of Small Businesses as Consumers in Regulated Markets, that such businesses are often dissatisfied with their suppliers and with how their complaints are dealt with. Four in 10 businesses that have complained to their water or gas supplier are unhappy with the way that their complaint is dealt with. About one-third feel similarly in dealing with a telecom service. So we want these very small businesses to be able to have these rights.
It is not that unusual a thing to ask. A number of regulators already treat micro-businesses as consumers. The legal services and financial services ombudsmen will both treat micro-businesses as consumers for their complaint handling. Ofcom extends consumer protection to micro-businesses and requires providers to apply an alternative dispute resolution scheme for dealing with unresolved complaints from domestic and small business customers. The Communications Act 2003 specifies that small businesses should be classified with domestic consumers, as long as they do not employ more than 10 people or trade in the telecom sector. The Federation of Small Businesses has reminded us that small businesses also count as consumers in respect of breaches of competition law, and the FSB can act as a super-complainant in that. Small businesses will also be covered under Clause 80 of this Bill with regard to redress under competition law, where the opt-out provisions will cover small businesses and the FSB can be a party to that. So what we are asking is not that unusual.
I know that the Government do not accept this amendment, allegedly because it is not what business wants. In the other place there were quotes from the 2008 and 2012 consultations giving the views of the British Retail Consortium and the CBI, but of course they mostly represent big businesses that maybe do not want their micro-business customers to have these rights. Rather as micro-businesses cannot spend time researching tariff options, I am afraid they also do not have time to respond to government consultations, so the responses may be rather more from big business than from small businesses. The most important point is probably that the Federation of Small Businesses is the voice of micro-businesses, and it supports the appropriate widening of the definition of “consumer” to encompass micro-businesses so that they can benefit from similar protections as consumers when they are buying goods and services that are not related to their core commercial activity. Again, it understands that hairdressers should know about hair-dryers but not about other products.
I know that the Government have said, “Well, these businesses are already covered by the Sale of Goods Act, which says that goods must be of satisfactory quality and fit for purpose”—so, if a greengrocer buys a kettle, they would be covered under that Act. However, when this Bill is quite rightly aiming for clarity, it seems to be a bit of a nonsense, both for retailers and for everyone else, if two different bits of legislation are relied on when someone goes to buy a kettle from a shop.
The Government have also said in the other place that our amendment would undermine the clarity that the Bill seeks to achieve, as the consumer rights directive uses a common definition of “consumer” and there would be a difference if our amendment were accepted. However, our amendment would not change the definition of “consumer”; it would simply apply the Bill’s provisions to micro-businesses. It should perhaps be noted that the EU directive certainly would not make it difficult because regulations in Germany, Austria, France and Sweden have all included small businesses as consumers within their domestic legislation.
In its pre-legislative scrutiny, the Commons Select Committee recommended that the Government consider the case for small businesses to be treated as consumers. The then Minister in the Commons said that her department was happy to commit to actively considering the treatment of smaller businesses when developing consumer law in future. It is a wasted opportunity not to do that now. At the very least, therefore, perhaps the Government would be wise to build in an enabling power to extend the Bill to micro-businesses so that, should they conclude at some time in future that this is a sensible way to promote small businesses, which I know they are committed to doing, then an order could make that happen. I beg to move.
Baroness Crawley (Lab)
My Lords, I simply wish to add my support to my noble friend’s amendment. We know that there are more than 4 million small businesses in the UK today. I am sure that we would all agree that they are the lifeblood of the economy. They account for well over 90% of all enterprises and employ up to 14 million people. We know that we live in very difficult economic times; that is the case for millions of our fellow country men and women. We also know that the vast majority of people who move from unemployment into employment go through the private sector and the small business sector.
This amendment put forward by my noble friend gives us an opportunity to assist those smallest micro-businesses in these difficult times to avail themselves of all the rights and protections that are, rightly, in the Bill. Such a move on the part of government, should it look sympathetically on this amendment, would help to sustain small businesses, as my noble friend put it, through the often complex minefield of business-to-business relationships, where the micro-business is very much the junior player and is often open to manipulation and resource-draining tactics by more powerful players.
When it comes to negotiating business contracts, the Federation of Small Businesses has identified four areas that add up to real detriment for those businesses. It talks about a “lack of expertise” in purchasing policy, high opportunity costs of time spent making those purchasing decisions, low benefits, and little bargaining power, which I have attempted to outline.
