Baroness Jolly
Main Page: Baroness Jolly (Liberal Democrat - Life peer)Consumer Rights Bill
Baroness Jolly Excerpts
Baroness Crawley (Lab)
My Lords, I remind noble Lords of my trading standards entry in the register of interests. I support the amendment proposed by my noble friend Lady Drake and I shall speak in particular to Amendment 63B in the name of my noble friend Lady Hayter and the noble Lord, Lord Best.
This amendment would amend the Enterprise Act 2002 so that an enforcer would be the subject of an order to pay the costs of and incidental to enforcement proceedings only if they had acted improperly, unreasonably or negligently. In the criminal courts, trading standards officers or enforcers can be liable for the defendant’s costs only in limited circumstances. However, in the civil courts, under the Enterprise Act, the loser generally pays the winner’s costs. As my noble friend said, this could act as a disincentive for enforcers such as trading standards who are acting in the public interest.
Amendment 63B would ensure that protections for enforcers in civil courts were equal to those in criminal courts. Unless such protections are in place, there will be a significant disincentive for enforcers to use the new legislation. As we all know, local government has very little spare cash these days to pay out for court costs, and trading standards officers will be hesitant, as my noble friend said, to bring important cases to court under the Bill in case things go against them and their authority is left with a hefty bill to pay.
While trading standards very much supports the new provisions in the Bill to give consumers redress and to help them make better choices, there is genuine concern among the enforcement community that there will be little take-up of such provision due to the complexity of the process—as set out by my noble friend—the costs and the risks to the enforcer.
There is also concern that the legislation places the onus on the enforcer in proving that the costs of redress measures do not exceed the cost of the harm. This adds an area of potential challenge and uncertainty, and could encourage enforcers to use the more reliable criminal route instead of the Enterprise Act. Enforcers would prefer a more balanced approach whereby the businesses bringing the case propose a package of measures to the enforcer or to the court, with this being negotiated as necessary. I call on the Minister to look favourably on these amendments.
Baroness Jolly (LD)
My Lords, our debate on enhanced consumer measures has been really interesting. As noble Lords have said, the measures are limited to public enforcers only. The Government have included a power in the Bill to enable private enforcers such as Which?—which at the moment is the only private enforcer—to use the measures subject to certain safeguards. These safeguards are extremely important and it is two of them that the first two of these amendments seek to remove.
Amendment 63AB would remove the requirement for the Government to ensure that the private enforcer is subject to the Regulators’ Code. The code ensures targeted, transparent enforcement that is based on risk. It encourages regulators to carry out their activities in a way that supports business to comply and grow.
On Amendment 63AC, the primary authority scheme delivers assured advice to businesses, thereby delivering better regulation. Amendment 63AC would remove the requirement for the private enforcer to act consistently with advice or guidance given by a primary authority to a business. This safeguard ensures that we do not end up in a situation where a business is subject to the measures even though it has been advised by its primary authority that it is compliant with consumer law.
The Government’s Better Regulation Delivery Office administers both the Regulators’ Code and the primary authority scheme. The noble Baroness, Lady Hayter, asked what would happen if a private enforcer disagreed with advice issued by a primary authority but wished to enforce anyway. The scheme has been in operation since 2009 and the process has never been used. Disputes have been resolved informally through negotiation. But if a private enforcer wished to take enforcement action that was inconsistent with primary authority advice, they should discuss that with the primary authority. It will be a matter for the consultation as to whether a formal dispute resolution process would be suitable as a last resort measure in the event that a private enforcer disagreed with advice from a primary authority.
The Better Regulation Delivery Office has already opened a dialogue with Which? on these matters to reassure it that these safeguards will not prevent it from using the new measures. It has agreed to provide written reassurance to Which? that adherence to the Regulators’ Code will not impact on its non-statutory functions. In addition, it has agreed to provide practical support to Which? to enable it to access primary authority advice.
The noble Baroness, Lady Drake, asked when the use of the measures would be reviewed. The Government will review the use of the measures three to five years after they come into force. If we are presented with evidence that the measures are not being used or that consumers are not receiving redress, we will look at whether it is necessary to extend the use of the measures. In addition—to answer the query about advice received from the primary authority—before the power in the Bill is used, there will have to be a consultation. It will be during this consultation that the Government can ensure that there is a robust mechanism in place to enable the private enforcer to access primary authority advice.
Turning to the amendment in the name of the noble Lord, Lord Best, we want to encourage enforcers to take action where appropriate, but we do not believe that it is right to alter the costs rules in the way that is proposed in the amendment. As we have already heard in Committee, it is a fundamental principle of civil litigation that one side is generally at risk of having to pay the other side’s costs if they lose. This deters unmeritorious, weak and poorly prepared cases, and ensures that the winning party is not unfairly affected by the case.
