Baroness Hayter of Kentish Town
Main Page: Baroness Hayter of Kentish Town (Labour - Life peer)Consumer Rights Bill
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The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe)
My Lords, this amendment clarifies that, when the power in subsection (5) of Clause 48 is used, the statutory instrument made under it can provide that an exclusion only applies to a service in the circumstances specified in the order. The amendment therefore enables a more precise or limited exercise of the power where this would be more appropriate. I beg to move.
Baroness Hayter of Kentish Town (Lab)
My Lords, I thank the Minister for introducing the amendment. Perhaps I could just take a brief moment to wish my noble friend Lady King a happy birthday today—it is always very nice to spend it in this way.
Our only query, picking up on the Minister’s use of the word “clarifies”, is whether the amendment clarifies the existing law or whether it extends it to enable the Government to cherry-pick, if you like, the provisions in this Bill so that they would not affect a particular service. As the Minister will understand, the Legal Services Consumer Panel and the Financial Services Consumer Panel are slightly worried that the power provides the possibility to carve out some legal services from being covered by the Bill, especially as—although I am sure that it was unrelated to this—the Minister’s helpful explanatory letter cited the equivalent power to exclude arbitrators from the scope of legal services legislation. Given that worry by consumer representatives about whether this might be aimed at particular consumer areas, if it is possible for the Minister to expand on what sort of circumstances she has in mind that this power might be needed for, that might allay people’s concerns.
Baroness Neville-Rolfe
My Lords, perhaps I can explain the general intention and then see whether we can clarify the point that has been raised about legal services. Our intention is that this power will not be used regularly. It is designed to accommodate certain services where it would not be appropriate to apply all or some of the provisions of Chapter 4. While the power is designed to be rarely used, we want it to be able to be used when it is needed. We are therefore proposing this amendment. The amendment clarifies that the statutory instrument can provide that an exclusion only applies to a service in the circumstances specified in the order. It therefore enables a more precise or limited exercise of the power where this would be more appropriate.
We plan to consider each case on its merits and the decision will be on a case-by-case basis. For example, we would want to consider the costs and benefits to both businesses and consumers. Let me reassure you also that any use of the power would be subject to parliamentary scrutiny, as an order made under it will be subject to the affirmative resolution procedure. Because this is an enabling power, it is difficult for me to comment on specific areas, but our broad intentions are as I have outlined.
Baroness Hayter of Kentish Town
My Lords, I think that probably goes even further, if I have understood the Minister correctly, as it makes more specific what might be excluded. My guess would be that this would be reassuring to the groups that have contacted me and, in that case, we will be happy to support the amendment.
“( ) In assessing whether the service has been performed with reasonable care and skill, any claim made by the trader as to the outcome the service will achieve must be taken into consideration.”
The Deputy Chairman of Committees
Let me just clarify that the noble Baroness is moving Amendment 46A. She said “Amendment 48A”.
Baroness Hayter of Kentish Town
I was just checking that the Chair is awake. I rise to move Amendment 46A in my name and that of my noble friend, Lord Stevenson. We have given him the day off today, so I fear that you are going to hear rather a lot of my voice.
Amendment 46A is, of course, of central importance to users of services, as it would ensure that they have access to the remedies laid out in the Bill, should a service fail to deliver on the promised or anticipated outcome. The amendment would bring the regime for services into line with that for goods and digital content. That is important for the clarity of the Bill, but it would also ensure that the Bill lives up to what customers expect, which is that a service should do what it is supposed to do, rather than being measured simply on whether the service provider used “reasonable care and skill”.
The amendment would also do what the BIS Select Committee in another place recommended, which is that the Bill should apply an outcomes-based standard to how we measure services. Thus, whether a service has been satisfactorily delivered should be measured against what it was meant to do, not the attributes of the provider.
We might note that the Solicitors Regulation Authority has moved to outcomes-based regulation. It places the emphasis not simply on compliance with rules, but on achieving the required outcome for clients. Many of the excuses given for the Bill not adopting this outcomes-based standard have cited lawyers, but they are the very people who have accepted that standard. Given that we have these very welcome statutory remedies in the Bill for substandard services, we fear that they will not properly protect consumers if they only test whether the trader exercised reasonable care and skill, with no consideration of the outcome.