As my noble friend said, small businesses are already treated as consumers in many parts of the European Union and in many of the regulatory areas in our own country. I simply quote the complaints handling process for the legal services and financial ombudsman—and my noble friend quoted many more areas. Therefore the Minister—whom I, too, welcome to her new post—would not be going where angels fear to tread if she was to look sympathetically on this amendment.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)
My Lords, I join the noble Baroness, Lady Hayter, in thanking my noble friend Lady Wilcox and my predecessor, my noble friend Lord Younger, who so elegantly got us to this point. I am also very touched by the welcome you have given me. I look forward to working with your Lordships on this very important Bill, the first on which I represent the Government. I was very sorry to miss Second Reading, but I have carefully studied the Hansard. I am honoured to be discussing a Bill that represents a seminal modernisation and simplification of consumer law. Simple rights simply expressed are, to me, very important.
I agree that it is vital that we support the smallest businesses and help them to grow. Small businesses are the lifeblood of our economy, making up 99% of private businesses and employing 14 million people. Small businesses are responsible for nearly half the job creation in the UK, employing more than 500,000 more people in 2013 than in 2011. That is why the Government are doing more than ever before for small businesses.
It has never been a better time to start, grow and operate a small business in the UK. To give you just a few examples, we launched a £1.1 billion package of business rates measures, with extra relief announced for small businesses through the extended doubling of the small business rate. We set up a £30 million growth vouchers programme, which will see 20,000 small businesses receive up to £2,000 to help them access specialist support on hiring, financial management and marketing, which, as I know from business, are key areas. Since April 2014, every business and charity is now entitled to a £2,000 employment allowance to reduce their employer national insurance contributions bill each year. Over 90% of this allowance will go to small business.
Perhaps even more importantly, in December 2013 the Government published Small Business: GREAT Ambition, setting out our commitment to making it easier for small businesses to establish and grow in the UK. As my noble friend Lady Wilcox said, we have now introduced the Small Business, Enterprise and Employment Bill in the other place. That Bill will help to reduce the financial and regulatory barriers to starting and growing businesses. I very much look forward to debating that Bill with your Lordships.
However, this Bill is about consumers. Its background is that consumer rights are found in a variety of places, often set out in inaccessible language. We know that consumers and businesses often do not know their rights. That is the motivation to have key consumer rights set out in this one place, where they are easy to find and to access. As soon as we start including rights for other parties in this Bill, that core purpose is diluted and we risk losing the clarity we are aiming for, which I believe is valuable to businesses and consumers. In passing, I should reassure the noble Baroness, Lady Hayter, that there are protections in law for businesses dealing with other businesses. For example, the Sale of Goods Act 1979 gives them a right to reject faulty goods.
We consulted on our proposed definition of “consumer” in 2008 and 2012. In both cases, we received overwhelming support for what we have now in this Bill—that is, clear support from the business community for not defining micro-businesses as “consumers”. The noble Baroness, Lady Hayter, suggested that small businesses do not have time to respond to consultations, but that is a reason to ensure that we do engage with them via their trade bodies, including the Federation of Small Businesses, with which I met only last week; it is not a reason to legislate on the assumption that we are doing what is right for them.
The Federation of Small Businesses recently commissioned and published research on this issue. The FSB did not recommend, as I think has been suggested, treating smaller businesses as consumers for this Bill but did make several suggestions for the future. My colleague Jenny Willott wrote to Parliament giving our detailed response to that report. Within that, we committed to considering the treatment of smaller businesses in developing future consumer legislation, just as we did in 2008 and 2012 for this Bill.
The noble Baroness, Lady Hayter, talked about taking an enabling power. We have already considered covering small businesses in 2008 and 2012, and taking a power would not be appropriate because this change could impact 97% of all businesses. It should not be left to secondary legislation.
This Government are also committed to closely monitoring and ultimately reducing burdens on business. That means that, for each and every proposal, we must be sure that we are not directly or through unintended consequences overburdening business. This amendment does not meet that test.
We simply do not have clear evidence of what the effect of treating small or micro-businesses as consumers would be. As a business person, my concern would be that, if a smaller business can, for example, successfully challenge terms as unfair, does it mean that a larger business will simply stop dealing with them? To give another example, how do we know that the benefits outweigh the costs? If smaller businesses were classified as consumers, there would be benefits to a small business as a buyer, but also a cost to them when they sell to small businesses. We must be wary of giving with one hand and taking with the other.
