Consumer Rights Bill

Debate between Baroness Laing of Elderslie and Stella Creasy

Monday 16th June 2014 Commons Chamber

[Stella Creasy]

I beg to move amendment 1, page 51, line 9, at end insert—

“1A A term which requires a consumer to pay a charge for, or be liable for, an element of a good or service that another party has also been charged for in the course of the same transaction.”

[Madam Deputy Speaker (Mrs Eleanor Laing)]

With this it will be convenient to discuss the following:

Amendment 2, page 51, line 15, at end insert—

“2A A term which relies upon any bill of sale, as defined in section 3 (Construction of Act) of the Bills of Sale Act (1878) Amendment Act 1882, to reduce the level of consumer protection in relation to contracts concerning consumer credit.”

Amendment 3, page 51, line 18, at end insert—

“3A A term that directly causes financial detriment to the consumer such that it can reasonably be seen to alter the capacity of the consumer to pay the costs of the contract, where the contract is for a financial service.”

Amendment 4, page 53, line 2, at end insert—

“20A A term which either—

(a) requires or encourages a consumer to contract third party services without informing them of their right to seek independent advice; or

(b) seeks to limit a consumer’s access to independent advice regarding third party contracts where there is a potential conflict of interest for the third party involved.”

Amendment 19, page 53, line 2, at the end insert—

“20A A term which has the object or effect of permitting a trader to block, restrict or otherwise hinder the access of a consumer to any lawful electronic communications network or electronic communications service on the basis of an unreasonable or unusual definition of ‘internet access’, ‘data’, ‘webaccess’ or similar word or phrase. Nothing in this prohibition shall affect filters for the purpose of child protection. Electronic communications network or electronic communication service shall have the same meaning as in the Communications Act 2003.”

Amendment (a) to amendment 19,  after “trader”, insert

“engaged in the provision of fixed broadband internet access or mobile internet services.”

[Stella Creasy]

I shall speak to all the amendments in the group, which are about unfair contract terms. Unfairness is such a central concept to British values, I will wager, that it provides an apt discussion point for this week alone. All the amendments deal with where a market is stacked against one party and, we would argue, both miss out as a result. When service providers exploit a lack of information or collude to distort behaviour, it is not just the public who are badly treated: competition is stifled, creativity and innovation are weakened and, above all, the consumer is ripped off. The amendments thus reflect some of the problems affecting markets that we see in Britain and deal with what more could be done to make a stronger consumer rights framework that would give the public the tools to be able to prevent rather than have to deal with the problems that come from these distorted behaviours. There are four different issues, but we consider them all to be part of the conflicts of interest that cause detriment to the consumer.

Amendment 1 refers to what we call “double charging”, and particularly the behaviour of estate agents. We all know that buying a house is one of the biggest costs any of us will face in our lifetime. An English man or woman’s home is their castle, but it is often a very expensive one. The cost of buying a house has gone up so substantially in my constituency that it is now 30% more than it was a year ago—a source of extreme concern for many. Indeed, we know that the average home is worth eight times the average wage and that it can take 20 years for a family to save for a deposit. A million homes were bought in the UK last year, and prices have risen across the country by 8%, even if they have not risen as much as in some of our London areas. That is why the Governor of the Bank of England has warned that the biggest risk to the economy stems from the fact that people are getting mortgages—sometimes four or more times their salaries—that they cannot sustain. Housing is indeed a bubble underpinning our economy and leaving it in an incredibly precarious position.

The Government’s housing Bill will provide 15,000 houses, but people in my constituency know that we need to double that and then some, which is why Labour are proposing to build 200,000 houses, getting us closer to where we need to get to in order to deal with the pressures that people are experiencing. This amendment speaks, too, to some of the other charges that people face when buying a property. We may disagree about how many houses need to be built, but I am sure we would all want the housing property market to be as fair and open as possible so that it does not involve more expenses that mean people needing an even higher mortgage or an even higher level of debt—particularly in the form of the personal loans that people are taking out to pay the sort of fees necessary when they start ownership of a new property.

The amendment would deal with what the property ombudsman has called an “emerging commercial practice”—one that means that people such as estate agents, who benefit from the increase in demand for housing by exploiting the pressure on the country’s housing supply, reap the benefits. The practice involves a contract that we believe is ripping off consumers—both buyers and sellers—and therefore needs addressing. It is called “double charging” if the estate agent applies a fee to both the buyer and the seller of a property on the same transaction.

Let me explain the problem for the benefit of Members who have not yet observed the practice in their constituencies. It often results from the process of “sale by informal tender”. House owners are asked to accept sealed bids for their properties. Increasingly, estate agents are then charging successful bidders a “finder’s fee”, which, in some cases, is between 2% and 2.5% of the property fee plus VAT. According to the Consumers Association, an estate agent’s commission should normally be between 1% and 2%. Moreover, sellers themselves are paying to market their properties. Buyers must find the cost of the additional fee in order to bid.