Baroness Neville-Rolfe
Main Page: Baroness Neville-Rolfe (Conservative - Life peer)Consumer Rights Bill
Baroness Neville-Rolfe Excerpts
Baroness Hayter of Kentish Town (Lab)
My Lords, I support Amendment 30, which has been moved by the noble Baroness, Lady Oppenheim-Barnes, which would ensure that regulators did what they are meant to do, which is to protect consumers and promote their interests.
I shall speak also to Amendment 50C, which is in my name and that of my noble friend Lord Stevenson of Balmacara. Our amendment would require statutory regulators to develop proper user or consumer representation on their boards, as well as reviewing annually the consumer experience of their industry, including whether consumers were sufficiently well represented and listened to so that their rights under this and other legislation were protected and, indeed, promoted. It would enable regulators to consider whether a levy might be needed to ensure that the consumer voice was clearly articulated.
Regulators exist in exactly those industries where the consumer cannot get a fair deal on their own behalf, either because of effective monopolies of the sort that we have just heard about or because the nature of the service is so complicated, long-term or specialist, such as in financial services or the law, that clients are in no position to evaluate it or to shop around. Despite this, not all regulators put the consumer, in whose interest they are meant to be working, first—sometimes because of industry capture, sometimes because they work at such a helicopter level that they fail to see the real consumer impact, and sometimes, as the noble Baroness has just said, because something new comes along and they are not feeling it from the grass roots up. Usually, however, it is because they do not embed the end-user’s views in their decision-making. They decide policy without researching the consumer’s experience or the consumer’s views, and they sometimes do not seem to understand the ordinary person who pays the bills. Our amendment would embed the consumer voice in the regulators’ governance, where it should have been from the start.
However, the noble Baroness, Lady Oppenheim-Barnes, has a rather craftier alternative, which is to place a duty on the relevant regulators to uphold the rights of consumers and to raise the possibility, as she has just said, of the fines levied by a regulator being used to compensate consumers for breaches of their rights. Given the £1.1 billion fine levied by the FCA last week, that part of her amendment has a particular attraction.
Without these amendments, the Bill will lack a certain crack of the whip in the hands of regulators. I therefore hope they get support.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)
My Lords, I start by applauding the contribution made by my noble friend Lady Oppenheim-Barnes in promoting consumer rights. She has outlined her concerns and given her views on what the regulators can do to help consumers, reading from her amendment. Given how much impact her work has had, her input will be invaluable in ensuring that we have a better understanding of what needs to be done when we start the implementation phase of this important Bill.
It is, of course, important that consumer rights in regulated sectors, just as in the rest of the economy, are protected and promoted; that consumers are given sufficient information to make informed decisions; that they are aware of how to make complaints and seek resolution to disputes; and that they have suitable representation to secure the best possible outcomes. The noble Baroness raised some important issues with this amendment and in our meeting.
However, I am concerned that this amendment would, first, complicate an already complex legislative and governance framework, through which regulators operate, with a number of new rules and requirements. Rather than helping consumers, it could muddy the waters further and lead to complex, unclear decision-making by regulators.
Secondly, it could perversely duplicate the extremely good work already being done across the consumer landscape. There are already various bodies and organisations fulfilling the objectives of this amendment, which I will explain in more depth shortly. In view of the comments made by the noble Baroness, Lady Hayter, I should add that similar concerns relate to Amendment 50C, although that comes from a slightly different angle and would provide, in some circumstances, for a levy.
We must not overlook the good work that economic regulators have done. As noble Lords may know, economic regulators have a statutory duty to take consumer interests into account. The nature of independent regulation means that consumers are at the heart of what they do, and I am confident that this remains the case. If anything, the tone of what I have heard suggests that regulators have not been vocal enough about how much their work helps consumers, so let me highlight a few examples. Average monthly household spend on telecoms services fell by 2.9% in 2013. In addition to this, satisfaction ratings across key telecoms markets are close to or over 90%. The majority of consumers remain satisfied with their service overall. Complaints about fixed-line and mobile mis-selling have decreased. In fixed-line, they decreased from 1,200 per month in April 2005 to just over 400 in 2013, and mobile mis-selling has also reduced very significantly. There is now more choice than ever for consumers, with at least 13 major suppliers of bundled residential services, 114 fixed-line operators and four mobile operators.
Ofcom is pushing to make it easier for consumers to switch providers, which is critical for a well functioning telecoms market. Water leaks are down by 40% since the 1990s, so there is a heritage of affordable water bills, with high-quality drinking water and cleaner rivers. Domestic energy bills, while having increased, are still favourable compared to Europe.
Lord Best (CB)
My Lords, I am delighted to follow the noble Lord, Lord Borrie. I, too, am a vice-president of the Trading Standards Institute. I moved this amendment in Committee because it seemed extraordinary when I first read it that trading standards officers would need to give 48 hours before turning up to find out some wrongdoing on a site, in a shop or whatever. However, the Bill already says that if,
“the officer reasonably considers that to give notice … would defeat the purpose of the entry”,
then the 48 hours’ notice would not have to be given. Nor would notice have to be given if the officer,
“reasonably suspects that there is an imminent risk to public health or safety”.
In Committee we received reassurances from the Minister, who explained that even if there was just a suspicion that there might be something going on, it would be quite in order not to give notice because that would totally undermine the purpose of looking in on the premises. That just leaves the 48 hours’ notice for “a routine visit”, which is how this is expressed in the amendments to follow in the name of the Minister. For a routine visit, 48 hours’ notice would be given but I understand that if trading standards officers are to make a routine visit—probably, as the noble Lord, Lord Borrie, said, to give advice, or to explain that the law has changed and there is something new that the business ought to know about—it will not be a matter of just giving notice. It is a negotiated thing. They will send an e-mail and receive a reply. What is the point of turning up 48 hours later if nobody is there or if the boss is not there and you need to see the boss? If it is something completely routine, this is how people behave just out of politeness, if for no other reason. They will make an appointment and go round and visit. The danger is that this will get blurred, the proper use of the unannounced visit will be inhibited and we will not see justice done when it should have been done. It seems much better if we simply omit this reference to 48 hours’ notice. It was probably a bad idea in the first place. There is a certain amount of retreat from it now—very sensibly by the Minister—but why not just knock it out? It does not seem to serve any purpose.