We do not know how larger businesses would react, and we do not know whether the costs outweigh the benefits, but we would need to know. We would need to change the legal framework for over 95% of businesses—that is, 4.7 million businesses—without a full and complete understanding of the impacts. This Government are committed to helping small businesses to grow. Businesses, including small and micro-businesses, are not of course unprotected despite not being defined as “consumers” for this Bill. Provisions under the Sale of Goods Act and the Supply of Goods and Services Act apply to them now and will continue to apply.
In conclusion, this Government are doing more than ever to help small businesses to grow, and there is a great deal of evidence that this is working. However, this Bill is about consumers. For the reasons that I have explained, I ask that the amendment be withdrawn.
Baroness Hayter of Kentish Town
I thank the noble Baroness, Lady Wilcox, and my noble friend Lady Crawley for contributing to this debate. I did not know that I was meant to answer questions but, of course, I was not in the previous Labour Government. Had I been, I could give noble Lords a long list of things that they perhaps should have done—please do not report me to the boss for that.
I thank the Minister. She has not actually answered the question of whether this would be wrong. She said, “We don’t know; there is not enough information; we haven’t got research”. Actually, however, she had no good answer. If two of us go to John Lewis and buy a kettle, one of us for a charity that we run which employs all of one person and three volunteers, and the other just for themselves, it does not help John Lewis for them to take their complaints in two different ways. John Lewis probably would not worry at all about there being the same form for both.
I was sorry that the Minister used the examples I had cited, the 2008 and 2012 consultations. Obviously, we can blame the 2008 consultation on the previous Government, but there is an issue in that this is about the big companies. We know that from responses to consultations. It is therefore important to remember that the Federation of Small Businesses has said that it supports this amendment. I would like to make that correction because the federation has asked me to do so, should the Minister refer to its research. It has said that, “This is not an accurate reflection of our conclusions. The report that we commissioned was to inform our policy”. So they were not actually the federation’s recommendations; they were recommendations made in an independent report. However, apparently where the report talks about “non core” area business such as purchasing energy supplies, there was a case for it being treated separately.
I would add only that all the help for small businesses is great, and I believe that on deregulation there is even more to come. But if the Federation of Small Businesses says that the best thing to help micro-businesses is this, it seems a little funny not to hear the federation on it.
I am grateful to the Minister for her comments and at this stage we will seek leave to withdraw the amendment, although I think that it is probably something to which we will want to return on Report.
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.
“( ) The trader is required to provide full details of the total cost of the goods prior to sale, including any additional service fees or charges that could be incurred by the buyer in purchasing the goods, and to portray this information in all public communication.”
Baroness Hayter of Kentish Town
I am sorry that noble Lords are hearing a lot from me today, but there will be other days that will be much more pleasant for them. Amendment 8 again stands in my name and that of my noble friend Lord Stevenson. It is to ensure that when consumers decide to buy something they do so in the full knowledge of the total costs of what they are signing up to. I cannot be the only one who has been attracted by a bargain offer, only to find that there are additional fees that have not been signalled upfront. We get four or five pages into an online purchase, only to discover, usually just at the point we get the credit card out to pay, that there is an additional £10 delivery charge, a fee for installation, or the ever popular booking fee on theatre or concert tickets. The amendment is to ensure that the total cost is signalled upfront.
We know, because it has been debated in the other place, that the Government’s arguments against this amendment are, first, that the consumer contracts regulations 2013 require traders to make consumers fully aware of the costs before a sale is made—though, of course, they do not—and secondly that requiring such information to be contained in all public communications would be enormously burdensome to businesses, because every time the price changed they would have to alter their communications. However, that underestimates the extent to which prices are now online. Most of these sorts of things are online purchases. We are not talking about the old days, when I was younger, of having to pulp umpteen advertising leaflets every time a change was made. The bad practice we are looking at here is mostly online.
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.
“( ) Prior to exchange of the goods or agreeing the contract, whichever happens first, the trader will explicitly provide the consumer with relevant details of their statutory rights under sections 20, 23 and 24.”
Baroness Hayter of Kentish Town
In moving Amendment 9, I wish to speak also to Amendments 13 and 25 in this group, which all stand in my name and that of my noble friend Lord Stevenson of Balmacara.