Let us take the example of a householder getting their windows cleaned. Were the windows cleaned properly? No, but the company said it used reasonable care and skill, so the customer may have no remedy for the late arrival of the window-cleaner, one window overlooked or a few smears left on the door. They would have no chance of a price reduction, or even a rewash, as the firm used skilled window-cleaners who said that they took reasonable care.
With many services, particularly those provided by the professions, it would be difficult, if not impossible, for a client to prove that the service had not been performed with reasonable care and skill, even when it is very obvious that the result is unsatisfactory. Furthermore, I understand that there is no general definition of “reasonable care and skill”, so we will have to await case law in due course to set out what will be taken into consideration when judging whether a service has met the required standard. It will be hard for the consumer to know, therefore, whether they have the right to a remedy if they are not satisfied with a job. By contrast, a professional trader or service provider is far more likely to know, and therefore be able to advise in advance, what outcome can be anticipated. It is, after all, the outcome that matters to the customer.
The organisation Which? told us that the majority of complaints it sees are about services, particularly about broadband, mobile phones and energy. Its research showed that consumers do not feel well protected when they are buying services and they are not confident that they will be treated fairly. Indeed, one-third of the consumers who failed to complain even when unsatisfied did not bother to do so because they simply did not believe that anything would be done. They have no knowledge of how a satisfactory service is to be measured at the moment, nor would they under the Bill.
Amendment 46A would also address the problem that, without it, the Bill sets two different standards for goods and services—that goods must be “of satisfactory quality” whereas services need be delivered only with “reasonable care and skill”. Perhaps we can revert to a discussion that we had earlier in Committee of the sort of transactions in which both those elements are involved. For example, our kitchen is purchased as a good, but its installation is a service. Surely, it would be to the advantage of both the consumer and the trader if the definition of what is satisfactory was the same for both. Also earlier in Committee we discussed botched plumbing and the problems of divvying up the elements of the contract. That would be made even worse if different standards applied to the different parts of the final service. So, just as we may not know whether the flooding of the kitchen has been caused by a faulty sink or by poor installation, it will be even harder if the test on the reasonable outcome, if there was a leak, is different for the two elements of goods and service.
In another place, the Government claimed that Clause 50 requires traders to comply with any information that they have given before the contract started and that, therefore, the concept of outcome is embedded in the legislation. However, that contract may well not specify outcomes in the terms of, “Well, we’ll install a bath and taps such that water flows into the bath rather than down the side of the bath and on to the floor”. No consumer is going to check whether the pre-work contract specifies such expectations, which they rather take for granted. They may read very carefully, for example, whether the old bath is to be taken away, but they will hardly check that the plumbing and the electrics will work and that the place will be left clean and tidy afterwards. Yet these are reasonable expectations to have of a service.
Amendment 46A places the consumer’s experience of the service—that is, its outcome—as a part of the definition of satisfaction rather than its simply being a matter of the provider’s claim to have used skill and care. I beg to move.
Baroness Drake (Lab)
My Lords, I support Amendment 46A, which covers a matter that I raised in Second Reading. The Government’s reasoning in strengthening consumer law through this Bill is that empowered consumers will make markets work more effectively and drive economic growth. However, I fear that the failure in this Bill to align the statutory rights of the consumer as between the sale of goods and the sale of services will weaken the protection of the consumer and result in less efficient markets in the provision of services.
As we know, goods supplied must be “of satisfactory quality” whereas services have to meet only a requirement of being provided with “reasonable care and skill”. In effect, the standard for services is based on fault rather than on satisfactory quality, as my noble friend Lady Hayter said, which is an outcome measure. It may prove more difficult for consumers to prove that a service has not been provided with reasonable care and skill because the focus is on the way in which the service was carried out rather than the quality of the end product. So there will still be many circumstances in which the consumer has not received what they paid for but will not be entitled to a remedy because the trader has exercised “reasonable care and skill”, because that measure focuses on compliance rather than on outcomes. That is a two-tiered standard of approach to consumer protection, and this amendment goes some way towards trying to address that problem.
In certain sectors and markets, the asymmetry of knowledge and understanding between trader and consumer is extensive—we know that. It should be remembered that the scale number of complaints come from consumers in sectors such as energy, broadband, mobile phones and—a sector close to my heart—financial services. Furthermore, the challenge of inertia and consumer behavioural bias, with which we are all familiar, can be used quite systematically by some service providers to deliver a poorer service or sustain profitable inefficiencies. That strengthens the need for consumer protection. However, I feel that in this Bill there is a lost opportunity by constraining to “reasonable care and skill” the statutory standard in respect of the provision of services.