Baroness Neville-Rolfe
My Lords, the Government certainly share the objective of an effective enforcement regime to protect consumers from rogues and traders from unfair competition. In this Bill we are, of course, consolidating and modernising the investigatory powers of consumer law enforcers, bringing together the powers from different Acts, and ensuring for the first time that enforcers can tackle rogue traders who operate across local authority boundaries. We have also introduced strong safeguards as to how these powers are exercised because the powers are necessarily intrusive. They allow officers to enter premises, seize goods and break open containers, for example.
Under the Bill, therefore, consumer law enforcers will now have to give notice to traders if they want to make a routine inspection. We introduced this change, following discussion in Committee, because we think it is a basic principle of civil liberties that a business should suffer the disruption of an unannounced visit only when there is some good reason, such as suspicion that a business may have broken the law. However, we recognise that trading standards has real concerns about the requirement to give notice. I want to set out the approach that we have taken in more detail before talking about my amendments.
Businesses, including small businesses, are very supportive of strong powers to investigate rogue businesses, as has been said, because they harm consumers and are unfair to them. However, businesses have told us that unannounced routine inspections by enforcers are disruptive, costly and needlessly so. For example, an officer visiting a shop may demand a lot of attention from staff at busy periods or want information that the junior staff available cannot provide. The Federation of Small Businesses told us that the safeguard of two days’ written notice of routine inspections, which can of course be sent by e-mail, will allow businesses to ensure that the appropriate staff and paperwork are available. This means that neither the trader’s nor enforcer’s time is wasted. For example, if an officer visits a retail store to check centrally set price promotions, store colleagues may be unable to change promotions or answer questions on price establishment periods. Hence, matters that could otherwise have been cleared up quite quickly can result in primary authority referrals or a formal investigation.
Clearly, the Government are aware that much of the vital work of enforcement officers is directed at illegal trading. We very much value the excellent work of enforcers such as trading standards to protect consumers and legitimate businesses from rogue traders—including, I should add, the advisory work that the noble Lord, Lord Borrie, mentioned, which I agree is extremely valuable. Officers clearly should not have to give notice of an inspection where illegal trading is suspected. That is why clear exemptions are set out in the Bill, which I need to go into to try to ensure that the House understands how reasonable our proposals are. As has been said, notice need not be given, for example, if there is an imminent risk to public safety. The noble Lord, Lord Best, explained that clearly.
The exemption would apply: where an enforcer reasonably suspects a breach—for example, where enforcers find evidence of illicit tobacco, such as stubs and papers, in the streets near suspected outlets; where giving notice would defeat the purpose of the entry, a good example of that being where counterfeit alcohol is being sold in local shops and the enforcer believes that the traders in question are likely to conceal the illegal products if notice is given; and where it is not reasonably practicable in all the circumstances to give notice—for example, because the officer reasonably suspects that there is an imminent risk to public health or safety, as the noble Lord, Lord Best, mentioned. There are three or four other exemptions but, taken together, these exemptions ensure that consumer protection is properly maintained because if there is evidence of a serious or immediate breach, enforcers can intervene. The Bill supports an intelligence-led approach to enforcement which is an effective use of enforcement resources.
The noble Baroness, Lady Hayter, said that test purchases were less effective if notice had not been given. However, notice need not be given for a test purchase or to observe the carrying out of business.
Baroness Oppenheim-Barnes
Before my noble friend leaves that point, I wish—possibly—to help her. Is she aware that EU authorities have to give only 24 hours’ notice when coming to inspect a British company and, within that period, that the Secretary of State responsible has to provide supporting police for the inspection?
Baroness Neville-Rolfe
I am grateful to my noble friend for that factoid, of which I was not aware. Of course, our proposed regime provides for routine inspections and then, where there is a potential problem, for immediate inspections when they would be more appropriate. That difference is entirely justified, for the reasons that I have explained. Having worked in business, I know that when you have routine inspections you want to make sure that the people who understand all the rules and how the systems work—and have all the necessary paperwork—are available, because otherwise you often end up with a second visit. That is what we are trying to avoid, because that costs both parties.
We have clarified where notice needs to be given by adding to the Bill reference to what a routine inspection is. To offer further reassurance—
Lord Harris of Haringey (Lab)
In the Minister’s amendment, the only definition given is that it is not one of those things that are exempt. In which case, what value does “routine” add?
Baroness Neville-Rolfe
We felt that it helped to clarify that there was not a gap. In Committee, we went through a number of examples about which individual noble Lords were very concerned. Having checked through the examples, we are able to show to people’s satisfaction that the thing would be clear. Doing it this way in the Bill achieves that effect. However, I want to add a further reassurance. I am today committing the Government to reviewing the practical effect of the notice requirement within two years of commencement of this part of the Bill. I have listened to what has been said and we have made changes to try to clarify this. We want to have a good enforcement regime—
Baroness Crawley (Lab)
I thank the Minister and do not wish to detain the House, but does she not agree that a clear lack of definition within the Bill of “routine inspection” boosts the confidence of potential rogue traders, who will take that to court on a technicality?
Baroness Neville-Rolfe
I thank the noble Baroness for her intervention. We believe that the amendment put forward clearly defines the term “routine inspection” for the purpose of this power of entry. We clearly set out the exemptions in the Bill and I commend both our proposed amendments to try to clarify the circumstances, and the review within two years that I have offered, in response to the concerns that have been expressed about exactly how this will work. The powers and safeguards strike the right balance. It is an important area; the notice provision is strongly supported, particularly by the small business sector—not so much by big business—which we all care about because of the huge contribution that it makes to our economy. I ask the noble Baroness to withdraw her amendment.
