Small Business, Enterprise and Employment Bill

Debate between Baroness Neville-Rolfe and Baroness Hayter of Kentish Town

Tuesday 3rd March 2015 Lords Chamber

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I shall add a few words about this because we are talking about the products and services that very small businesses buy not on a regular basis or within their main business. In the next amendment, we will come to the Government’s welcome attempt to encourage the growth of home businesses, but in other ways aid that could be given is strangely absent from the Bill.

As my noble friend Lord Mendelsohn said, we argued that the Consumer Rights Bill should cover micro-businesses for things bought outside their main area of business. We can all give examples of this, such as when an employee gets married and the boss sends a bouquet of flowers, except that it never arrives; or a sole trader suddenly needs some cleaning done because of an unexpected leak but the dry cleaner damages the chair cover; or a book-keeper needs a new kettle, a radio or a Hoover, but finds she or he will have none of the new protections provided in the Consumer Rights Bill; or, similarly, a charity orders sandwiches for a farewell lunch for a volunteer which fail to turn up.

There is no good reason for those people in such circumstances not to be treated as normal consumers. Unless this amendment is accepted, they lose those rights simply because the cheque is made out on a business account. As my noble friend reminded us, in Committee on the Consumer Rights Bill the Minister told me that such consumer rights for small businesses were best covered in this Bill, but these rights are not there. This is surely the time to add them.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, I thank the noble Lord for his amendment about treating small and micro-businesses as consumers. I welcome the opportunity to return to this issue. I am very glad to welcome back to the debate the noble Baroness, Lady Hayter. She reminded us of the good and graphic examples she always brought to the Consumer Rights Bill, which is very nearly on the statute book.

Since Committee, we have been giving this issue considerable thought. I remain concerned about the potential consequences of introducing such a wide-ranging measure in primary legislation. As I set out in Committee, we simply do not know the costs it might impose against the benefits which are assumed. The Government of course recognise that these concerns may not be realised, but nevertheless they, and the assumed benefits, require exploration.

Uppermost in my mind is the importance of small and micro-businesses to the UK economy, which the noble Lord, Lord Mendelsohn, rightly emphasised. As we know, these businesses make up 99% of all businesses in the UK and total 5.2 million businesses. Of these, 96% are micro-businesses, which in aggregate employ 8.3 million people and have a turnover of £655 billion.

The Government believe this underscores the need to move carefully. The Bill is designed to support small and micro-businesses and put in place the conditions for them to prosper. The unintended consequences of sudden changes in regulation have the potential to undermine these efforts. We do not know what the impact would be here. We only know that some business groups have concerns, which I will come on to in a minute, especially about the blanket application of consumer rights. This arises, I think, mainly because a protection for small businesses when buying could be a cost for such businesses when selling to others. The worst-case scenario would be where a small business buys an item from another small business and the item fails and causes a significant loss. The purchasing small business seeks to recover that loss from the supplying small business and, as a consequence, the supplier goes out of business. Currently, the businesses could agree in their contract to a reasonable limitation of this type of liability, whereas under this amendment they would not have scope to do so.

Since we last debated this issue, officials in my department have met business representatives and leading academics. As a result of these conversations, I am confirmed in the view that the issue is not straightforward. The British Retail Consortium considers that that the question of small business protection needs detailed consideration before any action is taken. For example, it raised concerns that the measure would remove businesses’ ability to reasonably limit liability in dealings with other businesses, and the possibility of this leading to significant claims for loss of business earnings.

[Baroness Hayter of Kentish Town]

I am sorry to intervene, but that suggests that the Minister is referring to things which are integral to the business. The example we gave in Committee was hair-dryers bought by a hairdresser. Of course if they failed that would create difficulties, but we are not talking about such things. We are talking about things that are not key to the core business, and therefore any failure would not lead to business interference.

[Baroness Neville-Rolfe]

I thank the noble Baroness for her clarification. The problem is that both the items she has described and other items might be covered, but perhaps I could make a little more progress.

I accept that the issue should not simply be dismissed for exactly the kind of point that the noble Baroness, Lady Hayter, has made. There are various points that need to be explored, so in the spirit of collaboration the Government consider that a possible way forward is to hold a public call for evidence, which we need. If the noble Lord will agree to this and withdraw his amendment, I propose that my department publish a call for evidence before the end of this Parliament so this can be taken forward. As I have said previously, small businesses and micro-businesses are not unprotected at the moment. There are protections in the existing law and these also allow businesses to enter into flexible transactions. All businesses need the freedom to contract for their particular requirements, which the current framework allows.

The call for evidence—if this seems a positive way forward—would ask whether these current arrangements offer sufficient protection or whether a gap in the law exists. If such a gap was found to exist, it would enable the Government to better assess whether this could be addressed by extending some of the consumer protections in what should shortly become the Consumer Rights Act to small businesses and micro-businesses, or through other options if they seem better.

I wish to thank the noble Lord and the noble Baroness for the commitment they have shown to this issue. I know we share the same objective of ensuring small businesses and micro-businesses are well supported. I hope that on this basis he will feel able to withdraw his amendment.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Baroness Hayter of Kentish Town

Tuesday 24th February 2015 Lords Chamber

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I see no reason why the noble Baroness, Lady Heyhoe Flint, should not feel triumphant. I think that is the right approach, and I join her and others in thanking the noble Lord, Lord Moynihan, who has done so much to bring us here, and also, as others have said, the Bill team; the sports and arts bodies; my colleague Nicola Jayawickreme, who has seen us through this; my noble friend Lord Stevenson, who alas is in a jungle today and cannot be with us; my gig-attending honourable friend Stella Creasy, who fought this much more alone, I have to say, in the other place; and also, if rather at the wire, the Government.

However, given that this will affect some of our premier sports, perhaps that final spurt, the holding of our collective breath till the very last moment when the line was crossed, and the smiles and cheers at the Minister’s words are particularly appropriate. Indeed, had the Minister sung her speech, that would have reflected as well the arts world’s relief that sense has prevailed and that genuine fans of music or sports will have access to the best without having to witness only those with the deepest pockets being able to pay to see the best of British performers, whether on the track or on the stage.

Furthermore, the money paid by fans will now, we hope, go to the promoters or the performers but will not be skimmed off by those who buy tickets purely to make excess rent, in the economic jargon. This was never an issue of individual fans wanting to sell the odd ticket they could no longer use. It is, as has been said, about industrial-scale touting—the buying up of sheaves of tickets to make a quick bang—and it is that that Motion A1 seeks to address.

We know that the Government had strongly resisted until almost the very last moment Motion A1 and all attempts to tackle an industry that makes a few people very rich but sucks money not just from fans but from sports and arts bodies—those that want to keep prices within the reach of all, not just the rich, so that ordinary rugby club members can go to Twickenham, tennis players to Wimbledon and music fans to their favourite gigs.

I remember that some years ago Paul Hamlyn opened the opera house—I think to celebrate his wife’s birthday—simply to groups of young people or community groups. I took 20 people there who would never have gone into the opera house without this. I will remember their faces, I think, for as long as I live, and the delight they had. I think they paid £10 a seat. In today’s world, with today’s methods, all those tickets would have been hoovered up and all those people denied that wonderful chance to go there.

Today the Government have accepted that it is time to deal with that industry, and we are delighted. There are of course issues not yet covered by the Motion, but these can fall to the review to consider. I hope the Minister can assure us that both sporting and arts representatives will be consulted on the choice of chair as well as on the terms of reference so that we learn from other inquiries. To add to the mix that has already been mentioned, I also ask that the Government consider for the review research into the impact of touting on fans and events, the effects it has in terms of pricing out ordinary fans and the wider reputation damage to events. They should also consider actions on bots, which have been explained to us, and enforcement of existing legislation; also, what constitutes a ticket—is it a piece of paper or is it the right to attend an event? Finally, they should consider whether the ticket identification number needs to be added to those tickets where there is no block, row or seat number.

Today, as the noble Viscount, Lord Younger, suggested, shows a job well done by your Lordships’ House. This final change will strengthen the Consumer Rights Bill. I think it is a triumph for the rights of consumers, in this case in the guise of fans and supporters. We wish the whole Bill well as it gets its final sign-off from the other place.

[Baroness Neville-Rolfe]

Before the noble Lord, Lord Moynihan, responds, perhaps, rather than repeating them, I will say that I share the many tributes that have been made during this debate to and by the noble Lord, Lord Moynihan. They have been made by the noble Lords, Lord Clement-Jones, Lord Stoneham and Lord Holmes, the noble Baronesses, Lady Heyhoe Flint and Lady Hayter, and the noble Lord, Lord Pendry, with his deep knowledge of the football world. On his question, the Bill provides for the measure to come into force two months after Royal Assent—so ahead of the Ashes and the Rugby World Cup, I hope.

I am also grateful for the points made by my predecessor, my noble friend Lord Younger, who did so much for enforcement of IP and the battle against counterfeiting. I will take away his various ideas, notably for dealing with fraud, and look forward to discussing his questions with him and feeding them into the review. I was also interested in his reference to sunsetting, which is one of the ideas that we look at in our Better Regulation work in the business department.

My noble friend Lord Borwick raised two important issues relating to how the amendments affect the secondary market in terms of employment and market share. As has been said, we have yet to set the terms of reference for the review, but I assure him that those issues will be considered for inclusion. He also expressed the concern that the amendment might criminalise consumers who give incorrect information. I reassure him that it will not introduce any criminal offences; the enforcement is but by civil penalties.

I can confirm that the blanket protection on ticket resale of the kind cited by the noble Lord, Lord Stoneham, is not provided for in the amendment. I reiterate what I said earlier on this important point: terms that prohibit or restrict resale above a particular price are assessable for fairness. They are not always fair and are not binding on the consumer if that is the case.

This is, of course, a compromise provision. The Government were not willing to jeopardise the passage of the Consumer Rights Bill. Therefore, while we share some of the concerns raised about how the industry could interpret the new legislation, it is up to it to show that it treats all fans fairly and to make these changes a success. We have a statutory review, which will be an opportunity to look at this matter and at many of the issues debated today. I know that this House will be very interested in the results of the review and that many noble Lords will feed in their thoughts and ideas. I should make it clear, as the noble Lord, Lord Moynihan, touched on the subject, that the review is a joint one between the DCMS and BIS—the reviewer is to be appointed jointly by the two Secretaries of State. I note the various points made by the noble Baroness, Lady Hayter, and will take them away to ensure that we have the right independent chair and the right terms of reference.

I thank noble Lords for their expert scrutiny of the Bill, and in particular for the provisions we are discussing today. I look forward to the Bill receiving Royal Assent.

Small Business, Enterprise and Employment Bill

Debate between Baroness Neville-Rolfe and Baroness Hayter of Kentish Town

Wednesday 21st January 2015 Grand Committee

[Baroness Hayter of Kentish Town (Lab)]

My Lords, this amendment stands in my name and that of my noble friend Lord Stevenson. I welcome the provision in the Bill which would empower the Secretary of State to designate a single regulator for all insolvency practitioners in place of the current seven regulators. It can only be in the interests of practitioners to have a single system for authorisation, technical standards, training, codes of ethics and conduct, discipline and other matters. It will also be in the interests of consumers as there would be a single standard of practice and, if my amendment is agreed, a single system of handling service complaints from debtors.

At the moment, there is no proper system for dealing with service complaints. Any that are made are handled broadly as disciplinary matters against the practitioner, which may well not be appropriate where there has just been a bit of poor practice, some delay, a lack of communication or similar. Furthermore, there is no system of redress should such a complaint be found to be justified, as the disciplinary committee will be concentrating more on the fitness to practise of the practitioner than on righting any wrongs caused by the inadequate work.

As the Minister knows, the EU directive on ADR requires that there should be an appropriate redress scheme in place for every industry and service. That might cover this issue but, due to legal uncertainty about whether the debtor in this case could be considered a consumer under the directive, it would be good to ensure that any such person can have their complaint heard and considered once it has gone to the practitioner in the first instance.

When I was involved in trying to set up such a system when I was on the Insolvency Practices Council, the challenge was made rather greater by the fact that there were seven different regulators. Given that the Bill enables, albeit perhaps well in the future, a single regulator to be designated, this would be an excellent moment to develop and licence a single ADR scheme, which would be independent of the disciplinary process handled by the new regulator. There is an obvious precedent in legal services, where service complaints had been handled by the various regulators, such as the Bar Council, the Law Society, the Council for Licensed Conveyancers and two others dealing with notaries, I think, and patent lawyers. Once the Legal Services Board was set up to oversee those front-line regulators, the new Legal Services Ombudsman was established to adjudicate on complaints from clients.

In the case of insolvency practitioners, Clause 141(3)(g) allows complaints to be investigated. However, it is unclear whether this would be done in the form of a disciplinary route so that complaints would lead to disciplinary action being taken by the regulator—which of course is completely right and proper. Alternatively, more in the area which I am looking at, of service complaints, the individual will be looking for redress and not for discipline to be taken against the practitioner.

I do not envisage the creation of a new ombudsman, given that perhaps we have too many of them already, but also given the very small number of practitioners and therefore the even smaller number of complaints. However, it would be possible for an existing ADR scheme, which could be the legal ombudsman, to handle these rather than—as we have now done thanks to this House—enabling the legal ombudsman to do that, meaning that they can now take complaints against CMCs. Alternatively, it could be done by the residual ADR scheme which is being set up under the auspices of BIS, thanks to the EU directive.

It is important for there to be a single system of such complaints, given that there will be very few of them. In addition, it might come under the auspices of the new regulator, but it should be independent of it. Handling complaints is very different from being a regulator. As I said, much as I welcome what is in the Bill, it is important that the two are different, as we have seen in various other professions.

Before I move the amendment, I note in passing that there are 2,000 or fewer practitioners who are about to face a complication in their regulation thanks to this very same Government’s rather mad idea of creating two new categories of insolvency practitioner. I note that that is not being handled by the Minister, but it is happening elsewhere in the same Government. At present there is just one type of insolvency practitioner, albeit regulated by seven different bodies. That regulation comes from the fact that insolvency practitioners as individuals emerge out of different professions. Some of them have been lawyers, some accountants, while others have gone straight into being insolvency practitioners, which explains the seven different regulators.

What we now face under the Deregulation Bill—although in this sense it is a regulation Bill—is a different way of cutting and chopping the profession. Instead of having different regulators because of the original profession, the proposal is that we will now have three sorts of insolvency practitioner: those who do only individual insolvencies, those who do corporate insolvencies, and those who do both corporate and individual insolvencies. We will have another split in the profession, albeit done by the type of debtor this time rather than the type of practitioner. I do not expect the Minister to be able to solve that today, but it is slightly nonsensical.

On the main issue, the intention here is to try to tease out the difference of having complaints handled such that the process is independent from the regulator, albeit the ombudsman could come under the auspices of the regulator, as is the case for the Legal Services Board. However, it is very important that any decisions are independent of the regulator and are taken via an independent process. I beg to move.

