Baroness Jolly
Main Page: Baroness Jolly (Liberal Democrat - Life peer)Consumer Rights Bill
Baroness Jolly Excerpts
Baroness Jolly (LD)
My Lords, I turn first to Amendment 10. The Government agree that it is important that when a consumer buys goods they should have confidence that they have free use of them without worrying that someone else has a claim to them. The consumer should always be made aware if someone else has a claim to the goods so that it does not come as a nasty surprise later. While I appreciate that the intention of the amendment is to ensure that this happens, Clause 17(2) already addresses this point appropriately and proportionately.
Clause 17(2) requires the trader to disclose any outstanding claims or charges over the goods. The provision makes it a term of the contract that there are no charges that the consumer was not told about or does not know of. If such charges are not disclosed to the consumer, the trader will have breached the contract and the consumer may claim for damages.
In simple terms, the trader makes a contractual promise that there are no charges or claims over the goods other than those disclosed. If the consumer is unaware that goods are subject to any charge, and the trader has not told them of any charge, they can expect the goods to be free of any charge. They will have protection if this is not so. That protection already exists under the current law and Clause 17(2) retains it. By making this a term of the contract, subsection (2) also provides a means of access to compensation for the consumer.
Clause 17(2) potentially goes further than the amendment in that it requires the trader to disclose all outstanding claims or charges. The amendment would require disclosure only when the claim or charge might impact on the consumer’s enjoyment or use of the goods or cause them financial detriment. I worry that this could be a potential source of dispute between the consumer and the trader. It is not clear how the consumer could demonstrate that a particular claim should have been expected to impact on their enjoyment or finances. The approach that is already in the Bill in Clause 17(2) is simpler; it is sensible; and it provides stronger protection to the consumer.
I want to respond more specifically on logbook loans, as addressed in Amendments 3, 5 and 56. One market where there are examples of consumers buying goods that have other claims to them is that of logbook loans. Across the Government, we share the Opposition’s concerns about the risks to consumers from such loans. The Government believe that people should be able to borrow and have the tools to make an informed decision about which credit products are right for them, but consumers should be confident that they will be treated fairly when things go wrong.
As the noble Lords will be aware, responsibility for consumer credit regulation, including logbook lenders, transferred from the Office of Fair Trading to the Financial Conduct Authority on 1 April. Consumers are far better protected under the stronger, well resourced FCA regime. The FCA defines logbook loans as “higher-risk activities” and, as a result, lenders face closer supervision. Moreover, logbook lenders are in the first phase of firms to require full authorisation, with the FCA thoroughly scrutinising firms’ business models and compliance with its rules.
It is important that consumers are aware of their rights before taking out logbook loans. The FCA therefore requires logbook lenders to provide a pre-contractual explanation to borrowers of their rights before any agreement is signed. On the noble Lord’s point about logbook lenders and affordability tests, logbook lenders are required to meet the standards that the FCA expects of lenders, including making affordability checks. These rules are binding, and the FCA can take action where wrongdoing is found.
Logbook lenders are subject also to the FCA’s high-level principles, including the overarching requirement to “treat customers fairly”. The Government have ensured that the FCA has a wide enforcement toolkit to take action where its rules are breached. There is no limit on the fines that it can levy and, crucially, it can force firms to provide redress to consumers.
The FCA actively monitors the market. It has flexible rule-making powers and, if it finds further problems, it will not hesitate to take action. Indeed, the FCA has said that it is,
“putting logbook lenders on notice”,
and that its new rules give it,
“the power to tackle any firm found not putting customers’ interests first”.
In addition to this robust action from the FCA, I confirm that the Law Commission has agreed to a request from Treasury Ministers to look at how best to reform the Bills of Sale Act. This legislation underpinning logbook loans is old, lengthy and incredibly complex, and affects businesses as well as consumers. Evidence suggests that around 20% of bills of sale are used by small businesses rather than individual consumers. As a result, the Government believe that the Law Commission is best placed to undertake a thorough assessment of how to bring this complex, arcane and wide-ranging Victorian legislation up to date. This project is now under way and the Law Commission launched its call for evidence last week.