Baroness Hayter of Kentish Town
I think the House knows that at the moment, no notice is needed in writing 48 hours before. The Government clearly made the wrong call, so they changed it a bit in the Commons by adding, “Well, unless the evidence is going to be lost”. They have now made more changes to say, “Well, routine inspections will be all right”; and now at the very last moment, we hear, “Well, there is going to be a review in two years’ time”. It sounds to me as if the Government know that this is wrong. The noble Lord, Lord Best, had it right: the Government should knock it out. They should not have put it there and it is not a way forward. There is no evidence that trading standards has misused its current powers; it will give notice because it is easier for it to do so. Ofsted does not have to define in law why it has made an emergency inspection without notice. The problem is the uncertainty: that if people are going to have to show that they had reasonable evidence or that they have fulfilled one of these requirements, there will be uncertainty, lack of clarity and fewer visits. I doubt that that is what the Government really want. I beg to test the opinion of the House.
Lord Hope of Craighead
My Lords, I will reply to that very briefly. I thought that I made it clear that the amendment is really provoked by the expanding jurisdiction in Schedule 8. The present position copes satisfactorily—it is not the ideal situation—but the expanded jurisdiction will greatly increase the workload of the tribunal and its visibility, because it is going to deal with private litigation as well as the regulatory authorities. It is that particular feature that is concerning the Lord Chief Justice and, I dare say, his equivalents north of the border and in Northern Ireland. I do not want to criticise anybody on the tribunal at the present time; I am trying to look forward to the expanded jurisdiction and see that it is served as well as possible.
Baroness Neville-Rolfe
My Lords, I am grateful to the distinguished noble and learned Lords, Lord Hope of Craighead and Lord Mackay of Drumadoon, for joining our debate and for their amendments, which are intended to address an anomaly in the appointment of Competition Appeal Tribunal chairs. I recognise their concerns and agree that this difference has existed for far too long.
As noble Lords will know, the CAT has a UK-wide jurisdiction and, as a result of the Bill, we expect the CAT to become the venue of choice for competition cases. As the noble and learned Lord explained, it will be busier. The CAT hears appeals against decisions by the regulators and competition authorities in cases arising in England and Wales, Scotland and Northern Ireland. I agree with the noble and learned Lord that the current process for appointing CAT chairs effectively acts as a barrier to judges sitting in the Court of Session in Scotland or the Northern Ireland High Court.
The Judicial Appointments Commission was created in order to remove the scope for any perceived political interference. As part of its responsibilities, judges who are appointed to the Chancery Division of the High Court are also assessed for appointment as a chair of the CAT. However, the Scottish and Northern Irish equivalents of the Judicial Appointments Commission do not have a remit to make recommendations for appointments of CAT chairmen. This means that the only way judges in either the Court of Session or the Northern Ireland High Court can sit as chairmen in the CAT is to seek appointment via an application to the JAC.
I agree with the noble and learned Lords that this cannot be right, nor can it be what was intended when the Judicial Appointments Commission was created. It seems needlessly bureaucratic, as the noble and learned Lord, Lord Hope, said. This is an issue on which we share common ground and I would welcome the opportunity to discuss it in more detail with the noble and learned Lords to see what progress we can make at Third Reading, including, if appropriate, tidying up any slip. I hope that what I have said reassures the noble and learned Lords and I therefore ask the noble and learned Lord, Lord Hope, to withdraw his amendment.
Lord Hope of Craighead
My Lords, I am extremely grateful to the Minister for her encouraging and constructive reply. I am quite sure that in discussion we will be able to find some satisfactory solution. There are two solutions on the table and I think that, with the assistance of the Bill team, we can probably work out a satisfactory answer. I look forward very much to achieving that before Third Reading. For the time being, I beg leave to withdraw the amendment.
Viscount Eccles (Con)
My Lords, I put my name to the amendment and I will make a brief addition to what my noble friend said. This is a very significant change to the law. It is quite complicated, moving from the present arrangements of opt in to the double arrangement of opt in and opt out, going beyond, interestingly, what the European Union advises, and perhaps not concentrating enough on alternative dispute resolution techniques. Having said all the way through that the one thing we do not want is a US-style lawyers’ charter—we are all agreed on that—unfortunately the Bill is drawn so widely that we run a real risk that that is what we will get.
We need to remember that we are in the Anglo-Saxon camp and have a tendency to do things in a similar way to the way they are done in the United States—in the creative arts or wherever, and including, I fear, the law. We also need to remember that where such arrangements have been made in other jurisdictions, they have not been free of problems. Australia, which is often cited, has had considerable trouble about the authorisation of those who are to conduct the class actions or collective proceedings. It has been described as skirmishing. The way the Bill is drawn, we will have very similar problems with the question of who is to be authorised and who is not—because the person who is not may not be very happy.
New subsection (8)(b) states that a representative can be appointed,
“only if the Tribunal considers that it is just and reasonable for that person to act as a representative in those proceedings”.
I will return to that on the next group, but it is very widely drawn. In support of my worry about the very wide drafting, there was a long and relatively confused debate in the other place in the Bill Committee. The answer, both there and here, seems to be, “Well, the Competition Appeal Tribunal will sort it all out”. I think that that puts too much of a burden on the tribunal and is unlikely to work well.
Baroness Neville-Rolfe
My Lords, I am delighted to see my noble friend Lord Hodgson back with us. We missed him on the day when the amendments were finally reached, but my noble friend Lady Noakes introduced his amendments with great clarity and verve. We had a good debate and we now have several different amendments, some of which we will be discussing in a minute. I am grateful for the efforts that my noble friends Lord Hodgson and Lord Eccles have made to explain their thinking to me in person. We have tried hard to meet their concerns. Having talked to my colleagues in the Government, I am now able to respond positively.
Although this amendment would require a review of the schedule, I believe that its driving force is to examine the effect of opt-out collective actions. I should say that the Government are happy with our proposals and believe that the existing opt-in regime is prohibitive, with only one collective case in 10 years involving 130 claimants. Therefore, the changes in the Bill are important. I do not share the pessimistic view about US-style claims, mainly because of the safeguards that we have written into the Bill, which we will no doubt come on to on the next amendment. However, I wanted to say that we have had a very good discussion, we have listened and we are happy to agree to a review after five years which covers the ground set out in the amendment. Following a further discussion that I had with my noble friend this morning, we will also commit to a ministerial Statement on the review here in Parliament. I am afraid that we cannot put the review in the Bill, as that would have ramifications for other possible reviews elsewhere in the Bill, but I can commit to a review, and I know that the Confederation of British Industry, which I met on Thursday because of its concerns about this part of the Bill, is content with that.