[Baroness Neville-Rolfe]

My Lords, I thank the noble Baroness, Lady Hayter, for Amendment 61AF, which proposes an approved redress scheme for debtor complaints about insolvency practitioners. This is an important issue and I am grateful to the noble Baroness for bringing her great expertise on redress to our Committee.

At present, all insolvency practitioners and/or their firms must have a complaints process which debtors and others impacted by their actions are free to access. If the debtor is not satisfied with the response, they can make a complaint to the complaints gateway, which is hosted by the Insolvency Service. All complaints referred to the gateway are reviewed by the Insolvency Service before being sent to the appropriate regulatory body for consideration.

A review of the gateway last summer found that this system works well, and the increased number of complaints suggests that access for complainants has improved. Information captured via the gateway—which is, if you like, a single point of contact for consumers and debtors—enables the Insolvency Service to monitor how complaints are dealt with by regulators.

I note what the noble Baroness said about the ADR directive. Although that is not for this Bill, I will look at how it fits in and the impact of changes to the insolvency practitioners’ profession that she mentioned. I would always share her wish that people understand the system.

Turning to the issue of the single regulator, the measures in the Bill aim to strengthen the current regulatory regime for insolvency practitioners by building trust and confidence without the need for further intervention. However, if that is not the case and self-regulation in this industry does not work as we hope, this would be the point to consider using the power to introduce a single regulator. I agree with the noble Baroness that were that the case, the complaints system, including arrangements for redress, is one of the things that would need to be considered at that time. However, given that we already have a bespoke system for dealing with complaints about insolvency practitioners under the existing system, I hope the noble Baroness would agree that the introduction of an additional scheme such as the one proposed is not necessary at this time. I hope that the noble Baroness has found my explanation helpful and will agree to withdraw her amendment today.

[Baroness Hayter of Kentish Town]

I thank the Minister for that. I agree with what she said about the complaints gateway. If we could do that for all the other ombudsmen, that would be wonderful. I know that under the other bit of the department attempts are being made to move in that direction. The idea that any consumer would have a single point of entry is excellent.

I am not proposing an additional scheme here. Really, my point is that when we have a single regulator it should be borne in mind that complaints that seek redress are different from those that lead to disciplinary action. I am just flagging that up. I hope at the point that this was to be implemented at some date in future that the need to make the redress part of the ombudsman environment, not simply under the regulator, is what is best. This is very close to that and I certainly do not want to set up any new additional bodies. I hope that those thoughts might be taken into account. With that comment, I beg leave to withdraw the amendment.

Small Business, Enterprise and Employment Bill

Debate between Baroness Neville-Rolfe and Baroness Hayter of Kentish Town

Monday 12th January 2015 Grand Committee

[Baroness Neville-Rolfe]

My Lords, I welcome the noble Baroness, Lady Hayter, back to the Dispatch Box on the Bill. I start by answering her question about why we are doing this. Clause 35 will help support the further growth of home businesses by removing the current incentive for landlords to bar tenants operating a business from their home. As we have heard already, there are nearly 5 million small and medium-sized businesses in the UK. Of those, 2.9 million are home businesses. Home businesses are of growing importance to the economy, with an increase of half a million since 2010. The Government want the home business sector to continue to flourish. That is why we are committed to do what we can to overcome obstacles, and Clause 35 is a key part of that work. Landlord and tenant bodies agree that that is a sensible step, so why not use this opportunity to act now to help the enterprise culture and the small businesses that we all agree are so important?

For those who rent their home, things can be particularly complicated. Landlords can be wary of letting them run a home business. Indeed, residential tenancy agreements will often include a prohibition on business use. Section 23 of the Landlord and Tenant Act 1954 provides that where there is a business use for a property, a business tenancy exists. Because business tenancies enjoy greater security of tenure, private residential landlords are keen to avoid them, as they fear that it may be more difficult to get their property back at the end of a lease. That is what Clause 35 will address by amending Part 2 of the 1954 Act.

I add that the opportunities created by the digital world, bringing ever more innovations into the marketplace, make that provision even more important. This change could help to encourage the enterprise culture. I think that it is a sensible move and would assist the graphic examples that the noble Baroness, Lady Hayter, gave, although I think it will take a little longer to get the younger generation sewing again. However, perhaps craft skills are coming through and there is certainly an element there.

I thank the noble Baroness for tabling the amendment, but we are concerned that the effect would be to cause confusion. It would not prohibit the types of business activity listed, but it would create uncertainty as to whether certain types of business carried on in a home would make the home subject to the business tenancy provisions of the Landlord and Tenant Act. As I said, currently, Section 23 provides that where there is a business use for property, a business tenancy exists. Because business tenancies enjoy a greater security of tenure, residential landlords are often keen to avoid them.

Clause 35 is aimed to remove that disincentive on landlords when they are considering allowing a home business from their property. Under our proposal, landlords would continue to have a veto. The landlord continues to have a right to impose conditions—which I think is important, because it can relate to matters such as noise, which can be a big issue—or prohibit a home business outright if that seems appropriate to the property in question. However, we believe that the amendment could have perverse consequences, create bureaucracy, disincentivise landlords from being willing to consider a home business and encourage them to set unnecessary conditions.

Let us take an example. Suppose that a tenant were to ask the landlord for permission to operate a home business. The amendment would encourage the landlord to check whether the proposed business fell foul of the factors listed. The landlord might have to judge what constitutes a reasonable number of clients calling at the property, the impact of deliveries, and so on. In the face of that increased burden, landlords might become risk averse and say no. We also have concerns about providing for a binding agreement between landlord and tenant on whether a particular business or description of business carried on in the business should be a home business. That could have a detrimental impact on business tenants—that is, those in premises where business is the predominant use—if they were to lose the rights secured for them by the Landlord and Tenant Act. The security afforded by business tenancies means that tenants can invest in their businesses, building up good will, buying equipment and stock, without fear that they will have to leave the premises before the end of the tenancy.

Amendment 33BH would allow people to define for themselves, by agreement between the landlord and tenant, what a home business tenancy was. Some landlords might seek to use this to exclude business tenants from having the security of tenure provided by the 1954 Act. There is already provision for the exclusion of security of tenure in business tenancies by agreement, and with tested procedures involving notices and declarations by the parties. I believe it would be undesirable for this clause to provide an alternative route for landlords to avoid security of tenure. The tenancy agreement can state in terms that the tenancy is a home business tenancy, as set out in the clause, and the tenancy agreement is legally binding, provided that the tenancy is a home business tenancy within the meaning of the 1954 Act.

I know that the noble Baroness was probing to some extent, and I hope that she has found my explanation of this background useful. I think that this is a concrete and important change, which I commend to the House.

[Baroness Hayter of Kentish Town]

My Lords, it was not meant as a probing amendment at all. It was tabled because the very senior advice that I have taken from the top planning chambers in the country says that this is not going to work unless people know what it means; it will end up in court and that is where the definition of a home business will have to be decided. When someone claims, as a residential tenant, “Well, I’m sorry, I’ve been running my business as a speechwriter for the House of Lords at home and am therefore a business, not a home business”, that will have to go to court. The landlord is going to say, “No, it’s a home business because you live there as well”, but the tenant will say, “No, the major thing is that it’s a business”. The advice is absolutely that the courts will need guidance as to what is a home business.

A landlord would be sensible to claim that an enormous business was a home business, just because the person running it also happened to live in the place, because of course that would deny them the right of security as a business. So the landlord will be saying, “This is a home business”, while the person running the business will be saying, “No, this is a normal business and I happen to live here”. I mentioned Barbara Hepworth. Anyone who has been to her house will know that there is a bedroom there, but 80% of the house is her sculpture gallery. Of course, she owned that house. Still, if a house has one room that is a bedsit and nine rooms that are a business, is that a home business?

[Baroness Neville-Rolfe]

The noble Baroness is rightly concerned about this question ending up in court with lots of legal proceedings, which we all agree is what one wants to avoid in good regulation. To some extent, we have thought about that. We have taken a power in the Bill that allows us to further specify the definition if that proves to be the case, so she is right and I am wrong.

[Baroness Hayter of Kentish Town]

That is why we thought it should go in the Bill rather than waiting for regulations. I think that we share the desire that this should work, but it will work only if landlords and tenants can have confidence. As I say, just because a person running a business from a rented place happens to live there, I assume it is not the intention that they should therefore lose the security that they get under the 1954 Act. This will also open up to quite big businesses, and I wonder what thought has been given to the planning issues that arise from this. Local government certainly needs to think about how big a business would be before there were planning implications.

The Minister said that there were 2.9 million home businesses; she did not of course say how many of those were in rented accommodation as opposed to owner-occupied. Maybe she would be able to write to me about the figures—or she may be getting them at this moment—for how many of those 2.9 million are in rented accommodation. I worry that this is so vague that it will not give certainty and there will have to be test cases in court. Without some guidance from Parliament about what we had in mind for what is probably a welcome and well intentioned measure, the fear is that there will not be enough certainty. We know that landlords are pretty risk averse, for understandable reasons. There will be so much uncertainty that the measure will not be implemented.

[Baroness Neville-Rolfe]

I do not have the figure that the noble Baroness would like, so I shall write to her. However, the powers apply only to tenants with a residential tenancy, so there is no risk that someone with an existing business tenancy could lose security. That is an important clarification. It does not affect existing planning requirements either, but I note the point she made. The planning requirements continue to apply. They are complicated, but it does not do anything about planning.

[Baroness Hayter of Kentish Town]

Existing businesses that will lose the right to secure tenure are those where the landlord has acquiesced because he has known about a business being taken on. Until this Bill becomes an Act, those businesses have security, and they will lose that, not necessarily wrongly, but it is not quite correct that all businesses will retain the rights they have. This is something we may come back to. We will certainly take further advice. People who are very active in this field certainly have concerns, and the Minister may also need to check a little more widely on that. For the moment, I beg leave to withdraw the amendment.

--- Later in debate ---

[Baroness Hayter of Kentish Town]

I thank the Minister but her suspicions, as ever, are completely accurate. We do not agree.

We are getting close to the time to finish, but I have two things to say. The problem with the CMA or for any of us who are legislators, in government, or whatever, is that the impact of malfunctioning markets falls most heavily on consumers. They are the ones who get ripped off when markets do not work. Not to have embedded in discussions in both identifying those problems and in looking at solutions the very people who feel the whack of it seems to be a mistake in legitimacy terms.

[Baroness Neville-Rolfe]

I agree that consumers are absolutely central to this. I have said it on many occasions, but I believe that we have a reinvigorated CMA. The processes for engagement with everybody, including small businesses and consumer groups, which are the subject of the second amendment, are very strong. It would be a mistake, as others have said, to put yet more requirements and red tape into this area because I fear that that would have an adverse effect on the ability of the CMA to tackle and use its competition powers to look at these very important markets in the way in which it is looking at energy.

[Baroness Hayter of Kentish Town]

The Minister might well say that. However, the Which? manifesto—I gather there is a general election in the offing—is that the CMA and all sector regulators should carry out routine, cross-examining analysis on the state of consumer competition. That may sound familiar to those who have been reading the amendment. The Minister may be very confident that consumer representatives feel that everything is tickety-boo—sorry, Hansard—but that is not how the consumer organisations themselves see it, and they have called for this. That is an important element. They still feel that they are shouting from the outside.

I take very much the comments made by the noble Baroness, Lady Wheatcroft, on what the problem is, as someone who has both run a lobbying organisation and an embedded consumer body within a regulator. The difference in the impact that one could make is enormous. Shouting from the outside one tends to do late. Indeed, I think the Minister gave it away when she said that consultation could delay something. The suggestion I hear from that is that we will have our report and then we will consult on it. That is not what we are trying to do.

[Baroness Neville-Rolfe]

There are systems within the CMA set-up, including the CPP, which allows it to consult on things. Who knows what the exact facts are, but that is how the system is designed. It is to try and give pre-eminence to competition which is done in a way that is envied by other member states I visit. They are very concerned both about competition and consumers.

[Baroness Hayter of Kentish Town]

The Minister thinks that we are not very far away. She is saying “Do it in consultation” and I am saying that, too. I tabled an amendment about consultation and the noble Baroness is saying that we are doing it in consultation but does not want this amendment because she does not want to do it in consultation. That is not quite an accurate portrayal of what we are saying but it sounds as if we are closer than maybe the Minister wants to admit. Having a review of how something will affect the competition and asking the CMA that is meant to do this only for consumers and not do it in consultation would be strange. Therefore, adding the words,

“in consultation with consumer advocacy groups”,

seems easy. That was the first amendment.

On the second amendment, the idea is to make sure that all the time somebody is asking, “Are there failures in the market?”. The difference between us is that it sounds as if everything is going well, yet our experience is that consumers are not always getting a good deal from parts of the market. The system that is set up is not good enough. We have been in government. My noble friend was actually in No. 10 but he obviously was not doing enough at the time. My other noble friend was a Minister, so it clearly goes back a long way. The idea is that we should have a driving mechanism, which is what the second amendment is about. The first amendment is important and one to which we should return. The idea of excluding those who are most affected by the lack of competition cannot be right, but for the moment I beg leave to withdraw the amendment.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Baroness Hayter of Kentish Town

Wednesday 26th November 2014 Lords Chamber

[Baroness Hayter of Kentish Town (Lab)]

My Lords, we are very happy to support this amendment, which would ensure that tenants do not end up being charged a share of the landlord’s legal costs which were perhaps incurred when he was challenging those very same leaseholders, as the noble Baroness has said. That makes sense and I hope the Government will accept the amendment.

While I am standing, perhaps I might report to the House the outcome of our discussions in Committee on the rights of leaseholders. In that case, the discussion was on insurance and the difficulty which leaseholders have in seeing the underlying information in the insurance policy, as the contract is actually between the landlord and the insurer. Partly because of that and partly because the cost is passed onto tenants by the landlord, there is no incentive for the landlord to shop around for a better deal.

I received a letter today from the ABI, which agreed with the statement that I had made in Committee that leaseholders should have increased opportunities to engage in the process when the managing agent purchases insurance and that the landlord, as the client of the insurer, should request relevant information from the insurer. The ABI supports leaseholders being given clear and timely information about the insurance contract. The letter from the ABI suggests the sort of information that should be provided before the contract is signed, including any commission paid to the agent. While the Government were not able to accept the amendment in Committee, it is very good that the knock-on effect has been that it will become a note of good practice, which should have some impact on leaseholders. I hope the Government will now accept this amendment and help them in that way, too.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, I have listened with great interest to the comments made on this important subject and I am very grateful to the noble Baroness, Lady Gardner, for giving up some time earlier today to take me through her points. The purpose of her amendment, as I understand it, is to provide leaseholders and tenants with protection from a landlord seeking to recover the costs incurred through proceedings at court or tribunal through their service charges. This is obviously a sensitive area for both leaseholders and landlords and it is important to get the right balance. It is of course important that leaseholders are provided with protections but also that the law creates parity between the parties.