Amendment 9 is central to the aim of the Bill as it states that the trader must be explicit about people’s statutory rights at the time of the purchase so that people know when they are buying something what they can do if something goes wrong and what their rights are. The Bill’s laudable aim of simplifying rights and making them useable will be achieved only if consumers understand what those rights are. The best time to explain them is when they are about to make a purchase; we should not wait until something goes wrong. For the vast majority of consumers nothing does go wrong, or we hope that is the case. We purchase goods where nothing goes wrong far more often than we do goods where something does go wrong, but it is at the moment of purchase that these rights should be explained. It is also part of the process of deciding whether to buy something. It is important to know what redress you have if you are worried about whether something is faulty or will work. I cannot be the only person who has been a bit mystified when standing by a till and reading a notice which says, “This does not affect your statutory rights”. Indeed, I am tempted to ask the Minister to explain that term, but I will save her blushes on this occasion.
BIS’s own consumer detriment survey showed that although the majority of people consider themselves to be confident and savvy there were still substantial gaps in their knowledge, so just asking consumers whether they are confident about knowing their rights is not good enough. For instance, more than two-thirds of them did not know that if a major appliance broke down 18 months after purchase, they could still have a right to have it repaired or replaced even if they did not purchase an extended warranty. Indeed, very few of us understand our rights and that will remain the case unless we all receive some very simple explanations, no matter how well the Bill is drafted. We agree with Citizens Advice that rights can be set out briefly and simply. It has produced wording on this issue which has been seen by BIS—for example, “Under the Consumer Rights Act, consumers have 30 days to return an item if it is faulty”, so we are not talking about complicated wording. Similar information on repairs or refunds could be given at point of purchase.
We know that the Government agree in principle with giving this clear information but have backed off including it in the Bill, arguing that that would reduce flexibility for the implementation group, which comprises retailer and consumer organisations. We know from gossip on the street that there is consensus in the group that action is needed to make sure that consumers are aware of their rights but no consensus on whether point-of-sale information should be mandatory. I hope that I am not giving away any secrets in saying that the business members, with support from trade associations, BIS and retail groups, argue that a voluntary approach would be the best way forward, whereas Citizens Advice, Which? and moneysavingexpert, which I think also sit on the group, remain unconvinced about that, as do we. There is no guarantee that traders will voluntarily display this type of information and, once a Bill is passed, attention and enthusiasm tend to fade. Some traders will go on displaying the information for a short period but that is not the same as it being displayed everywhere all the time.
It is true that at an earlier stage in the other place we were told that the implementation group would be looking at whether consumers would consider this sort of information better when something actually went wrong. If that is the case, I am sure that the Government will accept our Amendment 13 in this group, which I will get to shortly, which is about giving information at the time of a problem. However, our view is that information should be given both at the point of purchase, in the sense that it is part of the purchasing decision but it is also part of educating consumers, and later, should something go wrong.
Amendment 13 is about telling people their rights when they actually make a complaint. A key part of consumer rights is the availability of redress. The noble Baroness, Lady Wilcox, who is not in her place at the moment, started going through the six consumer principles, and of course the right to redress, as she knows very well—she probably wrote them—is one of them. The right to redress is having something put right, preferably by the service provider but, if not, having the issue settled by an ombudsman, perhaps with compensation. However, the consumer will not even start on that journey of complaint and seeking repair, replacement or refund unless they know they have that right to complain and when that right is there. Amendment 13 would ensure that the rights to redress was more widely understood and used by explaining, at the time when someone complained, what those rights were.
Although some of us have confessed to not being the savviest of shoppers, I hope we do not still fall for those offers. I do not know how savvy we are when we go back to a shop to complain, wanting either a replacement or a repair. What happens very often is that we are misinformed about what our rights are. There is a lot of evidence that traders themselves either do not understand the position or choose to misrepresent consumers’ statutory rights. Which? did a secret shopping exercise and contacted six major retailers, visiting them each 12 times. In nearly 80% of cases, a member of staff,
“stated or gave a clear impression that we”—
that is, the people doing the mystery shopping—
“didn’t have any rights against the retailer, or told us to speak to the manufacturer instead”.
Shoppers also get told that goods are out of warranty, that they need to go to the manufacturer or that there is simply nothing that can be done. The other thing that can happen is that traders refuse to give a refund even when they should, but offer a credit note to be used in the same shop. Clearly, that does not meet statutory rights. If the consumer is very persistent and goes to Citizens Advice, they may then know better and go back, but there is then still no guarantee that the member of staff they talk to will know what their rights are. Under Amendment 13, both staff and consumers would have easy access to information about the buyer’s rights and therefore would be able to have a better conversation.