Amendment 63B breaches that principle, shifting costs on to businesses even when they have been found to have done nothing wrong. Those legal costs can be significant. In some circumstances they could be thousands of pounds—enough to put a small firm out of business. The risk of not being able to recover its own costs could lead to a business choosing not to fight a case, even if it honestly believed that it had acted within the law.
Finally, it is important to note that the risk of adverse costs being awarded against an enforcer actually exists now. This has not stopped trading standards from using civil enforcement around 180 times every year. With these explanations, I hope the noble Baroness feels able to withdraw her amendment.
Baroness Hayter of Kentish Town
Perhaps I may ask the Minister a question on one bit of that—two now. I think she will accept that 180 is a very small number. She seemed to think that there was a risk to companies that are eventually found to have done nothing wrong, if they face civil action. But surely she must accept that they face that with criminal action. There can still be criminal action and they will face all of that and they will have to pay their own and the other side’s costs. Perhaps the Minister could explain why it is a greater problem for a company to have to face a trading standards officer taking civil action than to face the same trading standards officer taking criminal action.
Baroness Jolly
My Lords, on the number of cases per year, those which I quoted were actually civil cases, but there are around 1,800 criminal cases each year. Criminal costs are taken out of central funds, and it is civil costs that the loser pays.
Baroness Hayter of Kentish Town
My Lords, on the first question, the Minister has made my point: there are far more criminal cases than civil cases. However, they still have to pay their own costs. If they are defending a case in the criminal court, the company has to pay its own costs whether the case is a civil or a criminal one. As she quite rightly said, these costs can be high.
Baroness Jolly
I have been advised that the criminal system and the civil system are significantly different. Probably the easiest thing to do would be to write to noble Lords who have taken part in this debate.
Baroness Drake
My Lords, I thank my noble friend Lady Hayter for her remarks and the Minister for her responses. Perhaps I may deal first with some of the issues that have been raised in those responses. Reference was made to private enforcers having access to the primary authority’s advice, but the issue is that the Bill refers to all advice or guidance given by the primary authority. That is very broad and the parameters are not defined. I cannot ascertain from the Minister’s response the position as regards what happens when the advice is incomplete, what is the status of the advice in terms of whether it has to be formally documented, and the quality of the advice. It is a question of understanding. Will there be a definition of “primary authority advice” that is designed and designated to be fit for purpose as a consequence of the Bill? At the moment there is a great deal of ambiguity around what comes under the phrase “advice or guidance”, what will be “fit for purpose” and what will entail “records”, because these are pretty broad in the Bill and going against them would be pretty wide in its impact. There is still a lack of clarity around that point.
Given that extending these civil powers to private enforcers will not come about until the Government have satisfied themselves on how the civil powers for the public enforcers bed in, it would have been helpful to have been given greater clarity on the timetable. While something is desirable, if it is very far away, one must begin to question its desirability. It would be helpful if the noble Baroness felt able to elaborate a little more on this, at least in writing.
I turn to the amendment spoken to by the noble Lord, Lord Best, and the arguments deployed by my noble friend Lady Hayter. Of course they are reflective in some ways, although not in all, of the concern about the problems public enforcers will face, as well as private enforcers, in that exposure to costs under the terms of these safeguards will make them reluctant to use their civil powers. There is a question around whether the deterrent effect can be reinforced using the restricted resources that we know trading standards will face. Equally, private enforcement bodies have limited resources so they cannot willy-nilly avoid the consequences of what is in the Bill. Yet we all know that consumer bodies make a significant contribution to consumer protection by challenging dysfunctional markets. The Government must have accepted that because they put these provisions in the Bill in the first place. However, if the safeguards become such a disincentive, and the implementation of these powers is so far into the future, one begins to question the progress that the Bill offers in extending the civil powers measures.
Finally, on the point about exposure to costs, I conceded in speaking to my amendment that nothing in it would prevent a court from, as now, deciding that a private enforcer’s action should fail because it was inconsistent with previous advice and that exposure to costs would remain. My amendment would remove the automaticity of a case failing and exposure to costs existing because something, for whatever reason, was inconsistent with advice given when, as I said earlier, I have no sense of the nature of the primary advice as it will be defined for the purposes of the schedule in the Bill.
I have rehearsed my points. If the noble Baroness can elaborate further in writing, certainly on the timetable, it would be helpful. I beg leave to withdraw the amendment.
Baroness Jolly
My Lords, I am truly grateful to noble Lords for raising the thorny issue of payday lenders and for the informed debate that ensued. I will first discuss the amendments in the names of the noble Lord, Lord Alton, and the right reverend Prelate the Bishop of Truro. I am grateful to the right reverend Prelate the Bishop of Norwich for speaking in his stead.
The Government share the concerns of noble Lords that this market has caused serious problems for consumers, with unscrupulous lenders taking advantage of vulnerable consumers. The Government have acted decisively to fundamentally reform regulation of the payday market. The Financial Conduct Authority’s new, more robust regulatory system is already tackling sources of consumer detriment in this market. The Government have legislated to require the FCA to introduce a cap on the cost of payday loans to protect consumers from unfair costs, which will be in place by 2 January.
