Jenny Willott
Main Page: Jenny Willott (Liberal Democrat - Cardiff Central)Department Debates - View all Jenny Willott's debates with the HM Treasury
Consumer Rights Bill
Jenny Willott Excerpts(10 years, 6 months ago)
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Tom Greatrex
My hon. Friend makes a very important point about that specific market. I am also aware, as a result of talking to my constituents, that there is almost an expectation on people working for other retailers to sell these warranties, even if it is not obligatory for consumers to have them. In some cases, they even receive a commission for doing so.
That leads me to my concern about a specific case, in which what was written in the signed document was clear, but the way in which the warranty was described and explained to the consumer certainly was not clear and was very different. In that case, a constituent of mine bought a television set from a high street electrical store. He was told that the additional warranty he took out—on top of the manufacturer’s one—would entitle him to a new set if anything went wrong within the five-year period. His television set broke down during that period, but he found in the small print that he was only entitled to a repair or a replacement, which was exactly the same as the manufacturer’s guarantee. That meant that, on the basis of what he was told in the store, he had paid what for him was a significant amount of money every month for something that was effectively worthless.
Fundamentally, I believe that retailers have a duty to consumers not to sell them products that they know to be worthless, which appears to be the case if a warranty simply duplicates existing rights. Warranties very often apply to electronic goods that are significantly expensive, so we can see how a consumer could easily be persuaded to pay for an expensive warranty scheme that delivers no extra benefit, as the retailer is often probably very well aware. That is an area on which the implementation group should certainly undertake some work. Some provisions in the Bill—for example, clause 30—relate to warranties, but they do not seem to cover that point.
In that case, I took up the issue with both the company and my local trading standards office. The trading standards office was very sympathetic, but the long and short of it is that such practices are entirely legal, and there is nothing it can do other than to advise people to be more aware next time. That will not be much comfort for someone who has spent a significant amount of money on something that does not meet their expectations or provide the protection to which they think they are entitled. I of course understand that this problem is not new—it was raised several times in Committee as well as previously in the House—but the implementation group should be charged with ensuring that it is dealt with, and the new clause presents an opportunity for that to happen.
My new clause also addresses the management of deposits. I tabled it after a local small business approached me about an account held with a telecommunications firm— TalkTalk. As many hon. Members will be aware from their constituents, telecommunications contracts for small businesses often require quite sizeable deposits. My constituent was asked to provide a bond of some £900.
The size of such deposits has been a subject of interest for the regulator. I draw the House’s attention to the outcome of a dispute between Apple Telecom Europe Ltd and BT on the level of security deposit required for services, in which Ofcom stated that it was unwilling to determine what an appropriate deposit might be. In the light of that, it is clear that the regulator is not currently prepared to step into that space, but the size of some deposits places a clear responsibility on policy makers to ensure that the rights of the consumer or service user are protected.
After terminating the contract, two issues arose for my local business: first, TalkTalk was in no hurry to return the deposit; and, secondly, when it did return the deposit, it did so without any interest. On the first point, TalkTalk made it clear that it would hold on to the bond beyond the end of the agreed three-year contract. Effectively, it intended to hold on to the bond or deposit until my constituent ceased to be a customer, at which point the onus was on my constituent to write to TalkTalk to request the return of the money. My sense is that the responsibility in that scenario is the wrong way round. It places all the obligation on the consumer, and all the potential benefit of not meeting the obligation on the retailer. Because the retailer was not required to return a bond in a timely fashion, it is clear that my constituent missed out on substantial interest payments on the £900. Given that such contracts may well be for significant lengths of time and may then be renewed, the money amounts to a significant figure over time, particularly for small businesses; it is far from trivial.
My new clause addresses both concerns by requiring the implementation group to report on the length of time for which a retailer may retain a bond after the termination of a contract and on the payment of interest on the money. It would not be unduly burdensome for the company to be required to place bonds in a separate account, the interest on which could be returned to the consumer at the end of the contracted term. I am sure that the Minister is aware of the significant precedents for interest to be paid on money that is held. For example, solicitors are required to place moneys they hold on trust for a client in separate interest-bearing accounts, as is made clear in the professional code of ethics given in the Solicitors Regulation Authority handbook. Equivalent provisions cover other professions in which businesses hold money on trust—for example, an accountant who holds funds for a client to settle a forthcoming tax bill. Beyond such examples, it is clear that there is a substantial licence for abuse. There have recently been concerns in the energy market about moneys retained from excessive direct debit payments. One of the Minister’s colleagues in another Department described it as unacceptable, and said that something needed to be done about it, and the same case can be made in relation to my concerns.