Section 20C of the Landlord and Tenant Act 1985 enables a leaseholder to apply to the tribunal for an order that the landlord’s costs should not be included in determining the service charge payable by the leaseholder. At any point during proceedings, a leaseholder may make an application to the tribunal to ensure that they do not bear the costs of all the litigation. This ensures that the leaseholder knows where the costs of the matter will lie. The tribunal process is designed to be as cost effective and user friendly as possible. It may be that this could be better communicated so that leaseholders understand their rights. The judiciary has always been aware that, if costs have been awarded against the landlord, they should not get through the back door what has been refused through the front door. Tribunals must make decisions that are just and equitable in the circumstances; they are best placed to make those decisions because they are apprised of the facts.

I am a bit concerned about the perverse effect of the amendment, which could restrict landlords from ever recovering costs of legal proceedings by way of a service charge. This seems wrong. For example, in an insurance dispute resulting in the insurance company refusing to pay out, the landlord would need to instigate proceedings ensuring that leaseholders do not have to pay for repairs through service charges that might be covered by the insurance. However, I am very glad to say that the leasehold sector is large and growing; we have over 4 million dwellings in England subject to a long lease, and the noble Baroness, Lady Gardner, explained to me that there are 6 million leaseholders. Of course, there are also 2.8 million dwellings in flats. I am advised that the amendment could change the leases for flats without consultations with individuals or working with the sector to consider these matters, although I think the noble Baroness was saying something different in her comments. Be that as it may, this is an incredibly important sector, and I know that the changes and new regulations on redress introduced on 1 October may change the market place and need to be allowed to settle. Again, there may be an information problem that we would be keen to address.

Before I finish, I pick up the point that the noble Baroness, Lady Hayter, made about the ABI letter, which she was kind enough to give me a copy of earlier today. DCLG officials are working closely with the Competition and Markets Authority in relation to the remedial measures from its market study on property management services. The final report will be published next week and is likely to ask government to consider most of the points in the ABI letter. My noble friend will also be interested to hear about that report. She identified an important issue, that of legal costs that are incurred by landlords and how they are passed on as service charges. I do not feel able to accept her amendment but I shall write to my ministerial colleagues at the Ministry of Justice and DCLG alerting them to the issue, making sure that they consider the points that she made very carefully. I will ensure that we follow through as a Government and I will see her again if the need arises. There is a willingness to take this forward. In the circumstances, I hope that she will feel able to withdraw her amendment.

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[Baroness Neville-Rolfe]

My Lords, as Report stage draws to a close, I would like to move some technical amendments. These amendments are necessary to reflect the new provision regarding the student complaints scheme, which was agreed on Monday, to our great satisfaction. Without further discussion, I therefore beg to move the amendment.

[Baroness Hayter of Kentish Town]

My Lords, this is not quite the end of the process, because we will be back here at Third Reading. I know that between now and then Alex Crook, the Minister’s private secretary, will have to continue to deal not only with the Minister’s diary but with ours as well, so I wonder whether, through her, I may convey my thanks to him for what he has done. Needless to say, I am delighted with the technical amendments.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Baroness Hayter of Kentish Town

Monday 24th November 2014 Lords Chamber

[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.

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[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.

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[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.

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[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.

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[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.

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[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.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Baroness Hayter of Kentish Town

Wednesday 19th November 2014 Lords Chamber

[Baroness Neville-Rolfe]

My Lords, I thank the noble Baroness, Lady Hayter, for her kind words and acceptance of my amendment. I thank her for not wishing to press her amendment.

[Baroness Hayter of Kentish Town]

I thank the Minister for clarifying that she will be supporting Amendment 11 in my name, to which she has added her name, and moving her own Amendments 10 and 12, as we get to them. We will move our Amendment 11 in its place. I know that the Minister has put her name to it, but I think she will probably be moving Amendments 10 and 12 in their place. For the moment, I beg leave to withdraw Amendment 9.

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[Baroness Hayter of Kentish Town]

I genuinely thank the Minister for using this opportunity to announce that today. I also thank my noble friend Lord Harris of Haringey for his support for that. I welcome the review and I hope that it will consider one of the problems with the European system at the moment. It covers only goods that are sold in more than one EU country, not those sold either only in this country or only in this country and non-EU countries. I note the Register My Appliance initiative, but there is a problem with it which I hope the Government’s review will consider. The industry-led solution led by the AMDEA continues to be an opt-out system—you have to opt out if you do not want your details used for marketing purposes. It will make people reluctant to register if they know that they will get more junk mail or e-mails from product manufacturers.

I am advised by the people at Electricity Safety First that the system as set up will be used for marketing unless you opt out, and we know the difficulty with that. I trust that that can be looked at in the review.

[Baroness Neville-Rolfe]

My Lords, the noble Baroness makes a good point, and I will certainly take it away and suggest that we add that to the review of product recalls.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Baroness Hayter of Kentish Town

Wednesday 5th November 2014 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, higher education in this country rightly enjoys an excellent reputation, and we want to continue to ensure that all higher education students enjoy a high-quality experience. The vast majority of students report that they do: the 2014 National Student Survey shows that 86% of students are satisfied with their course, which is up on 85% last year. Statistics support the points that the noble Baroness made.

I, too, think that it is important that effective arrangements are in place for students to raise concerns and formal complaints in the relatively small number of cases that go wrong. Of course, it is absolutely right that responsibility for handling student complaints rests, in the first instance, with the autonomous and independent institutions that deliver education. I reassure the Committee that we have taken steps to ensure that all providers of higher education, including alternative providers, have a complaints policy. This is one of the expectations of the course designation process which permits students to access student support.

Institutions will want to respond to feedback from their students, including complaints. This enables the speediest resolution of issues and helps the institution to improve quality generally—feedback is very important. Where complaints remain unresolved, a good, well established service is offered by the Office of the Independent Adjudicator for Higher Education, to which the noble Baroness referred.

These arrangements were put in place in 2004 and in my view have served the sector very well. They provide students at universities in England and Wales with access to a dispute service and so to an alternative to the courts. However, as the noble Baroness rightly points out with her telling examples, they do not apply to the newer providers now offering education courses. I will reflect on the views expressed today and think very carefully about the arguments that have been put forward. In the mean time, I ask the noble Baroness to withdraw her amendment.

[Baroness Hayter of Kentish Town]

I hope that those words are as warm as my colleague is suggesting they are. We were, I think, hoping that the Government were going to go a little further and ask us to withdraw so that they could bring forward their own alternative. The numbers of students who would have been caught by this in the year after 2004, when it was brought in, was just over 3,000; it has now gone up to 12,000, so it has become a big issue. Can the Minister perhaps go a little further than she indicated?

[Baroness Neville-Rolfe]

I confirm to the noble Baroness that my words are extremely warm. We will obviously return to this issue and, if need be, have a discussion with her, but I would be grateful if she would withdraw the amendment on that warm basis.

[Baroness Hayter of Kentish Town]

I think that I will take my jacket off because of the heat in here. With those words of reassurance, I beg leave to withdraw the amendment.

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[Baroness Neville-Rolfe]

My Lords, I am very glad that we have been joined by the right reverend Prelate the Bishop of Truro. I will, rather rudely, come to his amendment at the end, because there are some general points that are relevant to that amendment.

Nuisance calls are an important issue; I want to make it very clear that the Government take it seriously. The calls are a scourge to consumers and I think everyone in this room has been troubled by them. We have therefore been working closely with regulators, consumer groups, parliamentarians and industry to take action. Our wide-ranging approach was set out in the Nuisance Calls Action Plan, published in March by my honourable friend Ed Vaizey, the Minister for Culture and the Digital Economy. I can circulate copies if noble Lords have not seen it, because it represented a major step forward.

Amendment 105F would require consumers to opt in to receiving marketing calls, rather than, as under the current system, being required to opt out by registering with the Telephone Preference Service. I am sure that many noble Lords have done that. While nuisance calls are certainly a problem that needs to be addressed, we also need to consider the benefits that can accrue to consumers and to balance the right of business to conduct legitimate direct marketing. Marketing calls can prove to be financially beneficial for many consumers; for example, calls on improved deals or tariffs can potentially save them money. The direct marketing industry provides employment opportunities, particularly in the regions and in support of our economy. The Direct Marketing Association estimates that its industry supports 530,000 jobs, so it is a significant economic operator. Equally important, it enables charities and voluntary organisations to generate essential funding.

Which?, which has contributed a great deal to the work on nuisance calls, agrees with our view that an opt-in system should not be sought, not least because there are many legitimate reasons why such calls might be made. They might be made, for example, by the emergency services, medical practitioners, or companies with whom the recipient has a genuine relationship. If an opt-in system were introduced, it is likely that calls of this nature might not be permissible.

The National Autistic Society, in its response to the CMS Committee, said that the telephone is,

“the single most successful way that—as a charity reliant on public donations—we raise money from individuals”.

[Baroness Hayter of Kentish Town]

I ask the Minister to check that quote. I checked with the chair of that organisation, which did not expect it to be used in this way.

[Baroness Neville-Rolfe]

I thank the noble Baroness and, of course, we will check on it. I suppose that the general point is that phone marketing is more successful than street, doorstep, direct mail, and so on. Changing an opt-in system can diminish a charity’s income, and that is our concern. Charities are subject to the same rules as those applying to marketing companies. That point may be of concern to my noble friend Lord Deben, who spoke with such energy on this subject.

Calls to consumers who are registered with the Telephone Preference Service, provided they have not given explicit consent to receive such calls, are already outlawed under the Privacy and Electronic Communications Regulations. The Government’s view is that those breaking the law by calling consumers registered with the Telephone Preference Service are just as likely to ignore any new law that is introduced, regardless of whether the system is opt-in or opt-out. Tackling marketing calls would, in our view, be better addressed in focusing on better enforcement, and we are taking action in this area. We have ensured that the monetary penalties, which the Information Commissioner’s Office and Ofcom can use, have been increased and issued more frequently to those breaking the regulations. Since January 2012, more than £2 million in monetary penalties has been issued by both regulators.

We have also made it clear that regulators need to continue to take strong action to send a signal that those who flout the rules will be caught and punished. Persistent offending companies are now named and shamed on the Information Commissioner’s Office website, so that those who make those marketing calls are made known to the public. Informed consumers are safer consumers.

The noble Baroness, Lady Hayter, said that it was very hard to know how to complain. Ofcom’s website, as she may know, has been revamped to provide comprehensive information for consumers on where to go about nuisance calls. I have talked to Ed Richards about this because he realises how important it is. Ofcom has found that most people go to their service provider in the first instance, which in turn passes them on to Ofcom. There is now much more collaboration between regulators sharing their knowledge and expertise to improve compliance.

Changes have been happening as the Bill has progressed. I mentioned the action plan, and on 25 October Ed Vaizey launched a consultation on lowering or removing the legal threshold for fining firms who make unsolicited marketing calls. The efforts of the Information Commissioner’s Office to impose penalties are currently frustrated by the legal requirement to demonstrate that nuisance calls cause substantial damage or substantial distress—especially given the volume of calls, mentioned by the noble Baroness, Lady Hayter. I am slightly surprised by her comments because, while there are two options in the consultation, which we have to take into account before making a final decision, the Government’s preference is to remove the threshold and give the commissioner the greatest scope to take action. This will help to solve the commissioner’s current frustrations. The consultation ends on 6 December and we expect the secondary legislation to implement the resulting changes to come into force in February—a more rapid avenue than in this Bill.

Amendment 105G would require businesses and other persons making unsolicited calls for direct marketing purposes to provide caller line identification. We are sympathetic to this amendment, as the noble Baroness knows, because we have discussed it, and agree that the current situation can be very frustrating when callers deliberately fail to provide their CLI. Unfortunately, however, mandatory CLI is not permissible under EU law. The EU privacy directive provides that callers, both individuals and businesses, must be allowed to withhold CLI. The directive allows for limited exceptions for the specific purpose of tracing calls, but that would not apply to this amendment, which covers all businesses and individuals making unsolicited calls for direct marketing purposes.

--- Later in debate ---

[Baroness Hayter of Kentish Town]

While we are talking of trying to find reasons not to take action about victims of domestic violence, the Minister will notice that in our amendment we allowed for Ofcom to be able to look at categories, either individual domestic callers or groups of them, that could be exempt, exactly in order to cover women’s refuges and things like that—if we are talking about grabbing excuses. The important issue, though, is that our understanding of the European directive on privacy was that it was about individual privacy, not about corporations, and that the individual within a company or an individual subscriber could be protected. I would be happy if the Minister could clarify that in writing.

The other issue is that no one tells you to go to the Ofcom site, which is not advertised, so there really is no way of being able to complain, particularly if you do not have the caller’s identification number. I ask the Minister to spell out for us why it is not reasonable to ask for all non-domestic callers making marketing calls to have to identify their number. I do not think that she has actually answered that.

[Baroness Neville-Rolfe]

Perhaps I could try harder; we will have to return to it if I cannot persuade the noble Baroness. The difficulty is that if, for example, someone rings up a domestic violence helpline and that number is public, it will then appear on the bill, so other members of the household will then know that people in their household have been ringing that number. This sounds like a detailed issue, although I think that our hearts are in the same place. My understanding is that this was debated at great length in Brussels at the time of this directive, and that these were the problems that came up. I thought that it was right to share that background with the Committee. I will go away to see whether the point that the noble Baroness has made about individual versus corporate stands; I think it is a legal point that I would need to take advice on. That is the difficulty; it was a combination of behavioural and legal points that reflected the concerns the EU had when it was talking about this, when obviously it was trying to do the right thing.

I turn to Amendment 105C. The Government share the concern of the right reverend Prelate and the Children’s Society about payday lenders using unsolicited calls to market inappropriate products to vulnerable consumers. Indeed, we had a long debate earlier in this Committee on the whole issue of payday loans. Such practices must not be allowed to occur, as the noble Lord, Lord Deben, said. I reiterate that the tough measures that I outlined as part of the nuisance calls action plan will capture the practices of payday firms, among other industries. Such firms will no longer be able to target consumers as they have previously been able to.

The right reverend Prelate asked why, as mortgage calls were banned, payday lenders’ calls could not be banned. I am afraid I must take that question away; I was not aware of the ban on mortgage calls, and I will investigate and write to the right reverend Prelate to see if that provides some new avenue into the debate.

To conclude, the Government take the issue of nuisance calls very seriously, and I have set out a number of ways in which we are tackling the problem and the way in which we have speeded up. The Government will continue to work with consumer groups, regulators and of course industry, which need to make changes to find effective solutions. The work outlined in our action plan is under way—new things are happening all the time—and this will help to contribute towards achieving more long-term solutions to deal with nuisance calls. I have outlined a couple of points of follow-up, which we will pursue before we get to the next stage of the Bill, but in the mean time, I ask the right reverend Prelate to withdraw his amendment.