Baroness Hayter of Kentish Town
My Lords, I thank the noble Baroness. She said that today was her first time speaking on this matter, so perhaps I may report that, in an earlier meeting, an extremely senior lawyer asked me whether lawyers are going to be classed as traders, because that is what they are called in the Bill. He was very surprised when I said that, yes, I think that they probably will be in this regard. Perhaps the Minister could clarify whether that is the case.
I thank my noble friend Lady Drake, who, as usual, makes the case much better than I could. It is in the financial sector where issues such as conflict of interest or lack of transparency, which would not be covered by skill and care, could affect the outcome that would not be included in any measure under the Bill. I am disappointed that the Minister reiterated what her colleague said in the other place: that Clause 50 provides that “any information given” would cover this. As I suggested, we are talking about other assumptions that may not have been written into the contract. The issue of whether the windows are clean is, it seems to me, an important measure.
We did not ask to move to a completely outcomes-based measure, but we asked simply that it should be taken into account in how we measure skill and care. We feel strongly about this, and it is one issue to be brought back, but for the moment I beg leave to withdraw the amendment.
“( ) In every contract to supply a service, traders who are ring-fenced bodies providing financial services as defined under section 142A of the Financial Services and Markets Act 2000 (ring-fenced body) shall be subject to—
(a) a fiduciary duty towards its consumers in the operation of core services to provide these with reasonable care and skill as well as in the management of any individual contract to provide services; and(b) a duty of care towards consumers across the financial services sector.”
Baroness Hayter of Kentish Town
My Lords, in moving the amendment in the names of my noble friend Lord Stevenson and myself—I do not think that I have to declare this as an interest, as it was rather a long time ago—I should say that I cannot help but bring to this debate my experience on the Financial Services Consumer Panel, where I am afraid we witnessed countless examples of financial providers acting completely without the fiduciary duty towards their customers, despite what the law said at the time. What subsequently became evident during the crash—which, I remind the Government, was not caused by the Labour Government and was not started in the United Kingdom, but was caused by the banks—was that they had also failed to exercise any duty of care towards consumers across the sector that the industry was supposed to serve.
I shall cite only a couple of examples; my noble friend Lady Drake may have others to offer. The ones that I was involved with at the time were interest-only mortgages, self-cert mortgages, high loan-to-value mortgages and high loan-to-income mortgages. I am not talking here of the mass mis-selling of PPI or endowment mortgages; this was about selling products to people without putting their interests first—indeed, probably in the full knowledge that, should circumstances change, those people would have no way of repaying their loans. More than that, as the number of those reckless loans added up to a torrent, once unleashed, that hurt not just the individual borrower but a far wider group of consumers whose house prices fell and future loans dried up or repayment terms became unsustainable.
Baroness Neville-Rolfe
However, if I may, I shall think about that one, as it probably goes a little bit beyond today’s discussion.
In conclusion, the Government firmly believe that it is better to impose specific, focused requirements on banks and other financial services firms through the regulatory system. Customers and regulators can more effectively hold the bank to account when they do not comply. I hope, therefore, that the noble Baroness, Lady Hayter, will agree to withdraw this amendment.
Baroness Hayter of Kentish Town
My Lords, I thank the Minister for that. I hope that it convinced her; I fear that it did not convince me. It is some time since I was on the Financial Services Consumer Panel, but I am still in close touch with the panel and I will be quoting it later on its disappointment with the Bill.
However, I want to take a moment to talk about the really interesting question that the noble Earl, Lord Lytton, raised. It was interesting in itself but so was the contrast with the Royal Institution of Chartered Surveyors, which is a chartered institute and has a code of conduct or ethics—I cannot now remember what it is called—which does include putting the customer first. In a sense, that is all we are trying to do for the financial industry, which could learn a thing or two from the surveyors.