I am conscious that the guidance and regulation arising from the work of the implementation group will not apply retrospectively, and so will not be of direct benefit to those involved in the two cases that I have outlined. However, their experience carries important lessons for all of us to bear in mind, and their cases might and probably will be repeated along the same lines. For that reason, I implore the Minister to look sympathetically at new clause 4. I hope that she will see that it is about enhancing the rights of consumers who, in many regards, have been and are being given poor advice and are not getting the service that I am sure she and all other hon. Members would expect.
The work of the implementation group will obviously be significant, given the number of times that the Minister has referred to it in Committee, and I am sure that she will mention it again this afternoon. It is important that the implementation group get on and deliver something, as the many people who have been following the progress of the Bill will expect. The new clause represents just one way in which there is a very clear path for the implementation group to follow in taking some action to benefit consumers and small businesses across the whole of the UK.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jenny Willott)
We have had quite a wide-ranging debate, which has been the case during many of the discussions on the Bill, because it covers so many issues. It is telling that the Opposition have tabled very few amendments; today, we are mainly discussing new clauses that attempt to add provisions to the Bill.
I want first to pause for a moment to reflect on the Bill, which has generally been accepted across the House as a good piece of legislation. It will benefit consumers—all consumers—and by setting out key consumer rights in one place, it will empower consumers. As we discussed several times in Committee, well-informed and confident consumers can experiment and shop around, which drives innovation, boosts competition and creates growth. The entire suite of consumer law reforms are estimated to be worth more than £4 billion to the UK economy over 10 years. Including the impact on consumers, business and the public sector, the Bill will generate £1.5 billion and the associated secondary legislation will generate more than £2.7 billion of benefit.
Some public services will attract rights and remedies under the Bill, as we discussed at length in Committee. That will be the case if there is a contract between the consumer and a public body for the provision of products that are within its scope, because the definition of a trader is wide enough to capture the activities of any Department and local or public authority. Consumers of public services provided under a contract will therefore benefit from clearer rights, clearer remedies and, ultimately, better outcomes. I think that we would probably all agree that that is a good thing.
What we are not doing—in a moment, I will explain why it is right and proper not to do it—is to change which public services are covered by consumer law. Public services that are currently subject to the Supply of Goods and Services Act 1982 and the Sale of Goods Act 1979 will be covered by the Bill. I will now turn to public services that are not covered by its provisions because such services are not provided under contract to a consumer. They include most NHS care, state-funded education and law enforcement services.
Let me be very clear: those consumers are nevertheless protected, and in a way that will often provide more tailored, specific and appropriate safeguards, designed to fit the particular service. Many of the tailored regimes already incorporate just the sort of protections that Opposition Members are pressing for—independent advocacy, regular reporting and established ombudsman schemes. In some cases, the protections already in place are similar to those provided by the Bill. For example, the rights that are consolidated in the NHS constitution are very similar to those in general consumer law, but are tailored for the provision of health care.
Mr Steve Reed
Does the Minister believe that public library users in Croydon should have a right to know why the council chose to sell the libraries off to one bidder rather than another, and that it should have taken that decision publicly, rather than in private?
Jenny Willott
Obviously, I cannot comment on the situation in Croydon because I do not know the details. However, the Government are committed to freedom of information and, in a moment, I will talk about the access to data and information that we are supporting in the private and public sectors.
We fully recognise that sometimes more intensive support is needed, above and beyond the advice that is given by Citizens Advice. That is why the patient advice and liaison service offers confidential advice, support and information on health-related matters. There are already independent third-party adjudicators in the public sector, for example at HMRC. Those systems exist to support consumers, often the most vulnerable, in making a complaint and having their voice heard.
There is a serious danger that mandating others to provide a service that overlaps what is in place will confuse, rather than strengthen, the landscape. We need to continue to make public services more responsive to end users, not dilute the central role of Citizens Advice and hinder its ability to act as a key advice agency by creating bureaucracy. We all share the vision of public services provided to a high standard, where consumer feedback and consumer choice work to push up standards. However, we do not need to bring them all within the ambit of the Bill to achieve that.