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[Baroness Hayter of Kentish Town]

My Lords, Amendment 105S, which stands in my name and that of my noble friend Lord Stevenson, seeks to protect tenants who, having made a complaint about their landlord, face being evicted by a Section 21 notice, effectively deterring any tenant from tackling their landlord over any bad practice. We seek not to outlaw the practice of evictions altogether but to require the Secretary of State to issue guidance on how tenants can be protected from the use of Section 21 notices for retaliatory evictions. Sadly, representatives of Citizens Advice and of tenants cite too many examples of threats of retaliatory evictions for this to be a rare occurrence. Indeed, some 200,000 renters have been evicted or served notice because they complained to their local council or to their landlord about a problem. Certain groups are more likely to suffer retaliatory eviction: those in high-demand areas; up to 14% of families in London; and 10% of BME families.

In preparing its report, Creating a Better Private Rented Sector, the relevant all-party group heard witnesses’ fears about this, which inhibited tenants from expressing their concerns. Indeed, one in eight renters failed to ask their landlord to make repairs because of their fear of being evicted. The particular worry for tenants about any complaint leading to eviction is the fact that it is not illegal. Ministers have given this matter their attention, following the report of an industry-wide group in connection with the introduction of the minimum energy efficiency standard, which was causing some of the same issues, and the right to request energy-efficient improvements.

The all-party parliamentary group’s report asked that Ministers keep the operation of Section 21 notices under review. We would like the Government to go one step further and issue guidance to help tenants avoid this disreputable practice. We know that the Government want to take action in this area. After all, they have given their backing in principle to a Private Member’s Bill in the other place to stop the minority of rogue landlords who, rather than meet their legal duty to keep their properties to a reasonable standard and remove health and safety hazards, instead evict tenants simply for asking for essential repairs. Shelter, from the evidence of those it helps, has campaigned on revenge evictions, which the Government undertook to outlaw, ensuring that tenants do not face the prospect of losing their homes simply because they have asked for such essential repairs.

In committing the Government to support the Private Member’s Bill, Communities Minister Stephen Williams said that there were a minority of spiteful landlords, and that he wanted to ensure that hard-working tenants were not afraid to ask for better standards in their homes. If the Government want to see progress, our amendment offers them a useful first step. I beg to move.

[Baroness Neville-Rolfe]

The noble Baroness’s amendment seeks to deal with the problem of retaliatory eviction. This occurs when a tenant is evicted by the landlord when they report problems with the property. Landlords may then use Section 21 of the Housing Act 1988, otherwise known as a no-fault eviction. The latest evidence suggests that retaliatory eviction affects about 2% of all tenants, so it is a big figure. That figure rises significantly for some groups, with 10% of black and minority ethnicity households and 14% of London families affected by retaliatory eviction.

We have been proactive in this area. In February this year we published a discussion paper on improving property conditions in the private rented sector. We specifically sought views on how to tackle retaliatory eviction and remove the fear that many tenants have about making a legitimate complaint. The Government announced on 11 September their support in principle for the Tenancies (Reform) Bill, a Private Member’s Bill designed to outlaw retaliatory eviction. This Bill will have its Second Reading in the other place on 28 November.

We do not think that more guidance, as proposed in this amendment, is the right solution as we do not believe that the existing law provides tenants with sufficient protection. Our How to Rent guide, which was published in June this year, 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. In addition, the industry-led voluntary code of practice, which was published on 11 September, makes it absolutely clear that the sector itself recognises that the practice of retaliatory eviction is unacceptable.

We therefore agree with the need to tackle the problem of retaliatory eviction. We believe that the Tenancies (Reform) Bill will provide the solution, and I ask the noble Baroness to kindly withdraw her amendment.

[Baroness Hayter of Kentish Town]

I thank the Minister for that response. It seems rather disappointing, perhaps, that something could not be put into the Consumer Rights Bill. Part of the problem with what is happening at the moment is that we are still not sure that tenants know about or are helped in avoiding those evictions. As we said before, this is the Consumer Rights Bill, so it seems a shame that the right for tenants not to be evicted for exercising their own right to ask for repairs is not embedded in a Consumer Rights Bill. We nevertheless welcome the Government’s support for the Tenancies (Reform) Bill and hope that they will push it along rapidly. We will have to see whether we still feel that some reference should be made in this Bill but, for the moment, I beg leave to withdraw the amendment.

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[Baroness Neville-Rolfe]

My Lords, as this Committee draws to a close, I will move some technical amendments, beginning with Amendment 106. I start by expressing my gratitude to the Delegated Powers and Regulatory Reform Committee, which scrutinised the Bill earlier this year and which does such a good job for us in this House. Amendments 106 and 107 give effect to one of its recommendations. Amendments 108 to 111 are technical amendments. Between them, they support the implementation of the Bill and are necessary to reflect earlier amendments regarding lettings.

As I may not speak again, I take the opportunity to thank our various Chairmen, the Members of the Committee, the doorkeepers and the Bill team for all their hard work and participation. This has been my first Committee as a Minister and I have been struck by the quality of the debate. It has been wonderful to have both very experienced noble Lords—some of whom are not here with us now—and newer noble Lords, who bring expertise from elsewhere. I have really enjoyed the examples: the beautiful made to measure suit of the noble Baroness, Lady Hayter, the bathrooms, the kitchens and the digital games. Even today there were the graphic examples of nuisance calls and of allergic reactions—very important issues.

I am very pleased with the progress we have made and obviously look forward to further debate on Report. In the mean time, I beg to move Amendment 106.

[Baroness Hayter of Kentish Town]

My Lords, the Minister says these amendments are technical. I have 74 questions here about them which I would just like to go through if the Committee could hold on. In fact, we are very content with these amendments—that was just my excuse to join the thanks to the Bill team and, indeed, to the Ministers, who have been very willing during this process to meet with us and discuss the Bill. I also want to thank noble friends who have been a tremendous assistance, particularly my noble friends Lord Stevenson, Lady King and Lord Mendelsohn from the Front Bench, as well as my noble friends Lord Harris and Lady Crawley, who have done sterling work. I will just take a moment to talk to them directly—it ain’t finished yet.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Baroness Hayter of Kentish Town

Monday 3rd November 2014 Grand Committee

[Baroness Neville-Rolfe]

I thank my noble friend for his intervention, and perhaps I may return to the mandatory client money protection proposals.

Mandating insurance cover for money received or held by letting agencies in the course of business would introduce additional costs for the agencies, and these could simply be passed on to landlords and thus to tenants in the form of higher rents. I am sure that I do not need to remind the Committee that tenants’ deposits, which are an important aspect, are already protected as a result of separate legislation. I know this from a problem one of my children had, and I was able to offer him advice thanks to the debates we have had in this Room. That is a crucial element of tenant protection which is already in place, so we are not talking about deposits here, but other aspects. This amendment seeks to protect other funds but, I fear, at a potentially higher cost to tenants.

I can reassure noble Lords that the Government already encourage agents to join client money protection schemes via the Safe Agent kitemark, which denotes that the participating agent is a member of a client money protection scheme. Our How to Rent guide encourages landlords and tenants to choose agents with client money protection. Ensuring that tenants know their rights and landlords their responsibilities will empower consumers to make the right choices and, if things go wrong, to find appropriate redress. Yet further regulation could deter letting agents and make it difficult to encourage landlords to invest in properties. This investment is much needed to expand the overall supply of housing and help meet the country’s urgent housing needs. I am sure that that is an objective we all share. However, we have had an interesting debate and I will reflect on the detailed points that have been made by my noble friend Lord Palmer of Childs Hill, the noble Lord, Lord Harris, and the noble Baroness, Lady Hayter.

Turning to Amendment 105R, I share the concerns raised about the practice of “double charging” by estate agents. In the lettings sector I can understand that an agent is providing a service to both parties and therefore may in some cases charge both. I can see that there are some justifications in other consumer markets. However, in the case of estate agents, I share the concerns of noble Lords. Estate agents have to be transparent in their dealings. Under the existing legislation that this amendment would affect—the Consumer Protection from Unfair Trading Regulations 2008—as well as their own self-regulatory industry codes, estate agents must already make fees and charges clear for both buyers and sellers. This means that fees and charges must be transparent. While I have serious concerns about the practice, I believe there is a danger that if we were to rush into further legislative measures, we could impose unjustified new burdens and risk damaging this important industry.

We believe—and I think that we have said this elsewhere—that a better way of addressing the rise of double charging is through estate agent redress schemes. My predecessor, my noble friend Lord Younger of Leckie, and my colleague Jenny Willott met with the Property Ombudsman and Ombudsman Services: Property earlier this year to draw their attention to issues around double charging and sale by tender. They told us that while they had not yet received complaints about double charging, they shared our view that this was not a practice that should be encouraged. As a result, the Property Ombudsman committed to addressing the matter with the industry to ensure that its code of practice is properly adhered to and high standards of behaviour are followed. I can today confirm for the Committee that positive discussions with the industry have taken place and updated guidance is being finalised. The aim is to have updated guidance ready to come into effect early in December.

This guidance will ensure that agents recognise their obligations under the Property Ombudsman Code of Practice in respect of transparency, disclosure and avoidance of conflicts of interest. If the guidance is not complied with, agents will be in breach of that code. Breach of the code could result in removal from the redress scheme. This would effectively prevent them from operating as an estate agent, as membership of one of the redress schemes is a legal requirement for estate agencies.

Given this ongoing work, I do not believe that it is currently necessary to legislate against double charging by estate agents. However, I reassure the Committee that action is being taken to protect consumers from the worrying and emerging trend of double charging, and we will monitor developments. In the circumstances, I ask the noble Baroness to withdraw her amendment.

[Baroness Hayter of Kentish Town]

My Lords, I regret that answer, particularly on client money protection. The only case made against the amendment seems to be that it would cost the industry money. It is not clear which industry—the only industry that it would cost money is bad letting agents, because good letting agents do it. Landlords support compulsory client money protection, tenants’ groups support it, estate agents support it, the British Property Federation supports it; and I have not read out—because I was trying to save time earlier—a submission from SAFEagent, to which the Minister referred. It stated that it supported the amendment and that it was excellent to see so many organisations supporting what it has been campaigning for over several years; that is, protection of consumer money through a requirement for all letting agents to be part of a client money protection scheme. Therefore, even those who used to support the Minister’s case are now saying, “No, this needs to be written in law”.

I think that the Minister also said that the amendment would in some way discourage landlords from entering the market, but it is exactly the fear of letting agents walking off with their rent that may discourage them. The amendment is the security that a landlord needs, particularly if they are raising money to enter the market. Anyone who has tried to raise money to put into property knows that a bank will ask, “What is the security of your income?”. If you can say, “Well, I know it’s secure because it’ll be coming through a letting agent and that money has been secured by law and an insurance service”, you are more likely to get a bank loan to be able to become a landlord and a slightly cheaper rate of interest for it. This amendment is therefore good for the housing market and I hope that, before we come to Report—because it is an amendment that we will re-table—the Minister will think about this.

On banning letting agents from charging tenants fees other than for security checks, the Minister’s figures on Scotland and what has happened since it banned fees to agents are very different from those that I have seen. Two independent reports were done, one by Rettie & Co, the property specialists, and one by BDRC Continental, which is another independent specialist, looking at the impact of clarification of letting agent fees in Scotland. On the impact of the 2012 change in Scotland, they state:

“Any negative side-effects … have been minimal for letting agencies, landlords and renters, and the sector remains healthy … landlords in Scotland were no more likely to have increased rents since 2012 than landlords elsewhere in the UK … Renters in Scotland were no more likely to report a recent increase in their rent than those in other comparable parts of the UK … Less than one in five … letting agency managers said they had increased fees to landlords”.

They went on to say that 70% of landlords had not noticed any increase. Our figures from Scotland are therefore clearly rather different, and those were from independent reports.

One of the arguments advanced is that transparency of fees is very good for driving competition, but, in the case of estate agents, the people who pick agents are the sellers of houses and, in the case of letting agents, they are the landlords. In both cases, the buyer of the property cannot shop around for an estate agent, nor can a tenant shop around for a letting agent. They have to go to the one who is handling the property they need. Transparency does nothing to drive the market. If our amendments are refused, two lots of people will be affected: buyers who are being charged by somebody who is already charging the vendor; and tenants who are being charged by the landlord. Neither of those groups is in any position to argue about the fees because they are not the people going to the agencies.

I hope that the Government will look at this again. We are clearly going to bring it back. The client money protection is widely supported. As for taking fees from both sides, the Minister herself said that she has serious concerns. I hope that she does something to deal with this issue.

[Baroness Neville-Rolfe]

As I have said, I will reflect on the points that have been raised this afternoon, particularly on Amendment 81D. On the point about Scotland, there is not a lot to be achieved by having a war of facts, but my facts came from the Office for National Statistics, and showed what they showed. I do not think that I can leave the debate without saying that there is value to transparency in this sector. I honestly believe that having transparent fees helps the consumer and competition. The truth is that often houses are listed with more than one agency.

[Baroness Hayter of Kentish Town]

They are, because there is an agreement for a half-charge but the buyers still cannot choose between them. Having made the case and having forewarned the Government that we will return to it on Report, I beg leave to withdraw the amendment.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Baroness Hayter of Kentish Town

Wednesday 29th October 2014 Grand Committee

[Baroness Hayter of Kentish Town]

My Lords, Amendment 56ZA, which stands in my name and that of my noble friend Lord Stevenson, deals with a similar area. It would add a type of contractual term to the list of what may be regarded as unfair. The purpose is to ensure that consumers do not have terms imposed on them which could leave them disadvantaged, specifically in a minimum or fixed-term contract where a price was increased and where they would then be disadvantaged if they were to switch products or providers. I refer to the discussion that we had on “mortgage prisoners” earlier in Committee.

Which? has pointed out that the Unfair Terms in Consumer Contracts Regulations 1999 recognise that such variation in contracts can lead to consumer detriment. However, the grey list, as currently drafted, would appear to absolve the person varying the terms of the contract from responsibility should the consumer be unable to end the contract. We discussed examples of where consumers could not leave contracts, for whatever reason. There are clear examples of where ending the contract would lead to significant consumer detriment—for example, if another mortgage is not available or one’s circumstances no longer qualify one for a mortgage. Merely being able in theory to terminate a contract does not alleviate the difficulty of a change being made to the contract for no good reason because the person concerned still needs to find another mortgage but cannot do so at that stage.

A mortgage is not the only kind of contract where growing older during its term could make it disadvantageous suddenly to have to find a new one. Life insurance is another such example, or home insurance where a neighbour might have experienced flooding or subsidence since the consumer first bought their own coverage. In the case of a university degree, where suddenly a subject is withdrawn, merely being able to move to another university does not mean that the student is not disadvantaged, especially if they have worked hard for two years at the first university.