We are committed to tackling abuse in the payday market wherever it occurs, including in the marketing of these loans. The Government strongly agree with noble Lords that it is unacceptable for payday lenders deliberately to target vulnerable consumers with their advertising material. However, it is clear that a robust set of measures are now in place to protect the vulnerable from such practices. Payday loan adverts are subject to the Advertising Standards Authority’s strict content rules. The ASA enforces the rules set out by the UK Code of Broadcast Advertising, or the BCAP Code. The BCAP Code requires that all adverts are socially responsible and that young people are protected from harm.
These rules specifically prohibit payday loan adverts from encouraging under-18s either to take out a loan or pester others to do so for them, and the social responsibility requirement of the rules prohibits lenders from deliberately targeting vulnerable people such as problem gamblers. The ASA has powers to ban adverts which do not meet its rules and has a strong track record of doing so: since May of this year the ASA has banned 11 payday loan adverts, including action against adverts which the ASA adjudged to trivialise payday loans. In addition to this, the FCA has introduced tough new rules for payday adverts, including the introduction of mandatory risk warnings and a requirement to signpost free debt advice. The FCA also has powers to ban misleading adverts which breach its rules.
It is important to understand the scale of this issue, and that any action is informed by evidence. Ofcom research found that payday adverts comprise a relatively small 0.6% of TV adverts seen by children aged four to 15—around one a week. As the noble Lord, Lord Alton, mentioned, the Broadcast Committee of Advertising Practice is currently reviewing how its advertising rules relating to the protection of children are applied to payday loan advertising on TV. The Government look forward to the findings of the review, which we expect to be published before the end of the year.
Lord Stevenson of Balmacara
My Lords, I hope the noble Baroness is not falling into a mode of argument which suggests that since you cannot stop children watching programmes all the time, it is not worth the candle to try to prevent these things happening.
Baroness Jolly
Nobody wants young children to grow up thinking that payday loans are the right way to go but we believe that currently there is a tough package of measures in place to ensure that vulnerable consumers are protected from inappropriate practices. I hope that the noble Lord will see fit to withdraw the amendment.
Lord Mitchell
I just want to make the point again that there is a difference between advertising that is directed at children and advertising that they just happen to see, but that really they are the same thing none the less. Children see them.
Baroness Jolly
Indeed. However, advertising of payday loans is less targeted towards children currently than it may have been in times past. There is also a larger issue here around parents helping children to understand. These adverts are shown in all houses, whether or not the parents have a problem with payday loans. There is an issue for parents to teach their children that this is not the way to go, even though for the majority of parents, that is not the case. However, the Government believe that regulation rather than statutory legislation is the way to move forward in these particular cases.
Lord Alton of Liverpool
My Lords, I am grateful to the noble Baroness, Lady Jolly, for her response to what has been, as she rightly said, a really excellent debate and one which I think has united opinion on many sides of the Committee. The noble Lord, Lord Harris of Haringey, was right when he said earlier on that if this matter could not be successfully resolved in Committee today, it would undoubtedly be returned to on Report. I get the sense, having just heard the concluding remarks from the Minister, that we will want to bring these amendments back on Report, because many of us do not think that regulation will be sufficient to deal with something that needs to be put on a firm statutory basis.
The thing that I will take away from the debate this afternoon is that, as the right reverend Prelate the Bishop of Norwich said earlier, four out of five children are not receiving money management education. I was particularly struck by the graphic example that he gave of people taking out a loan in order to pay for a pizza. That underlines where we are and why we have to do something about this situation.
Positive points have come out of the debate as well. The noble Baroness, Lady Jolly, touched on the issue of credit unions. I intended to do precisely that. The noble Lord, Lord Harris, is right to say that once we dispose of the usurious rates of interest that are being charged by payday loan sharks, that will be replaced by the sort of people described by the noble Lord, Lord Mitchell, offering all sorts of forms of violence. Organised crime may well move into this slot if we do not take preventive measures. We need a fundamental decision on how to give additional support to the welcome support given by the noble Baroness to credit unions, as well as dealing with pester power, dancing puppets and the watershed issue—all the sorts of things raised by the noble Baroness, Lady Crawley, my noble friend Lady Howe, and the noble Baroness, Lady Drake, who, rightly with the noble Lord, Lord Stevenson, reminded us of the importance of free debt advice services.
I was also struck by what the noble Baroness, Lady Bakewell, said, about the destruction of the age of innocence, and what was said elsewhere about the importance of updating the language of children’s protection. I made the point in my opening remarks that if we can do these things on a statutory basis for alcohol and gambling, there is no reason why we cannot do it for payday loan advertising targeted at children as well. I hope that in the period now elapsing between Committee and Report the Government will think again about this and perhaps have discussions across the Chamber to see what can be done to reach consensus. I get the sense that we all want to reach the same conclusion. I beg leave to withdraw the amendment.