The transparency of data in the public sector, which has been raised by hon. Members, is a priority for the Government. In many areas, transparency is much more advanced in the public sector than in the private sector. Consumers of public services have access to a wealth of data, such as crime statistics and educational standards. Those all work to empower consumers, promote choice and accountability, and, ultimately, raise standards.
Let me make it clear that the Government support the principle that the public should have access to the data that are held on them. That is in line with our open data policies and activities, and with the approach that we are taking to the negotiations on the European data protection regulations. We embrace the principle that where social benefits can be obtained from anonymised data sets—so-called “big data”—that should be supported. That is why, alongside the midata programme, which is concerned with commercially held data, we are exploring how the data that are held on individuals by Departments might be made available to those individuals in a useful way. That work is in its early stages, but it is designed to address just the sort of issues that we have been discussing today.
As the hon. Member for Walthamstow said, we have been reviewing the progress with the voluntary approach that has been taken to the midata programme so far. I plan to announce the results of the review shortly, but in the meantime I can report that there was an encouraging development in March. In the personal current accounts sector, which was raised by the hon. Member for East Hampshire (Damian Hinds), we have secured a commitment from the big banks to provide customers’ transaction records—their midata—as downloadable files with a consistent format. That has been called for by Which? and the comparison sites. It is encouraging that by the end of the year the vast majority of current account holders in the UK will have access to their midata files. I hope that that reassures the hon. Gentleman on the points that he has raised.
We are working with all the parties involved to ensure that tools are available to use those files. We are confident that this approach will help consumers to compare more easily what is on offer in terms of price and service. As was highlighted by the hon. Member for East Hampshire, there is clearly a lot more to be done to encourage consumers to switch. We hope that by providing the information and working with comparison sites, we can ensure that that happens more often.
Our central objective is that the Bill should deliver rights that are much easier for consumers to understand and use. It is a vast improvement in terms of the simplicity of the language and the consistency of approach. However, we recognise that traders need to know their forthcoming responsibilities in good time before the Bill comes into force, and consumers need practical guidance with real-life examples of how the legislation works. Achieving that quality of communication is a significant challenge and requires planning, which we have been doing.
As hon. Members have highlighted and as we discussed many times in Committee, we have been working with an implementation group to develop appropriate guidance and effective channels of communication. The group is making progress and we will publish a timetable later this year setting out when the parts of the work will be done. We intend to have guidance for businesses available soon after Royal Assent, and it will be available for consumers when the legislation comes into force to ensure that people are able to access and understand their rights.
Tom Greatrex
Will the Minister confirm whether the implementation group is looking at the specific issues that I raised: the retention of bonds and interest payments for small businesses, and additional warranties that are sold by retailers that do not provide any additional benefit to the consumer?
Jenny Willott
If the hon. Gentleman will bear with me, I will come to those matters later in my speech and address the points that he raised.
Fiona O’Donnell (East Lothian) (Lab)
With an increasing number of consumers shopping online, will online traders have any duties under the Bill to provide information about consumers’ rights?
Fiona O’Donnell
I am happy to repeat the question—it might even be better this time. Will the Minister say whether, with an increasing number of people shopping online, there will be a duty on online traders to provide consumer rights information to their consumers?
Jenny Willott
I apologise to the hon. Lady. That was a very sensible question. That is being looked at. As she says, more and more people are buying online, so this is an important outlook for retailers. We need to ensure that consumers are aware of their rights, whether they are buying things on the high street or online. As we discussed in Committee, some requirements are being introduced in June that will provide more information and safeguards for consumers who purchase items online. The implementation group is looking at all the ways in which consumers buy goods and services to ensure that they are protected and know what their rights are.
The hon. Member for Nottingham South (Lilian Greenwood) asked a number of questions about rail conditions of carriage, but such questions would be much more properly put to the Department for Transport. If I may, I will direct her points to Ministers in that Department and ask them to write to her with details of how the conditions of carriage are being reviewed. That is not a matter for the Bill but it is being considered by the Department for Transport, and I will ensure that her points are raised.
Lilian Greenwood
In Committee the Minister said that although rail services are excluded from the Bill, it was intended that any rights introduced by the Bill be incorporated in the rail conditions of carriage to ensure that consumers were no worse off as a result of that exclusion. How will she ensure that that is implemented?