This amendment is limited to fixed-term contracts and minimum-term contracts, where the expectation of the deal advertised is at its clearest. The fairness test allows consumers to challenge a term of a contract to make it non-enforceable. Any compensation would have to be decided separately, whether by the financial ombudsman or elsewhere. The Minister will be aware that the approach we are taking here was supported by the BIS Select Committee and the CMA, so I hope that the Government will find themselves in a position to support it, too.

Amendment 56D returns us to the issue of “mortgage prisoners”, although it takes a slightly different approach. It would add to the grey list a term in a contract which would give a mortgage provider the ability to increase the price of a mortgage in cases where the consumer cannot get a new contract for the reasons we have been through. It would have the effect of giving a consumer recourse to argue that the change in the terms of the contract is not legal and should not take place. This consumer detriment, where people cannot get another contract, will be familiar to the Committee.

The Minister’s letter, received on 27 October, to which my noble friend referred, relates to Amendment 56ZA and contracts that vary in their supposedly fixed lifetime, such as a mortgage. However, it applies only to what the FCA is doing on mortgages. But the bottom line is that there is little concrete provision in the rules to stop a lender changing the terms of a mortgage deal that they have come to regret offering in the first place—perhaps when hidden terms and conditions allow them to do so—leaving consumers high and dry where there is no alternative product. Does the Minister agree that if the banks cannot honour the terms and spirit of a fixed mortgage deal, they should never have offered it in the first place? After all, consumers cannot exit the contract without penalty if this happens the other way round, when there may well be exit fees. Therefore, it is hard to see why the provider should be able to do so.

Furthermore, while the Bank of England example allowed BIS to deflect the issue back to the FCA, this issue can occur in other markets that are regulated by different regulators, such as Ofcom with telecoms fixed contracts and Ofgem with fixed energy contracts. Even more importantly, what happens where there is no regulator at all? Who would take action then? Would it be trading standards or the CMA? Again, it is worth noting that the CMA supports our approach to this.

I turn now to the other issue in the example of the Bank of Ireland. The Government said that it would be for the court to decide if the Bank of Ireland case was unfair, although the FCA has already said that it does not think it was. Furthermore, while the Minister says that consumers can go to the Financial Ombudsman Service, in fact that service adjudicated against the complainant because the unfair contract term regulations are not adequate in this case. The financial ombudsman actually cannot help unless the grey list is complete; that is, if it allows these terms to be open to assessment for fairness. Our amendment would add terms that vary by unknown amounts within a fixed lifetime to the grey list and would thus be able to be assessed for fairness. That is what we are trying to achieve.

I would add once again that although the Government have tried to use the particular case of mortgages to show what the FCA considers to be acceptable, we are worried about wider markets where it does not operate. The amendment would provide a clear route for someone to take their complaint in such a situation, and I hope that the Minister will either be able to accept it or will lay out plans to provide an equivalent level of protection within this legislation. I beg to move.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, these amendments also relate to Schedule 2 covering the grey list, containing terms which are always assessable for fairness under Clause 62. These are terms that are likely to trip up even an astute consumer or that someone would not fully appreciate when agreeing a contract. As the noble Baroness, Lady Drake, set out, consumers do not always appreciate the terms they have agreed, and I agree with the sense of the debate that this is not the easiest area in the Bill in terms of understanding exactly what is happening. I note the points she made not only about regulated areas but other areas as well, and I am grateful to her for making them.

I shall try to address the generalities and then perhaps I may move on to financial services, which are the subject of Amendment 56D. Let me reassure the Committee that there are protections in place to protect consumers from unfair variation clauses. Where traders include a term to allow them unilaterally to change the characteristics of the goods, service, or digital content being provided without a valid reason, that is included on the grey list as set out in paragraph 13 of Schedule 2. Those terms can be challenged in court even if they allow the consumer to exit the contract. For example, if a painter decorating your bathroom includes a term stating, “All materials may vary in style, colour and finish”, that term can rightly be challenged for fairness.

Where traders include a term to allow them unilaterally to change the price of the goods, service, or digital content being provided, that is also included on the grey list as set out in paragraph 15 of Schedule 2. In that case, a term can be challenged for fairness if the increase is too high and it does not allow the consumer to exit a contract. I should remind the Committee that just because an item is not on the grey list, it does not mean that it is fair or exempt from the fairness test. In order for a price term to be exempt, it must be prominent and transparent, and I believe that the requirement for prominence that we are introducing in this Bill marks a significant increase in consumer protection. I hope that the noble Baroness, Lady Hayter, will bear that in mind in her further consideration of this issue.

The noble Baroness, Lady Drake, mentioned that I had written round—thank you for that. It may be worth reiterating a couple of the points that I made in that letter. The Government are determined that lenders should treat mortgage borrowers fairly. That is why, during the course of this Parliament, we have strengthened protections in a number of ways. Most significantly, in April of this year, the new independent consumer regulator, the Financial Conduct Authority, introduced a revised set of rules as part of its mortgage market review. These provide stronger protections than ever before for borrowers taking out a mortgage to buy a home and, indeed, have changed the marketplace a bit. Among the key changes were improvements to sales standards and to affordability assessments. The FCA’s rules are designed to protect consumers who find it difficult to switch once market or regulatory conditions change. Therefore there is a general requirement on firms to treat customers fairly, but there is a specific provision within the FCA rules that forbids lenders from taking advantage of a borrower who is stuck with their current mortgage—a circumstance that the noble Baroness, Lady Hayter, referred to. FCA rules say that lenders should not treat these customers less favourably than other, similar customers. In addition to that specific provision, the FCA has provided for transitional arrangements that allow lenders to waive the new affordability requirements for existing borrowers seeking to remortgage as long as they are not increasing the size of the loan. Finally, and most importantly, the FCA is also undertaking a review of its new mortgage rules which will consider how the rules are working in practice and whether any adjustment or clarifications are required. If need be there is scope for action and the FCA has the powers.

We believe that this amendment would significantly reduce valuable flexibility that lenders currently have in making commercial pricing decisions across the market. If we make it much more difficult for lenders to increase rates in response to changing market conditions, then lenders’ ability and readiness to offer the most competitive deals will be constrained. Ultimately, it will be mortgage borrowers who lose out.

In conclusion, we believe that introducing new legislative requirements would undermine the robust but flexible system of regulation that has been put in place in recent years. It would constitute a backward step in terms of delivering the Government’s aim to deliver a regulatory environment that offers consumers protection as well as choice and good value. I therefore ask that this amendment be withdrawn.

[Baroness Hayter of Kentish Town]

I am not certain about the flexibility point, because both amendments use the words “without a valid reason”. That is the point—there are valid reasons for things having to change. We are very focused on changes that are made without a valid reason and which therefore of course cannot be within the expectation of the purchaser. Valid changes in interest rates they know; we are worried about changes made without a valid reason. I want to look carefully at the words used in this amendment and the one before, which to some extent try to address the same problem, to see how we might come back to this. I beg leave to withdraw the amendment.

--- Later in debate ---

[Baroness Hayter of Kentish Town]

I rise to say “well done”. I should warn the Minister that we will have other amendments on letting agents next week. However, we are very pleased that this will be in the legislation and that it will happen early, by the extra resources, and by the incentive for local authorities to take action, given that they will be able to retain any fines levied. I realise that that is the end of her political career, having had praise from me, but so be it.

[Baroness Neville-Rolfe]

Before the noble Lady sits down, perhaps I can say thank you to her.

--- Later in debate ---

[Baroness Hayter of Kentish Town]

I am slightly confused by this. If I am completely honest, among friends and just within these four walls, I think our Lib Dem colleagues would very much like to support the amendment of the noble Lord, Lord Best, but are not allowed to. They do not want to confront the Government, so they are trying to find a weasel way of not quite confronting them while almost writing down exactly the same words but making it very complicated. They are not going the whole way but saying, “Well, in certain circumstances other than those already allowed for in the Bill, the 48 hours would not have to be given; that is, when a trading standards officer shows his or her credentials and they are going to see whether an offence has taken place”.

I am sure that the noble Baroness, Lady Bakewell, knows that trading standards do not go around in policemen’s big boots unless they think some offence is being committed. They do not have the time or inclination—why on earth would they? They always show their bona fides anyway. This basically seems to be saying, “We don’t like what the Government are suggesting but can we find a way of saying that round the back?”. I could be quite wrong—and look forward to being corrected—but I have my suspicions.

Of course, the problem with these amendments is that they have all the disadvantages of the Government’s own clause; that is, the uncertainty. The same people do food as do electricity safety, counterfeit booze or whatever else one is looking for. The amendments would still introduce two systems for when somebody could go in to do an inspection. It leaves all that complication and uncertainty of having to checklist things first but with no added advantage. That seems a convoluted way of saying that they do not like the present clause.

There seem to be two things going on here. First, in moving the amendment, the noble Baroness, Lady Bakewell, said very strongly that she supports unannounced inspections—which is exactly what is said in the amendment of the noble Lord, Lord Best. Secondly, she raised the interesting point about costs in civil courts, which we will come on to. I look forward to her support for that amendment when we get there. My concern about these amendments is not that they would not move a little way towards making life easier but that they are actually a rather weak way of telling the Government, “We don’t like your clause”.

[Baroness Neville-Rolfe]

My Lords, I thank my noble friend Lady Bakewell for her very interesting comments and good examples. They help us to understand so much more clearly the issues that we are debating.

In this part of the Bill we are consolidating and updating our investigatory powers in order to make enforcement more efficient and effective. A further objective is to reduce burdens on business without compromising consumer protection. We are doing this, for example, by making it easier for enforcers and businesses to know what enforcers’ powers are by consolidating them across 60 pieces of legislation and setting them out in one place. I think that the Committee will welcome this. We are also modernising them—clarifying that where there is a good reason enforcers can access information held or stored on computers. This brings us into the 21st century. We will return to the notice requirement again under the amendment of the noble Lord, Lord Best, and I expect that we will have a fuller debate.

I want to say a few words about why we have introduced the requirement for enforcers to give two days’ written notice, subject to some important exemptions. The Government are committed under the Protection of Freedoms Act 2012 to protect civil liberties and to reduce burdensome and intrusive powers of entry. Our aim is to strike a balance between the powers and safeguards that are needed for protecting businesses while ensuring that enforcers can tackle illegal activities. I am sure that we will come back to the detail.

I will answer a couple of points that my noble friend raised. She asked about notices and litigation, and court cases being lost on a technicality. As is currently the case, enforcers will need to ensure that they follow correct investigatory practices and procedures to ensure the integrity of their investigations and supporting evidence. We will not be amending the well developed principles on what amounts to reasonable grounds for suspicion. Many large businesses have a primary authority relationship with a local authority. This includes an inspection plan. Where an inspection plan is in place covering consumer law, this must be considered when deciding whether to carry out an inspection. We are committed to providing good guidance on what the law means; as noble Lords would expect, that is being developed by business and other organisations.

My noble friend also touched on the fact that enforcers risk costs in the civil courts. I reiterate that it is a fundamental principle of civil litigation that one side is at risk of having to pay the other side’s costs if it loses. That would be a difficult principle to change. Of course, the object of that is to deter unmeritorious cases and ensure that the winning party is not too adversely affected.

Amendment 63ZA, on the issue of whether food hygiene visits are covered by the Bill, is a probing amendment. There may be confusion in general as to whether food is covered by the Bill so it is good to have an opportunity to clarify the position. For example, the Bill does not apply to food hygiene inspections carried out under the Food Safety Act. That sort of inspection is normally done by environmental health officers. I should add that, curiously, I was the official Civil Service lead on that very Bill; I remember it with great affection. It was an important Bill at the time. In view of those alternative provisions, we do not see the need for this probing amendment.

On the lessons that horsemeat might give us for this Bill, the issue arose mainly through fraudulent activities of traders. That highlights the importance of greater sharing and use of intelligence sources, and how important that is in safety. The Bill supports the sharing of information and intelligence by local authorities, business and other partners such as the police. That can be used by enforcers to determine whether it is necessary to exercise a power of entry to premises and whether one of the exemptions to giving notice applies.

On Amendments 60, 61, 62 and 63, tabled by the noble Baroness, Lady Bakewell, it is worth noting that currently enforcers such as the Competition and Markets Authority, which has been referenced often today, have to give notice only for civil enforcement purposes. The amendments take us back to that position. However, when an enforcer decides to carry out a visit, they will not necessarily be focusing on whether civil or criminal enforcement action may result. We therefore think it makes more sense to provide a general requirement for notice to be given regardless and then provide a number of clear exemptions to giving notice, such as where giving notice would defeat the purpose of the visit because, for example, counterfeit or illegal software might be destroyed.

I am also keen to emphasise—we will come back to this—that this means notice need be given only for routine inspections. If there is a risk of a breach of a law, enforcers can still carry out unannounced inspections where they need to investigate illegal activities. The exemptions ensure that we have the safeguards we need. Small businesses in particular, which have been consulted about the changes in the Bill, welcome this approach. They welcome clarity, and the noble Baroness, Lady King of Bow, emphasised the importance of that earlier.

I believe that the Bill provides a better and simpler enforcement regime for both businesses and enforcers, whether civil or criminal enforcement action is involved. Hygiene and food inspections are dealt with elsewhere in the statute book. Therefore, I ask my noble friend to withdraw the amendment.

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[Baroness Neville-Rolfe]

The officers would be looking for a faulty electrical product that might be in circulation in an area; there would be a suspicion. That is exactly the kind of thing I am talking about. I am sorry, but I wanted to take the noble Lord through the examples in order to explain how the power will be used.

Perhaps noble Lords will bear with me while I make another point about powers of entry. The powers that other law enforcers have when they investigate offences are of interest, and the noble Lord has raised one or two of those. The police have no general powers of entry to commercial premises. They can enter a premises only with reasonable suspicion or a warrant. So there is, if you like, a form of notice. Even with a notice requirement, enforcers such as trading standards will have very substantial powers—more powers than the police, who deal with serious offences and serious crimes.

A noble Lord mentioned Ofsted—a question I have asked, actually. For practical purposes, Ofsted does give notice. It normally gives up to two working days’ notice before a planned inspection to a further education college—that is, a routine visit—but for schools, notice is given by midday on the working day before the start of the inspection. But it also has the right, quite rightly, to undertake unannounced inspections in cases of serious concern.

The noble Lord, Lord Best, asked about interpretation. I assure the Committee that we will be providing guidance. We are not creating principles such as reasonable suspicion. They are already well understood but obviously we will need to explain them for day-to-day work.

The noble Lord, Lord Harris, asked about evidence of the abuse of powers. This is not about abuse of powers; it is about reducing the burden on business from intrusive powers of entry and protecting civil liberties. It is about routine inspections, which, in my opinion, should be the subject of a warning. Where there are reasonable grounds of suspicion, obviously you can proceed immediately. I am a businessperson and I think business planning can have value in these circumstances.