Of course, Schedule 8 does not just introduce an opt-out collective actions regime. It reforms the entire private actions regime for the benefit of both businesses and consumers. I think we are all agreed that consumers come first here. Therefore, the Government believe that it would be appropriate for the review of the impact of Schedule 8 to examine the whole range of reforms. The review would take into account both opt-in and opt-out collective actions, the fast track regime, the number of cases under the CMA redress power, collective settlement cases and, of course, the provisions outlined by my noble friend in his amendment. In those circumstances, I hope that my noble friend will feel able to withdraw his amendment.
Lord Hodgson of Astley Abbotts
My Lords, I am extremely grateful to my noble friend for her response. Of course I would like the provision in the Bill, because that gives it real permanence, but I spot two-thirds, three-quarters or, perhaps, only 5% of a loaf, and I will certainly grab it. In the circumstances, I beg leave to withdraw my amendment.
Lord Hunt of Wirral (Con)
My Lords, I declare my interest as a partner for the last 45 years in the global commercial law firm, DAC Beachcroft. I wish to speak particularly to Amendments 41H, 41J and 41K. In doing so, I support my noble friend in urging caution when examining Schedule 8 to the Bill.
This is a complex area of law and procedure and I would be the first to say that I do not understand it all, but I think that the overview is this. We are now dealing in this group of amendments with situations where, first, one or more businesses have been found to be in breach of competition law; secondly, numerous consumers have been affected as a result; thirdly, the individual amounts by which each consumer is affected are small; fourthly, a collective mechanism is therefore needed; but, fifthly, getting all affected consumers to opt in to join a legal case has not worked to date. Against that background, I can well understand why the Minister has promoted the concept of opt-out, whereby a representative person can take action on behalf of all those affected unless they positively object to being included and so choose to opt out.
My caution is this: that is a wholly new concept in the United Kingdom, so I argue that we must be cautious. We must balance the rights of the consumer with the rights of each individual business, particularly small and medium-sized enterprises, accepting of course that we are dealing with situations where business has been in breach of its market obligations. My noble friend has outlined proposals that examine carefully some areas of the detailed mechanics in this schedule and I support their overall approach, which seems to me to be one of proportionality. I recall, when I was speaking from the Benches opposite on the Compensation Bill, that I urged similar caution when we were looking at the regulation of claims management companies in 2005. I venture to say that if we had been a little more cautious, perhaps we would not have been quite so inundated with nuisance calls and texts about payment protection insurance, where a similar balance has had to be struck.
So how do we promote the interests of the consumer in a proportionate way? I agree that we need to achieve greater control over the identity of the representative person who decides to launch down this compensation trail on behalf of others. To me, the proposal that we limit this to trade bodies has considerable force but, if that is felt to be too limiting, we should lay a clear marker that the guiding principle to be applied in appointing a representative person is that it is in the interest of the consumers, the so-called class members, to do so. I support Amendments 41H and 41K in particular but also applaud the thinking behind the amendments generally.
Baroness Neville-Rolfe
My Lords, I thank my noble friend Lord Eccles for his perceptive analysis, and for the discussions that we have had where we have found much common ground. I am also most grateful to my noble friend Lord Hunt of Wirral for intervening to urge caution from an admirably common-sense point of view.
I shall address each of the amendments in turn, particularly their possibly perverse effects. Amendment 41D would require us to place in the Bill scrutiny of the strength of a claim and the consideration of alternative dispute resolution. I agree that weak claims should not be brought and that parties should attempt to reach a settlement. Rule 7 of the draft Competition Appeal Tribunal rules provides for this, requiring the CAT to consider the strength of the claims and the availability of alternative dispute resolution.
It is appropriate for these requirements to be in the CAT rules so that they can be more easily modified and strengthened if need be. This ensures an effective regime that promotes the interests of consumers. Although the CAT rules have been made available in the House Library, they will be the subject of formal consultation in the new year, well ahead of commencement. I undertake that the points on both the scrutiny of the strength of the claim and the availability of alternative dispute resolution will be included in the consultation document. To clarify, the CAT rules are made via secondary legislation. They are the responsibility of BIS Ministers and produced by the Government. This means they are binding on the CAT, cannot be ignored and cannot be changed by the CAT. They are the right place for most of the concerns that we have outlined today.
The micro-amendments, Amendments 41E and 41G, would limit a collective action to one representative. I understand why my noble friend would like to prevent multiple representatives bringing claims, as that could lead to businesses facing uncertainty and larger claims for damages. However, these mini-amendments would also have unintended consequences, as he hinted, because they would prevent hybrid claims. These are claims where more than one group of claimants—for example, consumers and small businesses—join together to bring a case. For instance, in a claim for damages following a cartel in rail fares, both consumers and SMEs may wish to make a claim. During the private actions consultation in 2012, however, business groups said that the one thing they wanted was finality and closure. They want to be able to pay out one set of damages and know that it is binding on those within that action.
To prevent a business having to respond to multiple representatives, there is discretion for one representative to be the lead representative. I am happy to discuss this further with my noble friend Lord Eccles in the context of the consultation if that would be helpful. Ruling out hybrid cases, as these mini-amendments would, means that businesses might face an opt-out collective action as well as multiple follow-on actions. There would be an incentive for claimants to race each other to court to commence a claim before anyone else, even if that claim was then dropped. This type of behaviour could lead to just the kind of litigation and cost that we all want to avoid.
Amendment 41F would provide the CAT with discretion to take into account any other matters that it considered relevant when authorising the representative. The Bill already provides the CAT with a great deal of discretion, and the CAT rules will include other factors that the CAT must take into account. This is likely to include any other factors that the CAT considers relevant.