Jenny Willott
I understand that rail conditions of carriage are more detailed and already go further than the fundamental backstop rights in the Bill. However, the Department for Transport is reviewing them, and I will ensure that her questions are passed to Ministers so that she receives a more detailed answer. We will ensure that the Bill is not confused with the rail conditions of carriage, and that they take primacy.
The hon. Member for Rutherglen and Hamilton West (Tom Greatrex) raised an important constituency case, and I understand why he wished to do that. It concerned a business that had to pay a deposit for a telecoms contract, but the Bill does not affect business-to-business rights; it is about consumer rights and affects consumer-to-business rather than business-to-business contracts. I cannot comment specifically on the case, but it would probably not be covered by the Bill since it is a business case. Generally, however, we are doing more to protect deposits that are paid under contract.
Under the Bill, if a consumer enters into a contract for services and pays a deposit but then cancels, the trader does not have a free hand to retain that deposit. Any term in a contract that allows a trader to retain a deposit must be transparent and prominent to avoid challenge in the courts on grounds of fairness. Where such terms do not also provide equivalent compensation for the consumer when the trader dissolves the contract, they are liable to be challenged as unfair, even if they are transparent and prominent.
Our reforms also include clearer cancellation rights in consumer contracts regulations for consumers who buy at a distance or at home. Consumers must be informed that they have 14 days to change their mind and cancel such contracts, and a trader must reimburse them within 14 days of being informed by the consumer about a cancellation of the services. Those regulations will come into force in June, which will give consumers additional protection.
Fiona O’Donnell
The Minister is generous in giving way again. Is she not missing the point that my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex) made, which was that the Government missed an opportunity to protect small businesses in the Bill, to treat them as consumers and give them those rights? That £900 can be the difference between a business sinking or swimming.
Jenny Willott
As the hon. Lady will remember, we discussed this issue at length in Committee. The Government consulted on whether small businesses should be covered by consumer legislation in 2008 and 2012, and on both occasions the result of that consultation was that they should not be. Recent work by the Federation of Small Businesses considered whether micro-businesses should be covered by consumer law, and it too came to the conclusion that they should not be. There is work to be done on the protection of micro-businesses, and some regulators are considering treating them in a similar way. However, the Government consultation on consumer law resolved that it was far more complicated to include micro-businesses as consumers, and that was not the response to the consultation.
The hon. Member for Rutherglen and Hamilton West raised the issue of guarantees being sold with products. Consumer protection regulations already prohibit traders from presenting statutory rights as a distinctive feature of their offer, so a guarantee that offered no more than a consumer’s statutory rights would already be prohibited. We have now made it easier for consumers to get their money back when they have been mis-sold something to which they already have a legal right.
Yvonne Fovargue
Will the Minister elaborate on how that would affect customers of organisations such as BrightHouse and PerfectHome, where the cost of an extended warranty is included in the price of the goods and is compulsory? What rights do those customers have to cancel and get some money back, apart from giving back the goods?
Jenny Willott
The issue is whether extended warrantees provide anything over and above the statutory rights provided under the law. If companies charge more just to provide statutory protection, that would be prohibited under consumer protection regulations. A purchase that somebody would make, such as a hire purchase or whatever, would depend on the terms of their contract. If the contract contains terms that are unfair, they may well be on the grey list—we will come to that in future discussions on the Bill—and such terms may be challengeable in the courts on grounds of fairness. If the hon. Lady is concerned about specific terms in the Bill, she might raise them at that specific point in our debate to see whether they would be covered.
Tom Greatrex
I am grateful to the Minister for giving way again but I raised another point, to which she did not respond. It concerns what happens if a consumer buys a product with a manufacturer’s warranty and is then sold a supplementary warranty by a retailer, which does nothing more than the manufacturer’s warranty. Is that an issue on which the implementation group will be able to provide information for consumers?
Jenny Willott
That is the point I just made. If a warranty provides no more than the statutory rights and there is a charge associated with it, whoever is selling the warranty may well be in breach of consumer protection regulations. When shops sell goods and the warranty is purchased at the same time, the full cost must be disclosed and consumers must be informed of their statutory rights. Consumers also have the right to cancel the extended warranty within a set period, and those rights must be made known to the consumers when they purchase the warranty. That is covered under consumer protection regulations, and there are also rights in this Bill. The circumstances that the hon. Gentleman highlights would be covered.