I was also asked how notice can be given. Notice can be given by post or e-mail to the occupier or by leaving it at the premises. Actually, we have engaged extensively with the trading standards community while formulating the exemptions. That brings me on to the point that a number of noble Lords have made about the funding of the trading standards service. Obviously, spending and resourcing decisions are made by individual local authorities, which are better placed to make decisions about the enforcement needs of their communities than central government. Like all parts of central and local government, the services have faced budget reductions in recent years. There is no point denying it; that is agreed.

As noble Lords know, the Government are committed to tackling the inherited budget deficit by making savings and trying to improve value for money for the taxpayer, and this is part of that effort. We greatly value the work of trading standards to protect consumers from rogue traders and scammers, and we want to develop a better understanding of the impact it has across the economy. That is why, in partnership with the Trading Standards Institute, we have commissioned a group of academics at the Institute of Local Government Studies in Birmingham to undertake research to build an evidence base on the impact, effectiveness and efficiency of services, how improvements can be made, what works well and how we can do partnerships. This sort of evaluation is really important in public policy.

I think I have pretty well finished. I was asked about the deterrence effect of inspections. We would be concerned about the resource implications for trading standards services where uncovering breaches by chance is seen as an effective strategy for the future, even on the basis that it has been useful in the past. Targeting finite enforcement resources using an intelligence-led approach is a more efficient and effective strategy. I speak as a former businesswoman, with experience of a pretty small business trying to do a good job, and I think that better planning and targeting can save money both for business and for enforcers.

In conclusion, it has been an important and good debate. I have listened. I have tried to explain where we are coming from in the way in which we have drafted the Bill. I am trying to ensure that the investigatory powers in the Bill, modernised and brought together, strike the right balance between protecting civil liberties, reducing the burden on compliant businesses and ensuring that enforcers can tackle rogue traders.

[Baroness Hayter of Kentish Town]

The noble Baroness said that the balance is between civil liberties and business. Unfortunately, she did not use the word “consumers”. Perhaps I might leave her with three questions. I know she will not be able to answer them now but they are extremely serious ones. First, she alleges that £50 million will be saved. I would like to know how many visits are included in that £50 million. Secondly, as I understand it, test purchases can be made only in a retail outlet and someone would not be permitted to go into a warehouse or a wholesaler’s premises to make such purchases. Thirdly, the biggest worry about this issue is suspicion, as I mentioned. How could suspicion be proved in a court of law if it was the result of an anonymous tip-off? I am very content for her to write to the Committee on those questions as I do not think that she has answered them this evening.

[Baroness Neville-Rolfe]

I thank the noble Baroness. Perhaps she will also read Hansard on these points. We carried out an impact assessment and I think that the £50 million figure comes from that assessment, which I can certainly make available. I wanted to say that I was going to mention consumers at the end because this is the Consumer Rights Bill. It is important that we have a deal that is good for all sides. There are various different pressures relating to investigatory powers. I have tried to explain the wider picture and the parallels elsewhere. I am very keen that this should be an effective part of the Bill, which is obviously designed to modernise and improve both consumer rights and consumer enforcement. I therefore ask the noble Lord, Lord Best, if he will consider withdrawing the amendment.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Baroness Hayter of Kentish Town

Monday 27th October 2014 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, I have a lot of sympathy with the intention behind Amendment 50B. It seeks to help consumers get a better deal from their insurers through the provision of more information, which would help them to make an informed choice. I am glad that we are discussing the issue today. But I am equally concerned that the amendment could lead to customer confusion and might even hamper competition in the insurance market, which ultimately is not in the interest of consumers. I shall first address the requirement under the amendment to disclose risks taken into account when setting insurance premiums. An example of that would be the age of a driver, as has been mentioned.

The idea of equipping the consumer to make informed choices is in my view an admirable one, but mandating the provision of complex information would be likely to result in the opposite outcome. A complex algorithm would not help the consumer and competition could be affected. In my experience, there is good practice out there. As it happens, only yesterday I was renewing my motor insurance on my mobile phone, which kept giving up on me, so I had to ring in again. However, in the end I did succeed. It was actually quite interesting because I had a discussion about some of the options. I asked, “If I take one of my sons off the insurance, will it be cheaper?” and so on. They were very clear and also went through extra things that one might want to purchase but had no obligation to do so. Those were the sorts of thing that the noble Baroness mentioned, such as legal expenses or a replacement car.

As we know, it is important that consumers—who are busy and not always financially literate—take in the key information needed to decide whether to buy an insurance product. To overload them with more information can put them off reading any of it at all. There appears to be little appetite from consumers to understand the complexities of how premiums are arrived at. We know that consumers concentrate on price. A key part of price competition comes from the respective capabilities of insurers to assess risk. Asking insurers to disclose these assessments could harm competition as it would be tantamount to giving away the secrets of an insurer’s business model. I think that that was the argument discussed in the other place. Further, the price of premiums could increase as a result of this amendment as it imposes an additional cost burden on insurers to provide a breakdown of detailed premiums—which inevitably will be passed on to consumers. This cost burden could damage an industry that employs 320,000 people in the United Kingdom.

The amendment also has a requirement to disclose profit relating to a policy where no claim has been made. Information about expected profit if there is no claim on a policy can be only speculative. Insurance works by pooling risks together—that is the whole principle of it. If no claim has been made on a policy, this does not necessarily mean that an insurer makes a profit on that policy. I also highlight that the Financial Conduct Authority’s conduct of business rules already cover the provision of pre-contractual information by insurers—that is, what you are told before signing up—so creating a separate set of rules in this area is unnecessary.

The Financial Conduct Authority’s General Insurance Add-ons Market Study highlighted that there is currently no consistent or common method for measuring the value of these products, and proposed that insurers should publish claims ratios to increase transparency and focus on value. This would be an aggregate: how much they pay out relative to income for the whole fund. The FCA has not yet concluded that work so it is important that we allow the regulator space to draw its conclusions before taking additional action. Of course, it has powers to add or amend its rules—in this case, the Insurance: Conduct of Business Sourcebook.

Turning to Amendment 50D, I am again concerned about the risk of adverse consequences for consumers and about the potential conflicts with existing rules on claims handling set by the FCA. I will explain my concerns by going back to the fundamental nature of some insurance claims. For example, as the noble Baroness mentioned, property insurance claims for riot or flood damage can take a long time to resolve simply because of the scale and nature of the damage. A flooded property can take many months to dry out and it is vital that the property is dry before any renovation takes place. In these cases, to assist the claimant through a period and alleviate hardship, interim payments and temporary accommodation are usually paid immediately.

Instead of helping consumers, the amendment could have perverse effects. It could encourage insurers to rush people back into their homes and close the claim just to be within the law rather than because it is the best outcome for the customer. I am sure that that is not the noble Baroness’s intention but that is a risk, as was suggested in the other place—and one that I am very keen to avoid in this important piece of legislation. Further, I am particularly mindful that artificial deadlines would put a strain on customers to quickly evidence the loss to validate their claims, and might even encourage what could be seen afterwards as fraud.

I know from experience that processing and verification can take some time. I also know that insurers, in general, take their obligations very seriously. Insurance is an important industry and pays out £452 million every day. Good insurers earn loyalty and a good reputation which allows their business to flourish and grow.

I think it is also relevant to set out how the Government have responded to recent flooding in the UK. To ensure that home insurance is affordable for 350,000 properties at highest flood risk the Government have worked with the industry to create Flood Re. We debated this during the passage of the Water Bill. When up and running in 2015, Flood Re will effectively limit the amount that most UK households at the highest flood risk will pay for flood insurance. We have also announced record levels of government investment in managing flood risk.

Still on the subject of delays, the insurance industry complies with all-encompassing consumer protection and redress rules set down by the FCA which in many cases exceed the measures proposed in the Bill. The FCA’s Conduct of Business Sourcebook, which I have already mentioned, requires that insurers settle claims promptly once settlement terms are agreed. The FCA has recently undertaken work on household claims in particular. This year, it conducted a review which concluded that there was no evidence of insurers deliberately delaying settlement. Where things go wrong, as they unfortunately occasionally do, consumers have the right to complain to their insurer and can also go to the Financial Ombudsman Service. A ruling made by the service is binding on the financial service provider.

We have discussed a very serious matter. I feel we have the balance right in this Bill, for all the reasons I have outlined, and I ask the noble Baroness to withdraw the amendment.

[Baroness Hayter of Kentish Town]

The Minister clearly needs some advice about topping up her phone battery if she is going to be renewing her insurance that way. We trust she got it through all right.

I am delighted that the insurance industry is paying out £452 million a day. We do not know how much it is getting in per day, which from the point of view of the consumer is the interesting figure. I was trying to multiply 452 by 365, but I did not manage to do it. However, that is the issue. If you get a no claim bonus for not having made a claim in the previous year, which I hope the Minister got, the real issue is that you have no idea of its value. In other words, you do not know how much the insurer has saved by the fact that you have not claimed.

I think I made it clear, after what was said in the Commons, that we are not saying that this will be an artificial deadline. The amendment states only that the fact that someone has had to move out of their primary accommodation can be taken into account when determining the timeframe. We were not saying that it was the determinant.

On Amendment 50B, the issue is that we want consumers to shop around. We want them to have the details to be able to judge price, and without some of the underlying assumptions it is hard to do that. I hope we can find a way of strengthening the consumer in this way, whether through the FCA or this Bill, but the FCA’s responsibilities are wider than just consumers whereas this Bill has consumers at its heart.

[Baroness Neville-Rolfe]

We have consumers at our heart in relation to this Bill and many other pieces of legislation, but there has to be a balance. I am sure we agree that if you put up costs inappropriately, the consumer is the loser because costs tend to be passed on in higher prices. We have to work together to find the right balance.

[Baroness Hayter of Kentish Town]

I certainly agree with that, but I am not always convinced that having better-informed consumers leads to higher prices. That may be for another discussion. I beg leave to withdraw the amendment.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Baroness Hayter of Kentish Town

Wednesday 22nd October 2014 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe)]

My Lords, this amendment clarifies that, when the power in subsection (5) of Clause 48 is used, the statutory instrument made under it can provide that an exclusion only applies to a service in the circumstances specified in the order. The amendment therefore enables a more precise or limited exercise of the power where this would be more appropriate. I beg to move.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I thank the Minister for introducing the amendment. Perhaps I could just take a brief moment to wish my noble friend Lady King a happy birthday today—it is always very nice to spend it in this way.

Our only query, picking up on the Minister’s use of the word “clarifies”, is whether the amendment clarifies the existing law or whether it extends it to enable the Government to cherry-pick, if you like, the provisions in this Bill so that they would not affect a particular service. As the Minister will understand, the Legal Services Consumer Panel and the Financial Services Consumer Panel are slightly worried that the power provides the possibility to carve out some legal services from being covered by the Bill, especially as—although I am sure that it was unrelated to this—the Minister’s helpful explanatory letter cited the equivalent power to exclude arbitrators from the scope of legal services legislation. Given that worry by consumer representatives about whether this might be aimed at particular consumer areas, if it is possible for the Minister to expand on what sort of circumstances she has in mind that this power might be needed for, that might allay people’s concerns.

[Baroness Neville-Rolfe]

My Lords, perhaps I can explain the general intention and then see whether we can clarify the point that has been raised about legal services. Our intention is that this power will not be used regularly. It is designed to accommodate certain services where it would not be appropriate to apply all or some of the provisions of Chapter 4. While the power is designed to be rarely used, we want it to be able to be used when it is needed. We are therefore proposing this amendment. The amendment clarifies that the statutory instrument can provide that an exclusion only applies to a service in the circumstances specified in the order. It therefore enables a more precise or limited exercise of the power where this would be more appropriate.

We plan to consider each case on its merits and the decision will be on a case-by-case basis. For example, we would want to consider the costs and benefits to both businesses and consumers. Let me reassure you also that any use of the power would be subject to parliamentary scrutiny, as an order made under it will be subject to the affirmative resolution procedure. Because this is an enabling power, it is difficult for me to comment on specific areas, but our broad intentions are as I have outlined.

[Baroness Hayter of Kentish Town]

My Lords, I think that probably goes even further, if I have understood the Minister correctly, as it makes more specific what might be excluded. My guess would be that this would be reassuring to the groups that have contacted me and, in that case, we will be happy to support the amendment.

--- Later in debate ---

[Baroness Neville-Rolfe]

However, if I may, I shall think about that one, as it probably goes a little bit beyond today’s discussion.

In conclusion, the Government firmly believe that it is better to impose specific, focused requirements on banks and other financial services firms through the regulatory system. Customers and regulators can more effectively hold the bank to account when they do not comply. I hope, therefore, that the noble Baroness, Lady Hayter, will agree to withdraw this amendment.

[Baroness Hayter of Kentish Town]

My Lords, I thank the Minister for that. I hope that it convinced her; I fear that it did not convince me. It is some time since I was on the Financial Services Consumer Panel, but I am still in close touch with the panel and I will be quoting it later on its disappointment with the Bill.

However, I want to take a moment to talk about the really interesting question that the noble Earl, Lord Lytton, raised. It was interesting in itself but so was the contrast with the Royal Institution of Chartered Surveyors, which is a chartered institute and has a code of conduct or ethics—I cannot now remember what it is called—which does include putting the customer first. In a sense, that is all we are trying to do for the financial industry, which could learn a thing or two from the surveyors.

I thank my noble friend Lady Drake for her intervention, particularly the examples she gave. She usefully reiterated the reason why consumers in this industry need particular help: the complexities and the asymmetries of knowledge on these long-term products. She also warned that if we do not introduce somewhere in law that you must put your client’s interest first—and I do not think that something that is in an FCA rule is actually law, but I could be wrong about that—then we will carry on with a compliance, keeping-to-the-rules regime, which is of help to no one and continues to produce poor outcomes. As my noble friend warned us, there may be more to come, with pension unlocking.

The most important thing I have to say to the Minister is that treating customers fairly, which was in FiSMA and is now in the Act that my noble friend Lady Drake and I cut our teeth on in the House four years ago, is not the same as putting customers first. That is the extra push that we want. Although the Minister mentioned the duty of care on business in general, businesses have duties to shareholders and everyone else, which is why the client often comes a bit far down the pecking order.

If the Minister is right that no additional remedies would come from our amendment, then I see no harm in including it. She has not said what harm this would do. However, I fear that on this, just as the Government voted against a code of conduct for the financial industry when we were doing that Bill, they are again going to turn their back on consumers in this vital area.

[Baroness Neville-Rolfe]

Before the noble Baroness, Lady Hayter, sits down, perhaps I could clarify her point about FCA rules not being law. Our advice is that they are law, and that is why the principles say, “A firm must”.