Amendment 41H would exclude SMEs from bringing forward collective actions that would reduce their access to redress. We have deliberately avoided a prescriptive list of eligible bodies and instead afforded the CAT discretion, in accordance with the CAT rules, to determine whether a body is suitable. The CAT is a specialist competition court with a strong track record in dealing with consumer detriment. The Government believe that the CAT is best placed to scrutinise every body that seeks to act as a representative.
The CAT includes High Court judges—and may include some more if we make progress on the other amendment—who are experienced in making decisions based on broad criteria. It is appropriate that they use their experience to scrutinise each case on its merits. However, we would welcome contributions to our consultation on the collective action provisions of the CAT rules to help to ensure that only suitable bodies may bring collective actions.
Amendment 41J would require that the CAT may authorise a person to act as a representative only if they had appropriate experience and standing. The Government believe that this could be problematic. Given the lack of collective action cases brought forward in the past 10 years, it would be extremely difficult for the CAT to find a representative who would satisfy these claims. It is the Government’s intention to ensure that only appropriate representatives can bring forward cases, with discretion given to the CAT to achieve just that. Again, I will undertake to ensure that this concern is covered in the consultation.
Amendment 41K would require that the CAT believes the representative will act in the best interests of the class members. I agree with the sentiment of the amendment. Indeed, the rationale behind wanting only consumer organisations and trade bodies to bring collective actions is that they will represent the claimants’ best interests. To this end, we have introduced a similar test in the CAT rules. I am reluctant to place such a requirement in the Bill as it may deter those cases that have a mixture of consumers and SMEs. This is because the CAT might be forced to decide that a consumer organisation cannot represent a business or that a trade body cannot represent consumers. In turn, this would lead to business having to respond to multiple representatives, and possibly claims, which, as we have already, said we are keen to avoid.
I have discussed these amendments with noble Lords and set out some further considerations this evening. I hope that I have provided some useful reassurances about the consultation process. I hope that my noble friend will withdraw his amendment.
Lord Hunt of Wirral
My Lords, I strongly support my noble friend for all the reasons I outlined a little earlier. His Amendments 41L to 41N seek to promote the interests of the consumers above those of others and should therefore be warmly welcomed. If the representative person and the lawyers and funders working with them are incentivised to find enough of the consumers to make the compensation process worth while, that must be the right way forward. Surely the worst thing we could do is create a system that is intended to provide greater benefit to consumers and succeeds in taking money from the guilty parties, but then fails to pass it on to the consumers themselves. The case is so strongly made, and I support it wholeheartedly.
Baroness Neville-Rolfe
My Lords, Amendments 41L, 41M and 41N place certain restrictions on the amount of legal costs that can be awarded to a representative. The Government agree with my noble friend Lord Hodgson: they do not want lawyers gaining excessive financial benefit from this regime. Any damages should be awarded to the claimants. We agree with the overall objective of getting the cash to consumers. For that reason, the Government have placed in the Bill measures to restrict the costs lawyers can claim.
The first key safeguard is that the CAT must certify that a representative is suitable to bring a collective action. The draft secondary legislation requires the CAT to consider whether the representative has a material interest that conflicts with the interest of class members. That means a law firm will not automatically be able to bring a claim. Secondly, the Bill prohibits the CAT from awarding treble damages, which limits the scope of unclaimed damages. Thirdly, the Bill contains restrictions on the financing of claims because it prohibits damage-based agreements, which means that lawyers cannot take away some of the damages from claimants. The Bill also does not provide for a claimant to be able to recover any uplift in legal costs from a conditional fee agreement—so-called no-win no-fee agreements.
A conditional fee agreement provides for a success fee for lawyers who win a case. Unlike standard legal fees, which can be recovered from the losing party, a conditional fee agreement has to be paid by the party being represented. In a collective action case, that may be the consumer organisation or the trade body. Therefore, it is in their interest to avoid conditional fee agreements or, where they enter into them, to negotiate the success fee so that it is as low as possible.
It is imperative that damages are paid to claimants. Therefore, if a representative wishes to use any unclaimed damages to cover their legal costs, two stages are set out in the Bill. This comes to the heart of the points that my noble friend Lord Hodgson raised. First, legal costs may be recovered from unclaimed damages only after claimants have had an opportunity to come forward and claim their damages. That means that if all claimants come forward and claim their redress, there will be no unclaimed damages to apply for to pay legal costs.
Secondly, any award of unclaimed damages has to be approved by the CAT. Additionally, the draft CAT rules, which noble Lords will recall is secondary legislation on which we will consult, require the CAT to consider the ability of the representative to cover legal costs if ordered to do so and will require an estimation of the legal costs. Any further restrictions may discourage representatives from taking on these cases completely, as they will have very limited means of recovering their costs, which may mean that the consumer receives little or no redress.
I hope that my noble friend is reassured by the discussion we have had on these three amendments that we are aware of the concerns around introducing an opt-out regime; that we have addressed the concerns that have been expressed through safeguards; and that we stand ready to undertake a strong consultation on some of the details we have debated. I hope that he feels able to withdraw his amendment.
“(3A) The CMA may approve a redress scheme under subsection (2)(b) subject to a condition or conditions requiring the provision of further information about the operation of the scheme (including about the amount or value of compensation to be offered under the scheme or how this will be determined).
(3B) If the CMA approves a redress scheme subject to such a condition, it may—
(a) approve the scheme subject to other conditions;(b) withdraw approval from the scheme if any conditions imposed under subsection (3A) or paragraph (a) are not met; (c) approve a redress scheme as a replacement for the original scheme (but may not approve that scheme subject to conditions).”
Baroness Neville-Rolfe
My Lords, with this amendment we turn our attention to Schedule 8 and focus on some other aspects of competition law.
Effective competition is good for the consumer, and this part of the Bill reforms the regime for private actions to give businesses and consumers redress where they have been harmed by anti-competitive practices. However, the current private actions regime is not delivering the redress to consumers or SMEs that we would like. Therefore, Schedule 8 reforms the existing regime. As part of those reforms, the Government recognise that business may want to offer redress voluntarily, so the Bill provides for the Competition and Markets Authority to approve redress schemes.