The other issue raised today is nuisance calls, which is a priority for the Government. I am sure that all hon. Members have had constituency casework on that, but there is no silver bullet to eradicate the problem. That is why in our action plan of 30 March we set out a range of measures to address the issue. They included work that is already under way to improve call tracing, making it easier to disclose information between Ofcom and the Information Commissioner’s Office, and setting up a taskforce led by Which? to review consumer consent issues. We will also consult on making it easier for the Information Commissioner’s Office to tackle nuisance calls as part of amending the Privacy and Electronic Communications (EC Directive) Regulations 2003. Although I understand the intention behind the new clause, the Government are taking a lot of action in this area. Changes will be introduced in the next months, and we are consulting on more actions. I hope that I have covered the issues raised by hon. Members, and I therefore ask the hon. Member for Walthamstow to withdraw her new clause.
Stella Creasy
The Minister expressed surprise that some of these issues should have been the subject of new clauses. I am sad about that. In her responses, she is missing some of the debates that we had in Committee on just these issues—not just on implementation but on the impact of the Bill on the public sector. I am saddened that she has not answered what I call the Graham Norton question about the licence fee. We will take that as a yes, meaning that licence fee payers will be entitled to these rights.
The Minister said that a review of complaints is ongoing and talked about the role of the public sector ombudsman. This is what is causing so much concern and has prompted the new clauses. That is happening at the same time as this legislation is making progress, so a whole series of new legal methods of redress will be open to licence fee payers, personal care budget holders and students paying tuition fees. At the same time, a secondary process is being undertaken in government. The situation is confusing.
I am pleased that the Minister’s understanding of consumer rights in the public sector—and what they can offer—is evolving. In that sense, I am happy to give her the benefit of the doubt in what she says about new clause 2 and the implementation group. I am sure that the Lords will want to hear about its further progress. I am also happy to give her the benefit of the doubt about advocacy. Her conversion to the importance of advocacy is welcome: it was not clear in Committee, but it is wonderful to hear her talking about it now. She has been dragged kicking and screaming to the debate, and I refer to the comments made by my hon. Friends the Members for Croydon North (Mr Reed), for Makerfield (Yvonne Fovargue) and for Rutherglen and Hamilton West (Tom Greatrex), and even the hon. Member for East Hampshire (Damian Hinds) about the importance of advocacy and what more should be done in the Bill.
On that basis, I am happy not to press new clause 5 to a vote, but I will press new clause 3 and new schedule 1, given what the Minister said about information. I have to point out to the hon. Member for East Hampshire that the Government have admitted that the midata project has stalled. The look on his face spoke volumes about the problems of getting access to those data. The Minister said that the Government thought that people should have access to the data they create within the public sector: the Opposition think that people should own their own data. It is a clear dividing line.
New clause 3 and new schedule 1 set out some clear rights for people. On nuisance calls, the Minister said the Government are already doing something. Why does she oppose paragraph 5 of new schedule 1, which would place sanctions on those people who do not have consent, to send a clear message to the companies that are abusing the information that they have? It is beyond me. The issue of ownership of data is key, so we will press new clause 3, which would bring in new schedule 1, to a vote. The British public should not just have access to their data; they should own it. It is a clear division between the two parties on consumer and citizen rights, and an increasingly important debate for this country. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 3
Access to data
‘Schedule [Access to data] has effect.’.—(Stella Creasy.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Jenny Willott
I welcome you, Mr Deputy Speaker, to our exciting debate this afternoon. The hon. Member for Walthamstow (Stella Creasy) opened the debate by saying that we had an opportunity to take action on these issues. I completely agree, so I am sure she is absolutely delighted to see how much the Government have done to protect consumers and take action in these areas.
We have debated a number of issues, and I shall run through them in turn. First, on the issue of high-cost or payday lenders, hon. Members will know—certainly the hon. Lady knows this, as we have discussed it before—that the Government have taken robust action to curb the harm these lenders can cause. On 1 April, responsibility for regulating payday lenders, along with all other consumer credit firms, transferred from the Office of Fair Trading to the Financial Conduct Authority, as mentioned by a number of Members. The Government strongly welcome the FCA’s new, tough rules for regulating payday lending. The FCA requires robust affordability checks, limits the number of times that a payday loan can be rolled over to two, and places tough restrictions on lenders’ use of continuous payment authorities. As highlighted by a number of Members, the Government have also legislated to require the FCA to introduce a cap on the cost of payday loans to protect consumers from unfair costs. The FCA will consult on its proposals for the cap in the summer, and it will be in force no later than 2 January 2015.