--- Later in debate ---

[Baroness Neville-Rolfe]

My Lords, I thank the noble Baroness for her comments. We have heard a lot today about the importance of making information clear for consumers. I was glad that she felt comforted by the comment on objectives that the Minister—I imagine that it was Jenny Willott MP—was able to make in another place when the Bill was debated. There is already legislation in force that protects consumers from being misled. I have mentioned in our discussion of earlier clauses the Consumer Protection from Unfair Trading Regulations 2008 and the recent amendment to these from October this year which allows consumers a private right to redress for misleading actions.

Other rules, in the 2013 consumer contracts regulations, which I have also mentioned, introduced by this Government, mean that traders must give consumers certain key information before they enter a contract and that it must be given in a clear and comprehensible manner. I emphasise the word “comprehensible”.

The noble Baroness, Lady Hayter, rightly expressed concern about problems with small print. We are committed to protecting consumers from finding surprises in a contract’s small print. Part 2 of the Bill goes into that in some detail and we will hopefully reach that next week.

The Government are keen to help consumers to know what they are buying and get what they pay for. However, I have some concerns about the amendment. Clause 50 already gives consumers a right that traders comply with information given which the consumer takes into account. It allows the trader to qualify information but on the same occasion as the original information is given. The consumer must expressly agree to any later changes that the trader proposes. I think we are getting used to this process.

My concern with the amendment relates to certainty and practicalities. How can a trader ensure that he gives two pieces of information with equal prominence? Many contracts are agreed orally. In such cases, the trader cannot be sure that he has given two pieces of information with equal prominence, since he cannot say two things at the same time. Of course, there may be more than two pieces of information which are relevant, thereby exacerbating the problem. How would a consumer know whether the trader’s explanation during a conversation about a service had been sufficiently prominent to qualify a general point?

To give another example, let us consider a painter whom you have asked to paint your famous bathroom. Before he has measured all of the walls, he tells you that it will cost £100 to paint the room. He then measures and analyses the walls, confirms that the price will be £110 and writes that price down for you on a piece of paper. Do the parties need to consider which is more prominent—the written note or the initial oral comment—or are they equally prominent? I do not know which would be more prominent, and I do not think that most traders or consumers would know. I do not see that this extra test particularly helps the consumer.

I fully agree with the principle that consumers should be given key information in a clear and transparent manner. We have a suite of legislation in place and will have more when this Bill is enacted. Clause 50 provides appropriate protection by requiring a qualification to be given on the same occasion as the information it would qualify. I believe that that is sufficient, given the risks of causing uncertainty by going further.

I should perhaps add that Part 2 of the Bill implements Law Commission recommendations to protect consumers from surprises in the small print. Price terms must be prominent to avoid assessment in court for fairness, and that is new in this Bill.

In these circumstances, I ask the noble Baroness to withdraw the amendment.

[Baroness Hayter of Kentish Town]

I thank the Minister for that. If she were worried only about the application of the amendment to information given orally, then of course we could just put “where written, they should have equal prominence”. That could be a solution if that were the only issue that the Government had with this. The “hidden in plain sight” issue is quite important. Sometimes these things are known to the trader but are carefully put where they are not as obvious to the purchaser.

We will look at the wording and will think about whether, when something is known to the trader, we can find a form of words to ensure that it is all put in writing. However, for the moment, I beg leave to withdraw the amendment.

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[Baroness Hayter of Kentish Town]

My Lords, Amendment 49A is about mid-term changes to a contract. Therefore, this is not about things that were known at the beginning; it concerns the situation where a contract changes.

The intention behind the amendment is to deal with the situation where it is no good telling someone to shop around and find an alternative contract when some part of the original agreement, such as the interest rate, changes and either that person would incur a large financial penalty for doing so—the equivalent of an exit fee—or at that moment there are no other financial products around equivalent to the original one. There may be no such alternatives—perhaps because there is a mortgage famine, although there was not when the mortgage was taken out. The person’s employment status may have changed and therefore they cannot negotiate the same deal. They may have a few more children and so their outgoings are higher and, again, they cannot negotiate the same mortgage as they had to begin with. Alternatively, they could simply have retired and therefore find it very hard to negotiate a new mortgage. Also, annuity rates change a lot because circumstances may have changed.

Amendment 49A would not make the original terms of the deal necessarily unfair. It is not saying that it cannot be possible to change a contract, but it would seek to put the consumer back in the position where they would have been had the contract as made with and understood by the consumer been honoured. The amendment does not cover interest rate increases where those were part of the deal; it is where a provider seeks to change a part of the contract and where that leaves the client worse off because they cannot exit without a penalty. There is a contrast with the example of our house, which we keep going back to; if a cleaner says that they can no longer clean the house at the agreed price, you end the contract and find another cleaning firm. You can go elsewhere to get your house tidy, but that is not the case for financial products, where the exit fees, or changes in annuity rates, can mean a real loss from having to withdraw from the contract or where there is no other product available at that time, perhaps because of something in the market or one’s own circumstances.

Mortgage prisoners are the best example of the detriment that we seek to avoid. I am sure that everyone in the Committee will recall the Bank of Ireland example in March 2013, when the bank invoked a small part in its contract, citing exceptional circumstances, putting up the interest rates of more than 10,000 customers who had tracker mortgages that were supposedly going to be linked to the Bank of England base rate. That had gone up by 0.5% but the Bank of Ireland’s tracker rate went up by 4.49%. The issue is that consumers were essentially locked in to those payments at the time, because there were no competitive rates around where they could have taken their mortgage.

Amendment 49A is to ensure that, when the terms vary from those that have been mutually agreed, and when the consumer cannot leave the contract without a penalty, they must be protected by the provider. It is obviously vital for home buyers, whom we know that the Government are rightly keen to tempt back into the market at the moment, but it is also important for confidence in the financial industry, which, as I said, has some way to go before it reacquires our affection. I beg to move.

[Baroness Neville-Rolfe]

My Lords, I thank the noble Baroness for her comments. Clause 50(4) protects a consumer from detrimental changes to their contract. The noble Baroness talked about midterm changes—a phrase that I rather liked; it is rather American in flavour. When I was a director of a building company, we used to call them variations. The subsection makes it clear that, when key information about the trader or service is amended, the consumer must agree to that change for the change to be effective. That already provides a significant level of consumer protection. The noble Baroness posited what happens if the consumer does not agree to a change proposed by a trader. The answer in part lies in subsection (4). If the consumer does not agree to a change to the information set out in subsection (3), the original agreement stands. The trader must uphold its side of the bargain without the change. For example, if the trader increases the price but the consumer does not agree, the trader must charge the consumer the original, lower, price and bear the costs of doing so. The law on unfair contract terms also protects consumers from changes made to a contract after it has been agreed. There is already existing protection, and we are strengthening that in this Bill. I look forward to discussing the issue next week because there are a number of relevant amendments.

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[Baroness Hayter of Kentish Town]

I thank the Minister for her explanation. We are not really talking about buildings and builders. That is easy; you can go somewhere else. However, I do not think that she answered the question about mortgage prisoners. We are talking about people who cannot exit because they still have to have a mortgage and cannot get one somewhere else, as there are none available at the time. I think we remember that period when mortgages were virtually unavailable.

Can the Minister write to me to set out how, given all she said about how it should not happen like this, it was possible for the Bank of Ireland to change the rate when people could not exit because they could not go somewhere else? If everything which she said is in place should have protected consumers, why on earth did it not at the time? This has all happened since we have had the safeguards that she set out, so I am slightly at a loss about how we ended up with people in that situation. It was there in the contract but although it said “under exceptional circumstances”, it could be for any other reason. It could be anything: perhaps they might decide that they want to pay high bonuses to their owners. The problem is among those who cannot walk out from that contract. If there is nothing available at the time, because of either the market or their own situation, why did the protections which the Minister says are there not cover the Bank of Ireland? Perhaps she could look at that and write to us, because there is clearly a problem which does not seem to be satisfied by the existing law. That is why we would like some change.

[Baroness Neville-Rolfe]

On the Bank of Ireland matter, that is an issue for the FCA and it is not really for me to comment in detail. I have seen Martin Wheatley’s letter of May 2013 to the chair of the Treasury Committee, in which he stated that the FCA,

“did not identify concerns with the relevant terms which led us to believe that they might be unfair”.

However, it is a perfectly reasonable request that I should write to the noble Baroness and set it out in a little more detail, or arrange for the FCA to write to her.

[Baroness Hayter of Kentish Town]

That would be helpful. Clearly, what that letter said was, “Shucks, it wasn’t unfair—pay up”. That was not quite the answer I was hoping that the Minister would give us. However, it is the one we have been given at the moment and I look forward to seeing that detail. It seems that there is clearly some detriment which we need to look at but, for the moment, I beg leave to withdraw this amendment.

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[Baroness Neville-Rolfe]

I had not appreciated that the noble Lord wanted to talk in particular about price comparison sites. That is something I would like to discuss with him in a bit more detail. I will write to him and to other noble Lords.

[Baroness Hayter of Kentish Town]

I think these are hidden in plain sight. It probably did say, “If you go on holiday and you don’t print it then you are going to be hit by it”. Our disappointment is that the Minister is saying, “Don’t worry, the regulations are already there”. The evidence—from buying tickets, looking on price comparison websites, printing off boarding passes, or, even now, buying annuities, pensions and all that—is that the regulations are not working. This is the opportunity to strengthen them. I hope that the Government are not going to continue to tell us not to worry and that the regulations and law are already there when this is clearly failing to solve the problem.

The ASA is not mandatory. It is not a government agency or a legal enforcer. It is a voluntary organisation funded by advertisers, if I remember correctly, so it relies on the industry. I am pretty certain, because I take a lot of complaints to the ASA—I have a wonderful new one that I am giving it this week—that one does not get any redress, which is a great disincentive for people to complain to it. Although it either fines or tells people off for breaching its rules, consumers do not get any redress.

The Committee will be clear from our different responses, whether from the perspective of the National Trading Standards Board or from the financial sector—I thank my noble friends Lady Drake, Lord Harris of Haringey and Lady Crawley for their interventions—that we are uneasy that consumers are unable to be sufficiently protected by the regulations, which the Government assure us are there. The Minister said that this was comprehensively overseen by the FCA, but people are still having problems. There is quite a difference between us being told that it is quite adequate and our evidence.

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[Baroness Neville-Rolfe]

One area that my noble friend Lady Jolly touched on today, and which we have discussed before, is the implementation of this new and important Bill and its parallel provisions. Clearly we can debate further and clarify whether we have exactly the right provisions; that is entirely appropriate for this House to do. However, her point is also about how we implement and enforce some of the good regulations that have come in during the past couple of years—some of them EU-based—and the new provisions that we are creating in this process.

[Baroness Hayter of Kentish Town]

That is helpful. I know that one of the Ministers said that the implementation group would look at the regulations as well as the Bill. I welcome that, but perhaps she should also talk to the FCA to see whether it could be part of that. I thank the Minister, and for the moment I beg leave to withdraw the amendment.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Baroness Hayter of Kentish Town

Wednesday 15th October 2014 Grand Committee

[Baroness Hayter of Kentish Town]

Can the noble Baroness tell us when the consultation will be published?

[Baroness Neville-Rolfe]

All I can say is that the consultation will be published shortly. I confirmed that the implementation date for the directive is 2015. The noble Baroness anticipates what I was going to say at the end, which I will say now. I assure your Lordships that our implementation plans for the Bill, which we discussed on Monday, will also advise businesses of their forthcoming responsibilities under the ADR regulations. Similarly, information to consumers will be available in one place—to meet the point that we will be joined up.

If I may elaborate, our response will explain how we intend to make ADR widely available and accessible for consumer disputes and our plans for competent authorities to monitor the provision of ADR. I hope that noble Lords will understand that I cannot set out the full detail of the Government’s response before publication. We consulted on whether a consumer complaint helpdesk would be useful to help consumers and business to access ADR, which was a point made by the noble Baroness, Lady Drake.

We will publish our intentions in our consultation response document. Once we have published our response, we will work with partner bodies to prepare for implementation. We will then publish draft regulations to transpose the ADR directive by spring 2015.

I would not want to affect the ongoing work to implement the ADR directive in regulations by amending the Bill. The noble Baroness, Lady Howe, said that her amendments would achieve consistency and simplification. However, the ADR directive contains many provisions, several of which are linked. That is why we feel that it is far better and more straightforward for businesses to implement the ADR directive in one package. Our consultation response document will set out our plans for doing so. We certainly want to avoid any unhelpful confusion that could be caused by implementing the directive partly through the Bill and partly through regulation.

The noble Baroness, Lady Drake, raised an important point about the need for the implementation of the ADR directive to complement consumer rights. I am glad to say that the changes that we will make to implement the ADR directive will complement the reforms in the Bill and improve access to and awareness of the ADR. We want to take the same comprehensive approach to ensure that we deliver the best possible ADR framework. Our plans for implementation allow us to do so. I therefore ask the noble Baroness to withdraw her amendment.

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[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Baroness for giving me the opportunity to say what a good job I think trading standards do in many of those very difficult cases, having worked with them for many years. It is true that many government services have suffered from cuts as a result of the need to get the economy back on track and deal with the deficit problems that we inherited.

As noble Lords know, spending and resourcing decisions about local trading standards are made by the individual local authorities. They, rather than central government, are best placed to make decisions about the enforcement needs of their local communities. However, I have talked to them about how you can focus and get local authorities to focus on the real areas of importance, and they are trying to do that in often deeply difficult circumstances. BIS greatly values their work protecting consumers from everything from rogue traders to scammers and so on. That is one of the reasons why we have set up the National Trading Standards Board and work with the Local Government Association on trying to improve enforcement in local authority areas in important areas. Of course, product safety and risk of death always come very high on their agenda.

[Baroness Hayter of Kentish Town]

My Lords, I thank the noble Baroness, Lady Bakewell of Hardington Mandeville, for her support for this amendment.

The Minister’s response will be deeply disappointing to the fire officers and Electrical Safety First, who worked on this and who have earned this amendment. They are the stakeholders who are referred to, and they do not feel that what the Government are doing is enough, which is why they have called for this amendment. The Minister said that the legislation is robust, but it is not working. We are having a death a week because of faulty appliances, so that is not working. I do not ask for the information now, but it would be helpful if she could write and say how many prosecutions there were in the last five years of companies for not having reported and taken necessary action.