It is imperative that, for the business to make use of redress schemes, we strike the right balance in incentivising business and providing redress to consumers. This amendment allows for the CMA to approve an outline of a redress scheme when the CMA finds a breach of competition law. That removes the requirement for a business to submit a complete scheme at that time. That change is being made to prevent businesses being deterred from putting forward a scheme at an early stage. Businesses are concerned about disclosing information while still under investigation and the costs of setting up a scheme which may ultimately not be approved by the CMA.
If the CMA approves the outline redress scheme, it will be able to impose a deadline by which the business must have complied with conditions necessary to set up the full scheme. Once the full scheme has been created, the amendment allows the CMA to withdraw its approval of the scheme if it has not complied with the conditions. It also enables a revised scheme to be considered. I beg to move.
Baroness Hayter of Kentish Town
My Lords, we support the intention of this amendment. I know that it has been brought to the attention of BIS that Which?, certainly, is worried that the wording would not have the effect it wants. It looks as if the CMA will be bound into a pre-approved school and cannot object to it later because of the inability to revoke pre-approval once given. This is technical and not for tonight; if between now and Third Reading the Government’s lawyers concur with Which? that the wording is not quite right, perhaps we could bring it back and help it at that stage.
Baroness Neville-Rolfe
My Lords, I am grateful to the noble Baroness. I was aware that Which? had expressed some concerns during the course of today. The amendment actually flowed from the work of the private actions working group, which involved different stakeholders on this Bill. We have had discussions with Which? and we are happy with the form of the amendment. I can brief the noble Baroness separately if she wishes, but I do move the amendment.
“(4A) But, where the CMA approves a redress scheme subject to a condition of the kind mentioned in subsection (3A), subsection (4) does not prevent further information provided in accordance with the condition from forming part of the terms of the scheme.”
Baroness Hayter of Kentish Town
Amendment 44 stands in the name of my noble friend Lord Stevenson and myself and is about client money protection. It would require every letting agent to have the money they hold either belonging to the tenant, because it is being paid by way of advanced rent, or belonging to a landlord in that it concerns rents received but not yet handed on, to be protected, so that even if the letting agent were to disappear or go bankrupt, such money would be safe and available to the tenant or the landlord. This is something that is required of lawyers, of other professionals and of estate agents, who hold money belonging to others. It is what is needed for rents collected by letting agents on behalf of landlords. It is not their money, and it should be held separately in a protected client account.
It is no small issue. We know of at least 500 cases of letting agents taking money from tenants as a holding fee, but then not letting them move in and keeping the money. This autumn we saw an agent, Mr Glasson, jailed for 21 months because he unlawfully and dishonestly kept rents and deposits; Mr Jackson of Suffolk Lettings stole £70,000 from landlords; and another letting agent, Mr Farrer, stole £17,000 in rents and deposits. This money was neither paid back to tenants nor passed on to landlords. Shirley Player was jailed for stealing £400,000 in this way.
This is money that is not going into the housing market. It is depriving landlords of their income, and tenants of their security. Amendment 44 is supported by landlords as much as it is by tenants. It is backed by the National Landlords Association, the Royal Institute of Chartered Surveyors, the British Property Federation, the Association of Managing Agents, the Association of Letting Agents, the Property Ombudsman, Ombudsman Services, Crisis and Shelter. It was also recommended by the CLG Select Committee in the other place. As David Cox, who leads ARLA, said, client money protection,
“is fundamental for tenants and landlords to ensure they have peace of mind should an agent go bust or take off with their funds”.—[Official Report, 3/11/14; col. GC 594.]
Similarly, a director of Kinleigh Folkard and Hayward said that it should be compulsory for all agents to subscribe to a client money protection scheme. Again, Savills urged the Government to make it compulsory for letting agents to have client money protection. It said that millions of pounds of consumers’ money is being paid to letting agents, despite the fact that,
“anyone can open a letting agency unregulated and with no checks on their bona fides”. —[Official Report, 3/11/14; col. GC 594.]
We are talking about vast amounts of money. It is estimated that perhaps £2.7 billion is held at any one time—in other words, rents collected but not yet paid on to a landlord. We want every letting agent to maintain a segregated client bank account for such client money, with written confirmation from the bank that all money in that account is the client’s, and—importantly—that the bank is not entitled to combine that account with any other account, nor exercise any right to offset money in the client account, because any sum has been owed to the bank by the agent.
There is also client money protection insurance. That would ensure that when an agent fails to manage a client account properly, the landlord can claim against the scheme, because the largest losses are where a letting agent goes into liquidation and the client account has been emptied by the agent. Ombudsmen cannot help in those circumstances; it is simply no good making an award against a bankrupt agency. We know, for example, that when the London Housing Solutions agency went into administration, 100 landlords were left without the rents that had already been paid over by their tenants, but which never reached them. Amendment 44 would require letting agents to have appropriate client money protection to safeguard both landlords and tenants.
I think that the Government were convinced by our argument, and by the representations of RICS, landlords and everyone else in Committee. However, instead of saying, “Yes, this is the right thing to do”, and making letting agents the same as estate agents—which, as it happens, hold very little money—the Government have said, “Well, let’s get letting agents to say whether they have client money protection”. That is in Amendments 44A, 44B and 44C, that the Government have tabled. But that is an absolute damp squib. Any letting agent that already has client money protection already tells you that. They do not need this Bill to make it known; they boast about it. The problem is not the people who have got client money protection, it is the letting agents who have not got it.
The Government amendments would, I am afraid, add nothing, and they would not help tenants at all, because tenants cannot shop around to find a different letting agent. The landlord does at least have some choice, so at the point they choose the letting agent, they can see whether they have client money protection; but they cannot keep on checking on it after that. The tenant has absolutely no ability to shop around. They have to pay the rent to the letting agent selected by the landlord, with absolutely no guarantee that the rent will actually reach the landlord.
The Minister has said in Committee that the client money protection that we have been urging could,
“make it difficult to encourage landlords to invest in properties”.—[Official Report, 3/11/14; col. GC 600.]
But it would have completely the opposite effect. It is the security given to landlords by client money protection that will encourage them to invest, knowing that all rents that are being made over to the letting agent by tenants are safe and sound.