The Government believe that this package of action will fundamentally strengthen protections for consumers using logbook loans. I therefore ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
I thank the Minister for her comments. On the first point, about the third party, I take her point that Clause 17(2) covers the issue; I understand that. I would like to read what the Minister said in Hansard before I make up my mind on this, but my worry is that it still leaves the situation that anyone who wishes to take advantage of Clause 17(2) has to raise an action in order to recover the costs and damages that they may have lost. We would rather have the thing eliminated altogether so that it just cannot take place. That is the difference between us on this. We have cross-read Clause 17(2) carefully but still feel that it was right to try, within this overall package, to focus on the bill-of-sale techniques and legislation that have been used. That was the basis of our understanding, but I note what the Minister said on that point.
I am glad that the Government share our concerns about logbook loans. They are a really unpleasant way of offering high-cost credit. I am conscious that the responsibility now lies with the FCA on this. However, I make the following points. Simply passing responsibility to that body is not necessarily the same as cleaning up this area. There will be a time lag before the FCA gets around to this and it is quite interesting that the changes that have been made in the area of payday lending have been brought to the front of the FCA’s enormous workload—it has a lot to do to get itself up to speed in so many areas across our financial services sector—really only because of the insistence of this House and, therefore, of the Government. There had to be a decision, for instance, on capping payday loans by January 2015 and that has of course produced action on a magnificent scale. It is not quite there yet, but it is moving in the right direction. While I understand the point, therefore, I still do not think that it would be sufficient to get this issue addressed very quickly.
The problem, on which I think we agree, is about the use of these archaic bills of sale. While I accept that the Law Commission has a good record in this area and it might well be appropriate, there is a time problem with this. The Law Commission is not noted for rushing into action on these matters and, although I in no sense wish to impugn its great work, we are probably talking about three or four years before we get an outcome on that. Are the Government really saying that they are prepared to sit back and allow this to be dealt with by an FCA that, although it has a concern for consumers, as the noble Baroness said, also has a responsibility, which it insists on parading every time you talk to it, to ensure that markets are working efficiently? These two things do not necessarily sit well together. Here is a case with clear consumer impairment. It will not be to the benefit of many consumers to know that the market is working well.
Nevertheless, I accept the Minister’s point on that. I understand that we are basically moving in the same direction. The commitment to ask the Law Commission should result in changes, and it is clear from the evidence that I have already produced that we will be looking forward to legislation coming through. I am worried about the timetable, so we will reflect on this. In the mean time, I beg leave to withdraw the amendment.
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.
Baroness Drake (Lab)
My Lords, I support my noble friend Lady Hayter on Amendment 8 to Clause 11. As we all know, consumer markets are becoming increasingly complex and more and more transactions are conducted online, but we still have the asymmetry of understanding between the trader and the consumer and the consumer’s behavioural bias—both of which we are all familiar with—which can create real incentives for traders to frame and present price information in a way that enhances their chances of a sale rather than enhancing transparency or the protection of the consumer.
For markets and trading to be fair, consumers need to have full and easily accessible knowledge of the real costs of what they are purchasing. I am sure that most people in this Room, including myself, have been attracted into purchasing a bargain only later to discover that it comes with many catches. My husband dines out on humiliating me on my inability to see some of these catches when I am swayed by the attraction of the bargain. These additional costs may be things that we did not see or realise until we were just about to pay or had just paid—or, even worse, did not see until after the event when the receipt has come in and we start noticing these little items that we did not realise were there.
I do a great deal of my purchasing online and there are three things in particular that irritate me. The first is when, just before clicking “OK” to the purchase, the purchaser is asked to confirm that they have read the associated terms and conditions, which are lengthy and dense and may require one to disengage from completing the purchase in order to go back and find them. As we know, the closer that the consumer gets to confirming the purchase, the less likely they are to walk away from it and to come out of the purchase and start again in order to read these dense and lengthy terms and conditions. I and others like me are unlikely to do so and, because we do not, we subsequently find that we have agreed to additional costs. Secondly, as one proceeds through these websites to make the purchase, the default setting may be to add extra items and charges to the purchase of the goods, and this is not made clear—one has to see and recognise that this is happening before one can even negate or delete the additional costs from the default setting. Thirdly, the headline price that attracted the purchaser to contemplate or initiate the purchase can be significantly different to the final cost, when all the extras are added.
My noble friend mentioned a government reference to a previous National Consumer Council publication. We all know that consumers do not take in too much information when they make a purchase, but the price is so significant and so at the heart of that purchase that it is all the more reason why the trader should be required to provide full details of the total costs. It is incomprehensible that, because the consumer cannot take in too much information, that should become an argument for limiting the obligation on the trader to make sure that the full extent of the costs that can be incurred in making that purchase are made clear before it is made. In fact, the fact that people cannot take on too much information is a compelling reason for making sure that our legislation requires the party who is the trader to make clear what charges the consumer can be expected to be exposed to when they make a purchase.