However, my noble friend Lady Crawley raised an extraordinarily important point. It is also a surprise to find that this Government are saying that on this issue they want the public sector—that is, trading standards—to deal with it, rather than the people who done wrong—the manufacturers—who acted unwittingly to begin with, but who made a faulty product that is leading to carbon monoxide poisoning, electrocution, or death by fire. It is interesting that the Minister wants not to absolve them of that but to say that the major responsibility is to tell trading standards—that is, the public sector—which will do something about it. Other things that come from the Government are all about the public sector doing less and all of us, whether it is the big society or manufacturers, doing more. Therefore I am surprised but also disappointed that the Minister does not want to put more of an obligation on to the manufacturers who have made these fire traps. However, she will understand from what I am saying that we feel very strongly about this, and we will come back to it. It certainly does not seem to be good consumer protection when once a week somebody dies when they do not have to. However, for the moment I beg leave to withdraw the amendment.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Baroness Hayter of Kentish Town

Monday 13th October 2014 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, I join the noble Baroness, Lady Hayter, in thanking my noble friend Lady Wilcox and my predecessor, my noble friend Lord Younger, who so elegantly got us to this point. I am also very touched by the welcome you have given me. I look forward to working with your Lordships on this very important Bill, the first on which I represent the Government. I was very sorry to miss Second Reading, but I have carefully studied the Hansard. I am honoured to be discussing a Bill that represents a seminal modernisation and simplification of consumer law. Simple rights simply expressed are, to me, very important.

I agree that it is vital that we support the smallest businesses and help them to grow. Small businesses are the lifeblood of our economy, making up 99% of private businesses and employing 14 million people. Small businesses are responsible for nearly half the job creation in the UK, employing more than 500,000 more people in 2013 than in 2011. That is why the Government are doing more than ever before for small businesses.

It has never been a better time to start, grow and operate a small business in the UK. To give you just a few examples, we launched a £1.1 billion package of business rates measures, with extra relief announced for small businesses through the extended doubling of the small business rate. We set up a £30 million growth vouchers programme, which will see 20,000 small businesses receive up to £2,000 to help them access specialist support on hiring, financial management and marketing, which, as I know from business, are key areas. Since April 2014, every business and charity is now entitled to a £2,000 employment allowance to reduce their employer national insurance contributions bill each year. Over 90% of this allowance will go to small business.

Perhaps even more importantly, in December 2013 the Government published Small Business: GREAT Ambition, setting out our commitment to making it easier for small businesses to establish and grow in the UK. As my noble friend Lady Wilcox said, we have now introduced the Small Business, Enterprise and Employment Bill in the other place. That Bill will help to reduce the financial and regulatory barriers to starting and growing businesses. I very much look forward to debating that Bill with your Lordships.

However, this Bill is about consumers. Its background is that consumer rights are found in a variety of places, often set out in inaccessible language. We know that consumers and businesses often do not know their rights. That is the motivation to have key consumer rights set out in this one place, where they are easy to find and to access. As soon as we start including rights for other parties in this Bill, that core purpose is diluted and we risk losing the clarity we are aiming for, which I believe is valuable to businesses and consumers. In passing, I should reassure the noble Baroness, Lady Hayter, that there are protections in law for businesses dealing with other businesses. For example, the Sale of Goods Act 1979 gives them a right to reject faulty goods.

We consulted on our proposed definition of “consumer” in 2008 and 2012. In both cases, we received overwhelming support for what we have now in this Bill—that is, clear support from the business community for not defining micro-businesses as “consumers”. The noble Baroness, Lady Hayter, suggested that small businesses do not have time to respond to consultations, but that is a reason to ensure that we do engage with them via their trade bodies, including the Federation of Small Businesses, with which I met only last week; it is not a reason to legislate on the assumption that we are doing what is right for them.

The Federation of Small Businesses recently commissioned and published research on this issue. The FSB did not recommend, as I think has been suggested, treating smaller businesses as consumers for this Bill but did make several suggestions for the future. My colleague Jenny Willott wrote to Parliament giving our detailed response to that report. Within that, we committed to considering the treatment of smaller businesses in developing future consumer legislation, just as we did in 2008 and 2012 for this Bill.

The noble Baroness, Lady Hayter, talked about taking an enabling power. We have already considered covering small businesses in 2008 and 2012, and taking a power would not be appropriate because this change could impact 97% of all businesses. It should not be left to secondary legislation.

This Government are also committed to closely monitoring and ultimately reducing burdens on business. That means that, for each and every proposal, we must be sure that we are not directly or through unintended consequences overburdening business. This amendment does not meet that test.

We simply do not have clear evidence of what the effect of treating small or micro-businesses as consumers would be. As a business person, my concern would be that, if a smaller business can, for example, successfully challenge terms as unfair, does it mean that a larger business will simply stop dealing with them? To give another example, how do we know that the benefits outweigh the costs? If smaller businesses were classified as consumers, there would be benefits to a small business as a buyer, but also a cost to them when they sell to small businesses. We must be wary of giving with one hand and taking with the other.

We do not know how larger businesses would react, and we do not know whether the costs outweigh the benefits, but we would need to know. We would need to change the legal framework for over 95% of businesses—that is, 4.7 million businesses—without a full and complete understanding of the impacts. This Government are committed to helping small businesses to grow. Businesses, including small and micro-businesses, are not of course unprotected despite not being defined as “consumers” for this Bill. Provisions under the Sale of Goods Act and the Supply of Goods and Services Act apply to them now and will continue to apply.

In conclusion, this Government are doing more than ever to help small businesses to grow, and there is a great deal of evidence that this is working. However, this Bill is about consumers. For the reasons that I have explained, I ask that the amendment be withdrawn.

[Baroness Hayter of Kentish Town]

I thank the noble Baroness, Lady Wilcox, and my noble friend Lady Crawley for contributing to this debate. I did not know that I was meant to answer questions but, of course, I was not in the previous Labour Government. Had I been, I could give noble Lords a long list of things that they perhaps should have done—please do not report me to the boss for that.

I thank the Minister. She has not actually answered the question of whether this would be wrong. She said, “We don’t know; there is not enough information; we haven’t got research”. Actually, however, she had no good answer. If two of us go to John Lewis and buy a kettle, one of us for a charity that we run which employs all of one person and three volunteers, and the other just for themselves, it does not help John Lewis for them to take their complaints in two different ways. John Lewis probably would not worry at all about there being the same form for both.

I was sorry that the Minister used the examples I had cited, the 2008 and 2012 consultations. Obviously, we can blame the 2008 consultation on the previous Government, but there is an issue in that this is about the big companies. We know that from responses to consultations. It is therefore important to remember that the Federation of Small Businesses has said that it supports this amendment. I would like to make that correction because the federation has asked me to do so, should the Minister refer to its research. It has said that, “This is not an accurate reflection of our conclusions. The report that we commissioned was to inform our policy”. So they were not actually the federation’s recommendations; they were recommendations made in an independent report. However, apparently where the report talks about “non core” area business such as purchasing energy supplies, there was a case for it being treated separately.

I would add only that all the help for small businesses is great, and I believe that on deregulation there is even more to come. But if the Federation of Small Businesses says that the best thing to help micro-businesses is this, it seems a little funny not to hear the federation on it.

I am grateful to the Minister for her comments and at this stage we will seek leave to withdraw the amendment, although I think that it is probably something to which we will want to return on Report.

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[Baroness Hayter of Kentish Town]

In moving Amendment 9, I wish to speak also to Amendments 13 and 25 in this group, which all stand in my name and that of my noble friend Lord Stevenson of Balmacara.

Amendment 9 is central to the aim of the Bill as it states that the trader must be explicit about people’s statutory rights at the time of the purchase so that people know when they are buying something what they can do if something goes wrong and what their rights are. The Bill’s laudable aim of simplifying rights and making them useable will be achieved only if consumers understand what those rights are. The best time to explain them is when they are about to make a purchase; we should not wait until something goes wrong. For the vast majority of consumers nothing does go wrong, or we hope that is the case. We purchase goods where nothing goes wrong far more often than we do goods where something does go wrong, but it is at the moment of purchase that these rights should be explained. It is also part of the process of deciding whether to buy something. It is important to know what redress you have if you are worried about whether something is faulty or will work. I cannot be the only person who has been a bit mystified when standing by a till and reading a notice which says, “This does not affect your statutory rights”. Indeed, I am tempted to ask the Minister to explain that term, but I will save her blushes on this occasion.

BIS’s own consumer detriment survey showed that although the majority of people consider themselves to be confident and savvy there were still substantial gaps in their knowledge, so just asking consumers whether they are confident about knowing their rights is not good enough. For instance, more than two-thirds of them did not know that if a major appliance broke down 18 months after purchase, they could still have a right to have it repaired or replaced even if they did not purchase an extended warranty. Indeed, very few of us understand our rights and that will remain the case unless we all receive some very simple explanations, no matter how well the Bill is drafted. We agree with Citizens Advice that rights can be set out briefly and simply. It has produced wording on this issue which has been seen by BIS—for example, “Under the Consumer Rights Act, consumers have 30 days to return an item if it is faulty”, so we are not talking about complicated wording. Similar information on repairs or refunds could be given at point of purchase.

We know that the Government agree in principle with giving this clear information but have backed off including it in the Bill, arguing that that would reduce flexibility for the implementation group, which comprises retailer and consumer organisations. We know from gossip on the street that there is consensus in the group that action is needed to make sure that consumers are aware of their rights but no consensus on whether point-of-sale information should be mandatory. I hope that I am not giving away any secrets in saying that the business members, with support from trade associations, BIS and retail groups, argue that a voluntary approach would be the best way forward, whereas Citizens Advice, Which? and moneysavingexpert, which I think also sit on the group, remain unconvinced about that, as do we. There is no guarantee that traders will voluntarily display this type of information and, once a Bill is passed, attention and enthusiasm tend to fade. Some traders will go on displaying the information for a short period but that is not the same as it being displayed everywhere all the time.

It is true that at an earlier stage in the other place we were told that the implementation group would be looking at whether consumers would consider this sort of information better when something actually went wrong. If that is the case, I am sure that the Government will accept our Amendment 13 in this group, which I will get to shortly, which is about giving information at the time of a problem. However, our view is that information should be given both at the point of purchase, in the sense that it is part of the purchasing decision but it is also part of educating consumers, and later, should something go wrong.

Amendment 13 is about telling people their rights when they actually make a complaint. A key part of consumer rights is the availability of redress. The noble Baroness, Lady Wilcox, who is not in her place at the moment, started going through the six consumer principles, and of course the right to redress, as she knows very well—she probably wrote them—is one of them. The right to redress is having something put right, preferably by the service provider but, if not, having the issue settled by an ombudsman, perhaps with compensation. However, the consumer will not even start on that journey of complaint and seeking repair, replacement or refund unless they know they have that right to complain and when that right is there. Amendment 13 would ensure that the rights to redress was more widely understood and used by explaining, at the time when someone complained, what those rights were.

Although some of us have confessed to not being the savviest of shoppers, I hope we do not still fall for those offers. I do not know how savvy we are when we go back to a shop to complain, wanting either a replacement or a repair. What happens very often is that we are misinformed about what our rights are. There is a lot of evidence that traders themselves either do not understand the position or choose to misrepresent consumers’ statutory rights. Which? did a secret shopping exercise and contacted six major retailers, visiting them each 12 times. In nearly 80% of cases, a member of staff,

“stated or gave a clear impression that we”—

that is, the people doing the mystery shopping—

“didn’t have any rights against the retailer, or told us to speak to the manufacturer instead”.

Shoppers also get told that goods are out of warranty, that they need to go to the manufacturer or that there is simply nothing that can be done. The other thing that can happen is that traders refuse to give a refund even when they should, but offer a credit note to be used in the same shop. Clearly, that does not meet statutory rights. If the consumer is very persistent and goes to Citizens Advice, they may then know better and go back, but there is then still no guarantee that the member of staff they talk to will know what their rights are. Under Amendment 13, both staff and consumers would have easy access to information about the buyer’s rights and therefore would be able to have a better conversation.

I know that the Government were hoping that the implementation group could come up with a way forward but, given that we think that has not happened, it would be useful to take advantage of this amendment and put it into the Bill. Even if the group did come up with recommendations we are unsure of what their legal force would be, so perhaps the Minister could also say whether any recommendations from the voluntary group would have any legal force. We have the opportunity here to set a requirement that such information will be provided. This does not need to be the exact wording—the group can do that—but if we fail to put it into the Bill at all, we risk undermining the Bill’s benefits. We know that good traders are going to do all this; it is the poor ones that we are after.

One further small area in this group that consumers also need more clarification on is free guarantees—guarantees provided free of charge by traders over and above statutory rights. We are talking here not of paid-for warranties but of free guarantees. Amendment 25 would require that any such guarantee provided by a trader sets out what the statutory rights are; otherwise, the purchaser has only the trader’s guarantee and is still not told what their statutory rights are. This approach has been very much supported by Martin Lewis of moneysavingexpert.com, who says that it is really important for consumers to know whether the trader’s guarantee is worth anything more than statutory rights. Also, if consumers are told what their statutory rights are, they might decide not to buy the extended warranty, because they may have more rights—particularly after this Bill—than they thought that they had. Without this amendment, they might get very confused when they have a trader’s guarantee to know whether there is still something left to them under their statutory rights.

What the Minister in the Commons said is important: that statutory rights always override any statements in a trader’s guarantee. Even if a trader’s guarantee does not meet something, the statutory rights always override it, but my guess is that not many consumers know that. Even in that position, they may have to take legal advice to find that out or to go to court, which is not the position we want them to be in.

We hope this small amendment will be accepted, because it will again be a way for consumers who have this extra guarantee to know exactly what their statutory rights are, which is an objective that the Government, as well as ourselves, would like to meet. I beg to move.

[Baroness Neville-Rolfe]

My Lords, I should start by saying that it is extremely important to the Government that the implementation of the Bill should be done really well. Good implementation is a key feature of good regulation and our attention will not fade. That is why we set up an implementation group last year with representatives from business, consumer organisations and consumer law enforcers. I think we are agreed that we all need a better understanding of our rights. The group is helping us plan key aspects of implementation of the new law, including: the content, channels and timing of guidance; advice; and publicity. The group has been influential in devising our implementation strategy, which is summarised in the implementation plan that we recently published.

If this legislation is to be effective then it is hugely important that consumers should feel confident about exercising their statutory rights and that businesses should know and fulfil their statutory responsibilities. We certainly accept that this is not currently the case. This year’s consumer detriment survey and research by Citizens Advice and Which? show that consumers become discouraged from pursuing claims to a satisfactory settlement. Lack of knowledge about their rights and even misinformation by sales staff are factors in their giving up. That is why we asked the implementation group to consider carefully whether there should be a requirement for traders to provide information on consumer rights to all consumers at point of sale or when rights are enforced.

As your Lordships can imagine, the implementation group strongly supports the Government’s objective of making it easier for consumers to find out about their rights. We believe that traders have a very important role in this. Business and consumer organisation members of the group have therefore worked together to develop a high-level summary of consumer rights when consumers buy goods, services and digital content. The summary also signposts consumers to the Citizens Advice helpline and website for more detailed guidance on specific issues. We have begun testing this model wording with businesses and consumers to ensure that it is easily understood and we have had some very good feedback on the concept so far. We aim to make it available to businesses by April next year to use in their communications with their customers. I have a working draft, which is being canvassed widely, on my iPad. I do not think that I am allowed to show noble Lords my iPad on the Floor of the House.