I thank my noble friend Lady Drake for her intervention, particularly the examples she gave. She usefully reiterated the reason why consumers in this industry need particular help: the complexities and the asymmetries of knowledge on these long-term products. She also warned that if we do not introduce somewhere in law that you must put your client’s interest first—and I do not think that something that is in an FCA rule is actually law, but I could be wrong about that—then we will carry on with a compliance, keeping-to-the-rules regime, which is of help to no one and continues to produce poor outcomes. As my noble friend warned us, there may be more to come, with pension unlocking.
The most important thing I have to say to the Minister is that treating customers fairly, which was in FiSMA and is now in the Act that my noble friend Lady Drake and I cut our teeth on in the House four years ago, is not the same as putting customers first. That is the extra push that we want. Although the Minister mentioned the duty of care on business in general, businesses have duties to shareholders and everyone else, which is why the client often comes a bit far down the pecking order.
If the Minister is right that no additional remedies would come from our amendment, then I see no harm in including it. She has not said what harm this would do. However, I fear that on this, just as the Government voted against a code of conduct for the financial industry when we were doing that Bill, they are again going to turn their back on consumers in this vital area.
Baroness Neville-Rolfe
Before the noble Baroness, Lady Hayter, sits down, perhaps I could clarify her point about FCA rules not being law. Our advice is that they are law, and that is why the principles say, “A firm must”.
Baroness Hayter of Kentish Town
That is interesting, and I will try to find out how many court cases have been taken as a result. However, for the moment I beg leave to withdraw the amendment.
Baroness Hayter of Kentish Town
The amendment stands in my name and that of my noble friend Lord Stevenson of Balmacara. It seeks to ensure that any binding qualifications to contracts are given equal prominence with other promises made before they become binding on the person signing up. In effect, it is an amendment about small print, about charges that people may incur but which traders may not specify prominently as being part of the cost. In one sense, it is the future-proofing of the issues which my noble friend Lady King just raised, because we are mostly talking about future charges rather than those paid on a one-off fee. Because of those future charges, we want total charges to be displayed prominently prior to the purchase, so that people know exactly what they are paying for and do not later have any nasty surprises.
The amendment states that charges should be given equal prominence. People need to know what they may find hitting them in a year’s time, on the annual renewal. Sometimes, so much information is given to the consumer that it may be there in theory but it is hidden in plain sight. In other words, it may well say that there is a renewal price, but it is in with three or four other paragraphs—but it is binding on the consumer. They need to be given prominence, up with the actual price, rather than hidden in plain sight. That is an issue about which the Financial Services Consumer Panel and others are concerned—that a substantially increased fee that the consumer could not have predicted is suddenly applied at a later date. This is very much in the area of financially complicated services. There may be things which are very obvious to the provider, but may not seem obvious or relevant at the time of the purchase. There may be the possibility of having to pay for change of address: you would not think when you are signing up to something that that meant anything—you had not meant to move house at that point, or you did not think it would apply to you, but you could suddenly be hit by an additional charge later.
Baroness Neville-Rolfe
My Lords, I thank the noble Baroness for her comments. We have heard a lot today about the importance of making information clear for consumers. I was glad that she felt comforted by the comment on objectives that the Minister—I imagine that it was Jenny Willott MP—was able to make in another place when the Bill was debated. There is already legislation in force that protects consumers from being misled. I have mentioned in our discussion of earlier clauses the Consumer Protection from Unfair Trading Regulations 2008 and the recent amendment to these from October this year which allows consumers a private right to redress for misleading actions.
Other rules, in the 2013 consumer contracts regulations, which I have also mentioned, introduced by this Government, mean that traders must give consumers certain key information before they enter a contract and that it must be given in a clear and comprehensible manner. I emphasise the word “comprehensible”.
The noble Baroness, Lady Hayter, rightly expressed concern about problems with small print. We are committed to protecting consumers from finding surprises in a contract’s small print. Part 2 of the Bill goes into that in some detail and we will hopefully reach that next week.
The Government are keen to help consumers to know what they are buying and get what they pay for. However, I have some concerns about the amendment. Clause 50 already gives consumers a right that traders comply with information given which the consumer takes into account. It allows the trader to qualify information but on the same occasion as the original information is given. The consumer must expressly agree to any later changes that the trader proposes. I think we are getting used to this process.