This amendment is wanted by tenants, by landlords, and by reliable agents. I beg to move.
Baroness Neville-Rolfe
My Lords, I listened carefully to the debate we had on this issue in Committee, and to the points made today by the noble Baroness, Lady Hayter. I remain concerned that requiring letting agencies to belong to a client money protection scheme would introduce significant costs into this sector, which could have implications for rent levels and the availability of affordable rental properties.
Requiring agents to pay to belong to a client money protection scheme is forcing honest agents to buy insurance against themselves being fraudulent—something the vast majority of agents are not. Let me explain. There are two main reasons why a landlord or tenant could lose money that is held by a letting agent: the first, as already mentioned, is that the agent is fraudulent; the second is that the agent has gone bankrupt.
While I agree that an agent will not always know that they are about to go under, client money held in registered client accounts agreed in advance with the bank will be protected and returned to the client, rather than used to settle the agent’s debt. This is standard business practice and is not expensive. Good agents can therefore protect their client’s money without having to join expensive third-party insurance arrangements. These arrangements would be expensive. I am aware that good agents may do this already and that deposits must already be protected by law, but they are not as complex and expensive as they would be as a result of this amendment.
Baroness Neville-Rolfe
My Lords, I am grateful to the noble Baroness, Lady Hayter, for her comments and to my noble friend Lady Bakewell of Hardington-Mandeville for sharing her experiences.
The Government have already taken the opportunity of this Bill to increase transparency in the lettings market—an important change. In addition, a letting agent is already required to be a member of an independent complaints scheme. Now is not the right time to introduce yet further regulation on lettings, which will introduce greater costs into the sector. Instead, we have agreed to review these measures a year after introduction. That is the time to see whether the changes are working and whether further measures are required.
I turn to Amendments 44ZA and 44D. While I share the concerns expressed about the practice of charging both parties for a transaction by estate agents and lettings agents, I do not believe that regulation is the right way to tackle this issue. Many letting agents do share the cost of providing a service between tenants and landlords where both benefit from the service. This is consistent with standard practice in other industries—for example, auction houses—and is not considered to be double charging.
Letting agents are commercial operations and it is important that they are able to set their own terms and conditions without interference from government. Restricting these terms and conditions risks perverse consequences, such as increased fees for one party or an increase in fees for other services, such as property management and property searches. Mandating transparency, as we propose, will enable landlords and tenants to shop around, encouraging competition between agents on fee levels. Agents with the best-value services will prevail in the market, and that is what is best for tenants and landlords.
Turning to the possible prohibition of fees to tenants proposed in Amendment 44D, we see this as yet another example of a demand for blanket regulation which will only introduce costs, put off new providers, and ultimately reduce choice for tenants and deter lettings. Banning letting agents from charging fees to tenants is not necessary; transparency is a low-cost measure which will promote competition on fees. Transparency encourages agents to be competitive on their fees, and ensures that tenants and landlords are able to make informed choices.
Amendments 44ZA and 44D, concern a different strand of business but with some similarities. In fact, the local estate agent in my village has just sold her lettings business. The noble Baroness, Lady Hayter, expressed concern that estate agents are not covered by our amendments. I think she feels that they do not have to be transparent about their fees. I can assure the House that this is not the case. Under existing legislation, including the Consumer Protection from Unfair Trading Regulations 2008, estate agents must make fees and charges clear. She also talked about unethical agents but, in addition to the 2008 regulations, estate agents are regulated by the Estate Agents Act and they have their own industry standards.
Since concerns were raised in Committee about charging buyers as well as sellers, I am glad to say that we have continued to work with the Property Ombudsman, who has confirmed that updated guidance will be in place early in December. This guidance will address concerns raised by noble Lords at that time in relation to charging by estate agents and the need to avoid conflicts of interest. It will ensure that agents understand their obligations to make charging arrangements clear and avoid such a conflict.
In Committee, noble Lords also raised concerns that this non-legislative solution does not go far enough. However, estate agents must belong to a redress scheme. If they are removed from a scheme for breach of the code, including a breach of this new guidance, they would effectively not be able to work as an estate agent. That puts a considerable bite behind the obligations set out by these schemes. I would be happy to update noble Lords when the guidance is published.
As regards Amendment 50E, I agree that retaliatory eviction is a problem within the private rented sector. As the noble Baroness said, we have given support to action in the other place. I was very pleased to hear from my noble friend Lord Cathcart that as a landlord he is completely against the practice. He expressed concern and pointed out the circumstances in which tenancies normally end, bringing his experience of the sector to our proceedings. On 11 September, the Government announced their support, in principle, for the Tenancies (Reform) Bill, a Private Member’s Bill, which is designed to outlaw retaliatory action. As has been said, that Bill is due to have its Second Reading on 28 November. Our support is subject to the proviso that safeguards are put in place to ensure that the reforms do not bring in excessive red tape and so make it harder for landlords to evict tenants who should be evicted, for example, for non-payment of rent in circumstances as described by the noble Lord, and that the legislation does not impose unfair burdens on good landlords because of spurious or unfounded complaints.
We will produce a guide for tenants to help them understand how to identify health and safety hazards in the home.
Lord Harris of Haringey
If the Government are in support of this Private Member’s Bill in the Commons, which may or may not pass, why are they not prepared to see similar provisions written on the face of this Bill, in legislation that will get through Parliament?
Baroness Neville-Rolfe
I thank the noble Lord for his intervention and I will come to that point.
Perhaps I may pick up on the point about health and safety, which I know is another concern that I share with the noble Lord. There will be a guide for tenants to help them understand how to identify health and safety hazards in the home and what to do if the landlord does not take action to make the necessary repairs. Furthermore, our How to Rent guide, which was published in June, makes it clear to tenants that if a property is in an unsafe condition and the landlord will not repair it, they should contact their local authority, which can make the landlord deal with serious health and safety hazards.