In addition, the FCA will thoroughly assess every payday lender’s fitness to trade as part of the authorisation process. Given the risks to consumers, the FCA has said that those firms will be in the first phase of firms and will be required to be fully authorised from October this year. The Government believe that the tough and decisive action the FCA is taking, including the cap on the cost of payday loans, will ensure that consumers are far better protected than they have been.
Justin Tomlinson
The welcome news is that the measures are already making a difference, because a number of lenders have already withdrawn from the market, which is a bonus for the vulnerable consumer.
Jenny Willott
The hon. Gentleman is absolutely correct. We only have anecdotal evidence at the moment, but it is clear that a significant number of lenders have already withdrawn from the market because they know they will not be able to comply with the rules, which are extremely tough. As he said, that is absolutely as it should be. People who cannot comply with the rules are withdrawing, and consumers are being protected as a result.
Free debt advice is currently funded by a levy on lenders channelled via the Money Advice Service. As payday lenders are now regulated by the FCA, they too will contribute to the levy. The new clause tabled by the hon. Member for Walthamstow would duplicate the existing funding arrangements for debt advice. It is important that we put on the record the fact that payday lenders will be contributing to money advice services via the levy.
It is also important to note that the FCA is taking steps to ensure that vulnerable consumers are aware of the free debt advice available to them. It requires all high-cost, short-term lenders to signpost their customers to free debt advice at the point at which a loan is rolled over, and all payday lending adverts must include a risk warning and information about where to get free debt advice.
Yvonne Fovargue
Will the Minister confirm that the amount raised by the levy will increase as the payday lenders are brought into it and that the amount paid will remain the same and will not simply be spread more thinly among the lenders?
Jenny Willott
To be totally honest, I do not know the answer to that question, but I will write to the hon. Lady to clarify that point.
Similarly, the levy will duplicate the Government’s existing support for credit unions. The Government are already investing £38 million to support the sustainable growth of credit unions to help them meet borrowers’ needs, as highlighted by the hon. Member for East Hampshire (Damian Hinds). Through that expansion, credit unions could save people on low incomes up to £1 billion in interest repayments, compared with going to a payday lender.
The Government therefore firmly believe that consumer choice and protection will be substantially strengthened by the new FCA regime and the ongoing Government support for credit unions. For the first time, payday lenders and other consumer credit firms will start paying their fair share towards funding free debt advice through the Money Advice Service, so the Government are already dealing with many of the issues that have been raised today.
Turning to debt management companies, the Government share the concerns about the potential for detriment to occur to consumers who take out debt management plans. There has been increasing media attention and people are becoming increasingly aware of the problems affecting some consumers. I also recognise the importance of protecting that particularly vulnerable group of consumers. The Government’s focus is on comprehensively reforming regulation in this sector. Responsibility for regulating debt management firms, as with all other consumer credit firms, has been transferred from the OFT to the FCA. As with customers of payday lenders, those participating in debt management plans will be far better protected under the new FCA regime.
The FCA has stated publicly that debt management firms must start putting consumers first and that it is unacceptable that people who are struggling to make ends meet are being talked into unsuitable plans. The Government have made sure that the FCA has robust powers to protect consumers who use debt management firms. The FCA is proactively monitoring the market and has a broad range of enforcement tools that it can use to punish breaches of the rules. There is no limit on the fines it can levy. Crucially, it can force firms to pay redress to consumers. The FCA will thoroughly assess every debt management firm’s fitness to trade as part of the authorisation process—the same process that applies to payday lenders.
Given the risk to consumers, the FCA has said that debt management firms will be in the first phase of credit firms that are required to be fully authorised. Its rules make it clear that the fees charged for debt management plans should not undermine the customer’s ability to make significant repayments to their lenders throughout the duration of the debt management plan. Concerns have been raised, including by the hon. Member for Walthamstow, about the huge proportion of somebody’s payment that, in some cases, goes to the debt management firm rather than the creditors. That is a matter of significant concern.