My concern with the amendment relates to certainty and practicalities. How can a trader ensure that he gives two pieces of information with equal prominence? Many contracts are agreed orally. In such cases, the trader cannot be sure that he has given two pieces of information with equal prominence, since he cannot say two things at the same time. Of course, there may be more than two pieces of information which are relevant, thereby exacerbating the problem. How would a consumer know whether the trader’s explanation during a conversation about a service had been sufficiently prominent to qualify a general point?
To give another example, let us consider a painter whom you have asked to paint your famous bathroom. Before he has measured all of the walls, he tells you that it will cost £100 to paint the room. He then measures and analyses the walls, confirms that the price will be £110 and writes that price down for you on a piece of paper. Do the parties need to consider which is more prominent—the written note or the initial oral comment—or are they equally prominent? I do not know which would be more prominent, and I do not think that most traders or consumers would know. I do not see that this extra test particularly helps the consumer.
I fully agree with the principle that consumers should be given key information in a clear and transparent manner. We have a suite of legislation in place and will have more when this Bill is enacted. Clause 50 provides appropriate protection by requiring a qualification to be given on the same occasion as the information it would qualify. I believe that that is sufficient, given the risks of causing uncertainty by going further.
I should perhaps add that Part 2 of the Bill implements Law Commission recommendations to protect consumers from surprises in the small print. Price terms must be prominent to avoid assessment in court for fairness, and that is new in this Bill.
In these circumstances, I ask the noble Baroness to withdraw the amendment.
Baroness Hayter of Kentish Town
I thank the Minister for that. If she were worried only about the application of the amendment to information given orally, then of course we could just put “where written, they should have equal prominence”. That could be a solution if that were the only issue that the Government had with this. The “hidden in plain sight” issue is quite important. Sometimes these things are known to the trader but are carefully put where they are not as obvious to the purchaser.
We will look at the wording and will think about whether, when something is known to the trader, we can find a form of words to ensure that it is all put in writing. However, for the moment, I beg leave to withdraw the amendment.
“( ) Where the trader seeks to change any of the information set out in subsection (3) after a contract has been entered into by a consumer, the trader must—
(a) ensure that if the consumer does not wish to agree to the changes sought, the consumer is able to terminate the contract without incurring financial detriment; or(b) offer the consumer an alternative contract with a comparable financial outcome for the consumer of the existing contract.”
Baroness Hayter of Kentish Town
My Lords, Amendment 49A is about mid-term changes to a contract. Therefore, this is not about things that were known at the beginning; it concerns the situation where a contract changes.
The intention behind the amendment is to deal with the situation where it is no good telling someone to shop around and find an alternative contract when some part of the original agreement, such as the interest rate, changes and either that person would incur a large financial penalty for doing so—the equivalent of an exit fee—or at that moment there are no other financial products around equivalent to the original one. There may be no such alternatives—perhaps because there is a mortgage famine, although there was not when the mortgage was taken out. The person’s employment status may have changed and therefore they cannot negotiate the same deal. They may have a few more children and so their outgoings are higher and, again, they cannot negotiate the same mortgage as they had to begin with. Alternatively, they could simply have retired and therefore find it very hard to negotiate a new mortgage. Also, annuity rates change a lot because circumstances may have changed.
Amendment 49A would not make the original terms of the deal necessarily unfair. It is not saying that it cannot be possible to change a contract, but it would seek to put the consumer back in the position where they would have been had the contract as made with and understood by the consumer been honoured. The amendment does not cover interest rate increases where those were part of the deal; it is where a provider seeks to change a part of the contract and where that leaves the client worse off because they cannot exit without a penalty. There is a contrast with the example of our house, which we keep going back to; if a cleaner says that they can no longer clean the house at the agreed price, you end the contract and find another cleaning firm. You can go elsewhere to get your house tidy, but that is not the case for financial products, where the exit fees, or changes in annuity rates, can mean a real loss from having to withdraw from the contract or where there is no other product available at that time, perhaps because of something in the market or one’s own circumstances.
Mortgage prisoners are the best example of the detriment that we seek to avoid. I am sure that everyone in the Committee will recall the Bank of Ireland example in March 2013, when the bank invoked a small part in its contract, citing exceptional circumstances, putting up the interest rates of more than 10,000 customers who had tracker mortgages that were supposedly going to be linked to the Bank of England base rate. That had gone up by 0.5% but the Bank of Ireland’s tracker rate went up by 4.49%. The issue is that consumers were essentially locked in to those payments at the time, because there were no competitive rates around where they could have taken their mortgage.