We agree with the need to tackle the problem of retaliatory eviction, but we do not think that this amendment will add anything further to the guidance that is already available and which we have committed to. I am aware that some are concerned that the Tenancies (Reform) Bill is unnecessary as existing consumer law already provides protections. I have listened to the comments of my noble friend Lord Cathcart and his description of good practice, but the Government are clear that legislation is necessary: hence our support, in principle, for tackling this problem through the Tenancies (Reform) Bill. The noble Lord, Lord Harris, asked why we could not simply write this into the Consumer Rights Bill before us today. I have explained our attitude to the Private Member’s Bill. There are certain aspects of it that need to be debated and we are not happy simply to write it into the legislation as it is. We would like to see it debated in Parliament and we will obviously give it our support.
In the circumstances, I ask the noble Baroness to withdraw her amendment, and I look forward to her party’s support for the Tenancies (Reform) Bill.
Lord Rooker
The Minister has been very positive about the Private Member’s Bill and therefore it should be quite easy for her to give a commitment to the House that in any wash-up prior to the general election, the Government will move to salvage the good parts of that Bill if they are at risk of not getting through.
Baroness Neville-Rolfe
What I was going to say is that the wash-up is a little above my pay grade. However, I note the point made by the noble Lord and I can confirm that we are supportive of that Bill on the terms that I have set out.
Baroness Hayter of Kentish Town
My Lords, my noble friend has made a good suggestion but it seems to me that the response could have been, “Let us have the debate in the Commons on Friday”, so that it could either come back here at Third Reading with the correct wording or, indeed, when this Bill goes back to the other place, as it has to do. I think that we have retaliatory eviction in the pocket; one way or another, we look forward to seeing it before May.
I do not understand some of the Government’s responses. Their idea is that this legislation could put off new providers. I do not know about everyone else’s high street, but we have quite enough in the way of estate agents and letting agents. The notion that they will not be set up because we legislate for them to provide decent treatment for tenants and landlords, and indeed for buyers and sellers, is not one that I accept. I thank the noble Baroness, Lady Bakewell, for her support because there we have it from a real consumer who went to a letting agent and saw what happened. Basically, you keep on paying but you are not sure what it is that you are paying for.
Our amendment would do two things. It would stop estate agents from charging sellers and buyers for the same service and it would stop letting agents from charging tenants what they have already charged landlords for. I wish to test the opinion of the House.
“(4A) Subsections (4B) and (4C) apply to a letting agent engaging in letting agency or property management work in relation to dwelling-houses in England.
(4B) If the agent holds money on behalf of persons to whom the agent provides services as part of that work, the duty imposed on the agent by subsection (2) or (3) includes a duty to display or publish, with the list of fees, a statement of whether the agent is a member of a client money protection scheme.
(4C) If the agent is required to be a member of a redress scheme for dealing with complaints in connection with that work, the duty imposed on the agent by subsection (2) or (3) includes a duty to display or publish, with the list of fees, a statement—
(a) that indicates that the agent is a member of a redress scheme, and(b) that gives the name of the scheme.”
Qualifying institutions for the purposes of the student complaints scheme
(1) The Higher Education Act 2004 is amended as follows.
(2) In section 11 (qualifying institutions for the purposes of the student complaints scheme) after paragraph (d) insert—
“(e) an institution (other than one within another paragraph of this section) which provides higher education courses which are designated for the purposes of section 22 of the 1998 Act by or under regulations under that section;(f) an institution (other than one within another paragraph of this section) whose entitlement to grant awards is conferred by an order under section 76(1) of the 1992 Act.”(3) In section 12 (qualifying complaints for the purposes of the student complaints scheme)—
(a) in subsection (1) for “subsection (2)” substitute “subsections (2) and (3)”, and(b) after subsection (2) insert—“(3) The designated operator may determine that a complaint within subsection (1) about an act or omission of a qualifying institution within paragraph (e) or (f) of section 11 is a qualifying complaint only if it is made by a person who is undertaking or has undertaken a particular course or a course of a particular description.””
Baroness Neville-Rolfe
My Lords, I would like to end by thanking the noble Baroness, Lady Hayter, for retabling this important amendment, which seeks to ensure that students in receipt of student support funding can access the dispute resolution scheme run by the Office of the Independent Adjudicator for Higher Education—the OIA. In Committee, the noble Baroness set out a cogent case for ensuring that higher education students receiving public support should have access to this valuable service. We listened carefully to those concerns. As the noble Baroness pointed out, the 2011 higher education White Paper, Students at the Heart of the System, had already set out our intention to require that all higher education students receiving public support should have access to external dispute resolution. This was part of a wider package of measures aimed at developing a new regulatory framework across higher education that required legislation to implement it.
Increasingly, there are new and different providers offering higher education, not just the traditional university sector. Currently, students at these newer higher education providers do not always have the right to take their unresolved complaints to the OIA. A handful of alternative providers have so far voluntarily joined the OIA’s complaints handling scheme. However, we think that all higher education students receiving student support should be able to access this service, and the only way to achieve this is by requiring it in legislation. We have now tabled a government amendment to enable a much wider group of students in future to have access to the OIA’s complaint handling scheme. In practical terms, it means that full and part-time higher education students in receipt of student support and studying at alternative providers and further education colleges in England and Wales will be able to bring a complaint to the OIA.
In future, these students will be able to ask the OIA to look at unresolved student complaints on issues such as an institution failing to deliver courses as advertised or courses that are not fit for purpose; misleading or untrue information about a course; and complaints about teaching and facilities, bullying and harassment and welfare issues. We should also expect to see an improvement in complaint handling arrangements at those institutions required to join the OIA scheme. A major part of the OIA’s role is also to spread good practice in complaint handling more generally. I beg to move.
Baroness Hayter of Kentish Town
My Lords, it is a genuine pleasure to thank the Minister for responding to the amendment that we tabled in Committee and improving the language somewhat from our draft. We are delighted by that. She may, however, be amused to learn that just yesterday, Which? published a new report. It is entitled A Degree of Value: Value for Money from the Student Perspective, and it calls for all higher education students to have access to the OIA. The report was published yesterday; students are going to get it in about 30 seconds’ time. I am not sure whether Which? will claim the credit, but it is nice that it will seem a quick win for it. We are delighted, and I know that the adjudicator is also very pleased that this will treat all students in the same way. I thank the Minister and we look forward to that being enacted.