I know that the Government were hoping that the implementation group could come up with a way forward but, given that we think that has not happened, it would be useful to take advantage of this amendment and put it into the Bill. Even if the group did come up with recommendations we are unsure of what their legal force would be, so perhaps the Minister could also say whether any recommendations from the voluntary group would have any legal force. We have the opportunity here to set a requirement that such information will be provided. This does not need to be the exact wording—the group can do that—but if we fail to put it into the Bill at all, we risk undermining the Bill’s benefits. We know that good traders are going to do all this; it is the poor ones that we are after.
One further small area in this group that consumers also need more clarification on is free guarantees—guarantees provided free of charge by traders over and above statutory rights. We are talking here not of paid-for warranties but of free guarantees. Amendment 25 would require that any such guarantee provided by a trader sets out what the statutory rights are; otherwise, the purchaser has only the trader’s guarantee and is still not told what their statutory rights are. This approach has been very much supported by Martin Lewis of moneysavingexpert.com, who says that it is really important for consumers to know whether the trader’s guarantee is worth anything more than statutory rights. Also, if consumers are told what their statutory rights are, they might decide not to buy the extended warranty, because they may have more rights—particularly after this Bill—than they thought that they had. Without this amendment, they might get very confused when they have a trader’s guarantee to know whether there is still something left to them under their statutory rights.
What the Minister in the Commons said is important: that statutory rights always override any statements in a trader’s guarantee. Even if a trader’s guarantee does not meet something, the statutory rights always override it, but my guess is that not many consumers know that. Even in that position, they may have to take legal advice to find that out or to go to court, which is not the position we want them to be in.
We hope this small amendment will be accepted, because it will again be a way for consumers who have this extra guarantee to know exactly what their statutory rights are, which is an objective that the Government, as well as ourselves, would like to meet. I beg to move.
Baroness Neville-Rolfe
My Lords, I should start by saying that it is extremely important to the Government that the implementation of the Bill should be done really well. Good implementation is a key feature of good regulation and our attention will not fade. That is why we set up an implementation group last year with representatives from business, consumer organisations and consumer law enforcers. I think we are agreed that we all need a better understanding of our rights. The group is helping us plan key aspects of implementation of the new law, including: the content, channels and timing of guidance; advice; and publicity. The group has been influential in devising our implementation strategy, which is summarised in the implementation plan that we recently published.
If this legislation is to be effective then it is hugely important that consumers should feel confident about exercising their statutory rights and that businesses should know and fulfil their statutory responsibilities. We certainly accept that this is not currently the case. This year’s consumer detriment survey and research by Citizens Advice and Which? show that consumers become discouraged from pursuing claims to a satisfactory settlement. Lack of knowledge about their rights and even misinformation by sales staff are factors in their giving up. That is why we asked the implementation group to consider carefully whether there should be a requirement for traders to provide information on consumer rights to all consumers at point of sale or when rights are enforced.
As your Lordships can imagine, the implementation group strongly supports the Government’s objective of making it easier for consumers to find out about their rights. We believe that traders have a very important role in this. Business and consumer organisation members of the group have therefore worked together to develop a high-level summary of consumer rights when consumers buy goods, services and digital content. The summary also signposts consumers to the Citizens Advice helpline and website for more detailed guidance on specific issues. We have begun testing this model wording with businesses and consumers to ensure that it is easily understood and we have had some very good feedback on the concept so far. We aim to make it available to businesses by April next year to use in their communications with their customers. I have a working draft, which is being canvassed widely, on my iPad. I do not think that I am allowed to show noble Lords my iPad on the Floor of the House.
Baroness Hayter of Kentish Town
I think I heard the Minister say that she would ask the implementation group to look at the regulations in what they are doing on information. If that is the case, I welcome that; that is a very joined-up approach, if I heard that right.
On the guarantee, yes, it was very much the free one that I had in mind. I think that the Minister has just highlighted the reason why we want our amendment: at the moment the Bill says that any trader’s free guarantee must say, “Your legal rights are not affected by the guarantee”. That is exactly the problem; no one knows what their legal rights are that are not affected by the guarantee. We want words along the lines of, “Your rights to a full return if this is faulty are not affected” or whatever, rather than the phrase, “Your legal rights are not affected”, because I do not think anyone understands what their legal rights are. That is why we want that phrase there.