Amendment 49A is to ensure that, when the terms vary from those that have been mutually agreed, and when the consumer cannot leave the contract without a penalty, they must be protected by the provider. It is obviously vital for home buyers, whom we know that the Government are rightly keen to tempt back into the market at the moment, but it is also important for confidence in the financial industry, which, as I said, has some way to go before it reacquires our affection. I beg to move.
Baroness Neville-Rolfe
My Lords, I thank the noble Baroness for her comments. Clause 50(4) protects a consumer from detrimental changes to their contract. The noble Baroness talked about midterm changes—a phrase that I rather liked; it is rather American in flavour. When I was a director of a building company, we used to call them variations. The subsection makes it clear that, when key information about the trader or service is amended, the consumer must agree to that change for the change to be effective. That already provides a significant level of consumer protection. The noble Baroness posited what happens if the consumer does not agree to a change proposed by a trader. The answer in part lies in subsection (4). If the consumer does not agree to a change to the information set out in subsection (3), the original agreement stands. The trader must uphold its side of the bargain without the change. For example, if the trader increases the price but the consumer does not agree, the trader must charge the consumer the original, lower, price and bear the costs of doing so. The law on unfair contract terms also protects consumers from changes made to a contract after it has been agreed. There is already existing protection, and we are strengthening that in this Bill. I look forward to discussing the issue next week because there are a number of relevant amendments.
Baroness Hayter of Kentish Town
I thank the Minister for her explanation. We are not really talking about buildings and builders. That is easy; you can go somewhere else. However, I do not think that she answered the question about mortgage prisoners. We are talking about people who cannot exit because they still have to have a mortgage and cannot get one somewhere else, as there are none available at the time. I think we remember that period when mortgages were virtually unavailable.
Can the Minister write to me to set out how, given all she said about how it should not happen like this, it was possible for the Bank of Ireland to change the rate when people could not exit because they could not go somewhere else? If everything which she said is in place should have protected consumers, why on earth did it not at the time? This has all happened since we have had the safeguards that she set out, so I am slightly at a loss about how we ended up with people in that situation. It was there in the contract but although it said “under exceptional circumstances”, it could be for any other reason. It could be anything: perhaps they might decide that they want to pay high bonuses to their owners. The problem is among those who cannot walk out from that contract. If there is nothing available at the time, because of either the market or their own situation, why did the protections which the Minister says are there not cover the Bank of Ireland? Perhaps she could look at that and write to us, because there is clearly a problem which does not seem to be satisfied by the existing law. That is why we would like some change.
Baroness Neville-Rolfe
On the Bank of Ireland matter, that is an issue for the FCA and it is not really for me to comment in detail. I have seen Martin Wheatley’s letter of May 2013 to the chair of the Treasury Committee, in which he stated that the FCA,
“did not identify concerns with the relevant terms which led us to believe that they might be unfair”.
However, it is a perfectly reasonable request that I should write to the noble Baroness and set it out in a little more detail, or arrange for the FCA to write to her.
Baroness Hayter of Kentish Town
That would be helpful. Clearly, what that letter said was, “Shucks, it wasn’t unfair—pay up”. That was not quite the answer I was hoping that the Minister would give us. However, it is the one we have been given at the moment and I look forward to seeing that detail. It seems that there is clearly some detriment which we need to look at but, for the moment, I beg leave to withdraw this amendment.
Baroness Hayter of Kentish Town
Before the Deputy Chairman arrived, I warned the Committee that it was going to hear an awful lot of my voice today. I have apologised to the rest but maybe I could extend that apology.
Amendment 49B, which is also in the name of my noble friend Lord Stevenson, would ensure that consumers pay only,
“a reasonable price for the service, and no more”,
where the contract does not expressly fix a price,
“for all elements of the service”,
and where consumers subsequently find themselves facing “ongoing costs and charges”. The original clause covers situations such as those where you engage a plumber at short notice, without agreeing a price. It is intended to stop him charging £10,000, or whatever, for a 10-minute job. Our amendment would broaden the idea of a reasonable price to include later prices, when you are already tied into the contract.