I am sure that the Government will argue that requiring the visibility of such information may be burdensome to business because of the frequent price changes that they may have to incur. However, given that much of the bad practice takes place online, it is difficult to see how such a requirement can be burdensome. When a price is altered, the trader will have to change their internal processes and internal systems, so having to go that bit further to update a website to make clear what the prices are hardly seems a compelling reason why the consumer should not be protected from not knowing the exposure on costs that they can incur when they make a purchase. Presumably one has the infrastructure of the information set out regarding the additional charges; it is a question of putting the new figure in.
Baroness Jolly
I am sure that noble Lords will be happy to know that, under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, traders are already required to make the consumer fully aware of total costs before a sale is made. The regulations require traders to give, or make available to the consumer, information about costs—and this includes online sales; it is any sales at all—before the consumer is bound by a contract. From on an online point of view, it is before they have pressed the return button. The information must be clear and comprehensible. The regulations came into force on 13 June 2014 and the main body of this amendment is therefore not required.
However, the Government believe that the additional requirement in the amendment for this information to be included in all public communication could place an enormous burden on business. The trader would need to alter all associated communications every time a price was altered, upwards or downwards. In some instances, that might put traders off lowering prices or offering special deals. In other instances, the price change might have been decided by the manufacturer or supplier, but the trader would have to bear the costs of the change.
Where the trader uses television or radio adverts, the additional costs could be significant. Already, radio adverts for financial services end with a lengthy and sometimes almost incomprehensible declaration of terms and conditions—the audio equivalent of small print. How much worse will this become if they must also detail every possible charge that may apply to every type of goods?
The important point is that the consumer is provided with the necessary information before they enter into the contract so that they can decide whether to continue. The consumer contracts regulations already require this. It might help Members of the Committee if I give a quick breakdown of the two sets of regulations that are independent of, but are referred to in, the Bill. The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 implement the consumer rights directive. They set out the information that the trader should provide to the consumer, and this will form part of the contract. It will also include cancellation rights for consumers buying away from trader premises, such as a trader visiting their home, on the phone or, of course, online. It will also include measures to avoid hidden costs to consumers. As these regulations implement the consumer rights directive, the same basic rules apply across Europe and came into force on 4 June this year.
The second set of regulations came into force on 1 October, the Consumer Protection (Amendment) Regulations 2014. These give consumers new rights to get their money back and seek damages through the civil courts where they have been victims of misleading or aggressive practices. The regulations make the processes clearer and simpler for consumers, and consumers will have 90 days to cancel a contract and receive a full refund if they have been misled or bullied into agreeing it. They had previously only limited rights in this area.
To recap, the important point about the amendment is that the consumer is provided with the necessary information before they enter into the contract so that they can decide whether or not to continue. The consumer contract regulations that I have just outlined already require this. I therefore ask the noble Baroness to withdraw her amendment.
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.
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 Jolly
Baroness Jolly
My Lords, I am very grateful to Professor Hugh Beale, an eminent legal academic, for his view that the Bill required greater clarity on our intention that there should be no right to terminate a contract for the supply of digital content when the quality rights are breached. It is important to put this beyond doubt to provide the necessary clarity for consumers and business.
The amendments, which are government amendments so they are an improvement that we have made to the Bill, seek to make that explicit by adding a new line into Clause 42 making it clear that there is no right to terminate the contract for digital content when the quality rights are breached. The related amendments in Clause 19 for goods and Clause 54 for services ensure consistent terminology across the goods, digital content and services chapters.
The amendments are technical changes but I realise that the underlying issue has not been fully debated. We will be returning to the substantive point about whether there should be a short-term right to reject digital content when we debate the amendments to Clause 33. If there are no questions at this point, I beg to move.
Lord Stevenson of Balmacara
I thank the Minister for introducing these very technical amendments. We have no objection to them as they are drafted, we want to get that on record, but she has made it clear that Amendment 14, and to some extent Amendment 17, bearing on matters relating to digital content in Chapter 3 of the Bill, contain within them substantive issues that we will want to readdress. I was grateful to note her comment that the fact that we will not oppose these amendments as they go forward at this stage does not rule out the possibility of coming back to the substantive point at a later stage.