I absolutely understand one half of what the Minister was saying about wanting this to be flexible. It is “flexible and voluntary” that I have a problem with, in that the good traders are going to do this but leaving this as voluntary means that the bad traders will not. If at the moment they do not want this as a statutory requirement—we may return to this on Report—I leave it to the Minister to think about whether she is able to consider looking at a back-up power in case the voluntary approach does not deliver the desired result. If the group comes up with something and all the businesses involved in the group say, “We’re going to do it”, but the businesses that are not there do not, in a year or two we will find out that it is not being done by some retailers. A back-up power to make the voluntary approach statutory might be a way forward. Flexibility is important, but leaving it just to the good will of traders will not help us with some of them. An order-making power that could allow the Secretary of State in future to make displaying point-of-sale information mandatory, should the voluntary approach fail, is something that perhaps could be considered. We will certainly come back on the first of these amendments on Report, but for the moment I beg leave to withdraw the amendment.
“(4A) Where the installation of goods leads to a risk to the consumer, as set out in the Housing Act 2004, the consumer retains a right to a full refund of the cost of the contract and any additional fees associated with the installation.
(4B) Any action taken under subsection (4A) will not prevent the consumer from seeking other remedies or further compensation for the consequences of the installation.”
Baroness Hayter of Kentish Town
Amendment 11 seeks to protect the consumer if a faulty installation puts them at risk by giving them an immediate right to a full refund without having to accept a repair first. The amendment is about domestic situations and people’s homes. It is about permitting the consumer in certain circumstances, where there is a risk to them, not to have to go through one repair before they have a right to a full refund.
There will be circumstances where it is not appropriate to have a repair done first. When I mentioned to a colleague who was here earlier the example of an attempt to install a dishwasher where a trader has caused enormous flooding, she said, “Oh, you mean they shouldn’t have the chance to come back and flood it a second time?”. I thought that my noble friend Lady Drake got it in one.
Other examples might be an electrician who has come to install a new shower and wires it up to an electric light bulb rather than to the mains, which could produce interesting results, or a gas engineer who has made a complete mess of a new boiler installation and caused a gas leak. Such instances will leave the consumer thinking, “I actually don’t want these people back. They don’t know what they’re doing. I want them out of my house before they do any more damage and I want my money back so that I can get someone trustworthy in here to install something”.
Under the Bill as it is, the trader can say, “No, sorry, you can’t have your money back. I’ve got to come back and mend it and you’ve got to give me the chance to sort it out”. There will undoubtedly be times when that is not appropriate. The amendment would provide great clarity for both parties and allow a customer to say, where there is a risk, “I’m sorry, as a consumer I don’t trust you. I don’t want you back in my house and I want my money back”.
I know that the Minister in the Commons was sympathetic when this issue was discussed there, but she argued that the amendment was unnecessary because, in those circumstances, the consumer retains the option to seek damages for the unsatisfactory goods or installation and the trader cannot enforce the right to repair. However, that option of seeking damages is not what this Bill is about. It would involve the consumer instigating legal action; it is complicated; it is a little frightening; it is expensive and uncertain; and, in particular, it is quite lengthy. If it involved your shower or dishwasher, and you needed it the next day, being told that you can go to court does not quite answer the point.
Consumers share our approach to this issue. We know that, in a survey, four out of 10 people thought that consumers should not have to give the trader the chance to sort out the problem. Given that the Bill tries to make this very clear, and if it is the consumer’s expectation, it would be much better that we keep it out of the courts. We should make it clear that where someone has put a resident a risk, they should be able to have a full refund rather than have to go to court.
The Bill allows that right to reject under Clause 24 only after the consumer has given the trader one shot at repair or replacement. The amendment would change that. We are talking only about residential premises and those areas of risk. I beg to move.
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.
Baroness Hayter of Kentish Town
But that is the right to a refund. All we are saying is that that should be a right. I think that we are very close on this. You are saying that if you do not want the trader back, please negotiate for damages, which are basically your money back. We are saying that there should be a right to your money back. At that stage, either you go to court, which we do not think is appropriate because it will take a long time to get your money back and you have no washing machine for that period, or you get your money back from the trader. The only difference is that we say that it should be automatic, and the Minister is saying that you should negotiate with them. The consumer is in a very weak position at the moment; we would like to strengthen it. We may return to this. We are probably not that far apart: we both agree that in those circumstances you would not want the trader back and you would want your money back. It is really just a matter of how we could get to that point. For the moment, I beg leave to withdraw the amendment.