I am not going to go to see Paul Simon—I forget what else is happening—but my noble friend Lord Stevenson, who is not in his place, has just flown by Ryanair, which gives me the example I want to give. Ryanair charges customers £20 for each boarding pass printed at the airport. However, if a particular customer, who will be nameless, buys a ticket—often several tickets—he believes that he has accounted for everything. He has paid for the extra luggage and for rapid boarding—I do not know what else one can pay for—then he goes off to have his holiday. He arrives at his holiday accommodation and discovers that there is no access to a printer in the hotel, so he cannot print the return boarding pass to be able to come back home. We think that the boarding card is an intrinsic part of the service and the contract—you cannot get on the flight without one—yet Ryanair exploits the position. Customers must have it and are charged what we would say is an unreasonable fee: it is about £20, so £100 for a family of five. I do not know how many children my noble friend, who went through this, has. He may have many children: it may have been £1,000. However, this is a cost that would not have been anticipated for 30 seconds’ work and a few pieces of paper. It is part of the contract, yet suddenly one has to pay it.
A longer-term issue is where consumers buy financial products and do not have clarity on what they are being charged for the longer-term administration. Sometimes their pension or annuity provider is eating up most of their savings. It is essential that the consumer should know about future costs and be able to decide whether it is a fair price. They need to know what they are paying for, not so much for Ryanair, but especially for services where customers will be for a very long time.
If I read it correctly, the Minister in the Commons agreed with this basic point, but felt that it would be covered by the Consumer Contract Regulations. However, as we have recently heard, they do not seem to have done the job. They make it clear that traders must disclose all costs, which the Government seem to think means unavoidable future costs that the trader could reasonably foresee before the consumer enters the contract. However, as one of the aims of the Bill is to provide consumers and traders with greater clarity on their rights and obligations—preferably all in one place—I urge the Minister to take the opportunity to make those rights clearer by accepting this very small amendment. I beg to move.
Baroness Drake
My Lords, I support Amendment 49B. Information and transparency, although not sufficient, are essential ingredients for empowering consumers. Providing good-quality, transparent and clear information to consumers enables them to make good choices and therefore make markets more efficient. This is particularly so, as my noble friend Lady Hayter has pointed out, with services contracts that do not expressly fix a price, where there are many elements to the service provided and where the contract is ongoing over an extended period with ongoing charges being incurred.
The consumer needs the necessary information to enable them to assess whether they are being charged a fair or reasonable price for a particular service, particularly given the issue of ongoing fees and charges. We all know that consumers can suffer from information overload and behavioural bias. Differences of knowledge and understanding between the consumer and trader can be commonplace. This gives rise to particular though not exclusive requirements—that clear information should be provided for all elements of the service contract and over time for ongoing costs and charges and that the prices for all those elements must be reasonable. This amendment would lock in all elements of the service provided into the reasonable price requirement.
Baroness Neville-Rolfe
I had not appreciated that the noble Lord wanted to talk in particular about price comparison sites. That is something I would like to discuss with him in a bit more detail. I will write to him and to other noble Lords.
Baroness Hayter of Kentish Town
I think these are hidden in plain sight. It probably did say, “If you go on holiday and you don’t print it then you are going to be hit by it”. Our disappointment is that the Minister is saying, “Don’t worry, the regulations are already there”. The evidence—from buying tickets, looking on price comparison websites, printing off boarding passes, or, even now, buying annuities, pensions and all that—is that the regulations are not working. This is the opportunity to strengthen them. I hope that the Government are not going to continue to tell us not to worry and that the regulations and law are already there when this is clearly failing to solve the problem.
The ASA is not mandatory. It is not a government agency or a legal enforcer. It is a voluntary organisation funded by advertisers, if I remember correctly, so it relies on the industry. I am pretty certain, because I take a lot of complaints to the ASA—I have a wonderful new one that I am giving it this week—that one does not get any redress, which is a great disincentive for people to complain to it. Although it either fines or tells people off for breaching its rules, consumers do not get any redress.
The Committee will be clear from our different responses, whether from the perspective of the National Trading Standards Board or from the financial sector—I thank my noble friends Lady Drake, Lord Harris of Haringey and Lady Crawley for their interventions—that we are uneasy that consumers are unable to be sufficiently protected by the regulations, which the Government assure us are there. The Minister said that this was comprehensively overseen by the FCA, but people are still having problems. There is quite a difference between us being told that it is quite adequate and our evidence.
Baroness Neville-Rolfe
One area that my noble friend Lady Jolly touched on today, and which we have discussed before, is the implementation of this new and important Bill and its parallel provisions. Clearly we can debate further and clarify whether we have exactly the right provisions; that is entirely appropriate for this House to do. However, her point is also about how we implement and enforce some of the good regulations that have come in during the past couple of years—some of them EU-based—and the new provisions that we are creating in this process.
Baroness Hayter of Kentish Town
That is helpful. I know that one of the Ministers said that the implementation group would look at the regulations as well as the Bill. I welcome that, but perhaps she should also talk to the FCA to see whether it could be part of that. I thank the Minister, and for the moment I beg leave to withdraw the amendment.
Baroness Hayter of Kentish Town
I have never heard the noble Lord, Lord Hodgson, describe himself as a butcher before, but he talked about coming in with a cleaver. I thank him for tabling Amendment 50 and for the way he moved it. I was delighted to give it my complete support. My amendment is simply to ensure that what he has asked for is available at least once a quarter, as there will be many instances where, particularly with phone bills—I cannot remember who I phoned last week, never mind three months ago—it would be very difficult to divvy up a bill like that if it was only once a quarter.
As the noble Lord said, this is a forerunner, in a way, of the debate on Monday on Amendment 53. He spoke about the banks. If we include regulated industries, of course, that might well cover banks. In a way, they are almost like a utility at the moment, so I am sure that a form of words will develop. The principle, as he said, is clear: it is bad enough paying a bill, but to be charged to get your bill is adding insult to injury. For me, the principle is clear that the sending of an invoice and, indeed, the paying of that invoice, is part and parcel of the contract, not something completely separate for which we should be charged.
We know that consumers are pretty insulted when a provider tries to decide for them how they will receive a bill. Eight out of 10 adults do not like it when companies take away their right to choose how they receive communication and four out of 10 worry that they might miss a payment if they do not get a paper statement and that their financial records would be incomplete without paper statements. Like all of us, the public do not understand why they should have to pay a fee for a bill, rather than it being included in the basic cost of a service.
Some people are particularly affected by this. Rather like those people who do not have a computer when they go on holiday, as we spoke about on the last amendment, some people do not have a computer at home. Such people, and there are a lot of them, cannot print off something to keep for their records, even if they can see it on their iPad. Another affected group is people who share accommodation and therefore share bills. They still like a bill that they can look at and maybe take a copy of, so they can know how to split it. There are also people whose carers or families help them in the payment of bills. Again, a paper bill that you can discuss is important for that, and for knowing who is dealing with which one. Those who are struggling to make ends meet very often have to juggle which bill they are going to pay next in order to avoid being cut off, or something like that. It is much easier, for many of us, to do that with a piece of paper.
Bills also fulfil other purposes. If you want to get a parking permit in London you have to have a utility bill in your own name and to your own address. That is difficult enough for those of us who have more than one name. If you cannot even get a paper copy, it makes it very difficult. There are other purposes for which you have to show a bill addressed to your home, including, I think, opening a bank account.
The other group of people for whom I think that it is particularly important to have a paper bill are probably the Members of your Lordships’ House. Having declared my interest as someone who still does my paperwork and my payment of bills in that way, I move my amendment and give my wholehearted support to the main amendment.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I support Amendment 50. I have an elderly father who is 91 and who has recently been extremely ill. While looking through his paperwork, I found a number of bills that needed paying. We discussed this and I said, “Why don’t you set up a direct debit?”. He definitely did not want to do that. He felt that he would lose control of what was going on in his life and his finances. He liked the security of filling out a cheque and sending it in the post, with a copy of the bill or the counterfoil on the bottom of it. He felt that that was the way that he could make sure that his money stretched, that he had money at the end of the month and was able to pay all his bills. He is not a man who did not want to enter the technological age. He bought a computer—much to my utter amazement—because Lidl had them on special offer. He loves Lidl. He joined a course to teach him how to use to the computer, and my husband and son went over to help him to set the computer up and get to grips with it. However, he did not use it often enough to be able to use the skills that he had been taught in his computer classes, so he was never going to be able to pay all his bills from the internet. My father is not on his own. Lots of people want the security of a paper bill and of being able to pay by cheque or a direct debit—because my father has direct debits for some things, such as council tax. They want that security, and I think that they ought to be able to have that.