Mrs Main
Does the Minister think there is any merit in making people aware, potentially at school age, of exactly what they can afford and how they can manage their personal finances? People often get themselves into a mess before they approach some of these loan sharks and high-interest places. It might be good if we started this off at an earlier age.
Jenny Willott
The hon. Lady makes an extremely important point. There are some really good schemes in schools across the country, but provision can be a bit patchy. I have worked in schools in my constituency that are doing exactly that. Such matters can be extremely complex for people to understand, and learning about them as part of the school curriculum before they get into debt can be extremely helpful.
Justin Tomlinson
I reassure the Minister that, as of September, that will be in the national curriculum, so all is under control.
Damian Hinds
To complete the set, may I use this opportunity to mention the important work done by credit unions that operate junior savers clubs in schools in the constituencies of many hon. Members? It would be great to have them in many more schools in many more places, so that young people get into a savings habit before they reach the first point at which they might take on consumer credit.
Jenny Willott
Perhaps the hon. Gentleman would like to speak to the hon. Member for North Swindon (Justin Tomlinson) about that. He raises a very important point: the more we can help young people to understand some of these complex financial systems and how to manage money, hopefully, fewer people will end up in debt—particularly unaffordable debt—in the future.
Returning to the FCA rules on hire-purchase contracts for household goods and what has been called the “BrightHouse clause,” the FCA’s new rules will require firms to provide pre-contractual explanations and information in line with European requirements. I hope that answers the point made by a number of Members on both sides of the House. The information will include the cash price of the goods being financed and the total amount payable. The FCA rules will require that information to be provided to consumers before they sign up. I hope that will ensure greater transparency for customers.
The rules also mean that firms have to adhere to debt-collection rules—a point raised by the hon. Member for Makerfield—including treating customers who are in default or arrears with forbearance and due consideration. They also require firms to assess credit worthiness and affordability, including the potential to impact adversely on the consumer’s financial situation and their ability to make repayments as they fall due. There are, therefore, broad requirements on firms to try to tackle some of the hon. Lady’s concerns about consumer detriment.
When firms sell associated insurance products, they must do so in line with the FCA’s requirements for assessing a consumer’s eligibility to claim on a product and the high-level principle of treating customers fairly. Those are new requirements to ensure that we try to tackle consumer detriment. The Government believe that the tough and decisive action taken by the FCA will ensure that customers are better protected as a result.
Finally, we discussed the issue of logbook loans at some length in Committee and I completely understand the concern about the potential for consumer detriment as a result of these products. The Government believe that people should be free to borrow and have the tools to make an informed decision about which credit product is right for them, but consumers should be confident that they will be treated fairly and that the regulator will step in when things go wrong.
As the hon. Member for Walthamstow will be aware, logbook lenders now also fall under the responsibility of the FCA. As I have said with regard to other credit firms, I believe that consumers will be far better protected under the FCA regime than they have been in the past. The FCA has been very clear that logbook lenders are among the firms that it considers pose the greatest risk to consumers, and they will be in the first phase of firms that have to be fully authorised from October. Logbook loans are defined by the FCA as higher risk activities and, as such, lenders face closer supervision and higher regulatory costs.
Logbook loan providers are now also required to meet the standards the FCA expects of lenders in making thorough affordability checks and providing the adequate pre-contractual explanations to consumers. They are also subject to the high-level principle of treating customers fairly. Indeed, the FCA considers this area to be a particular concern. It has said that it is
“putting logbook lenders on notice”,
and that its new rules give it
“the power to tackle any firm found not putting customers’ interests first.”
It is therefore taking its new responsibilities very seriously.
In addition to the FCA’s robust action, Treasury Ministers have asked the Law Commission to look at how best to reform the Bills of Sale Act—as we know, the legislation underpinning logbook loans is old, lengthy and incredibly complex—and, as the hon. Member for Gainsborough (Sir Edward Leigh) highlighted, the Government believe that the Law Commission is best placed to undertake a thorough assessment of how we can bring the legislation up to date. It has responded favourably to the Treasury request, and it will confirm its upcoming work programme soon.
The hon. Member for Walthamstow raised concerns about people buying cars with outstanding loans against them and about the impact on customers. She said that a large proportion of second-hand cars are sold with pre-existing charges. The Bill, like the existing law, is clear that there is a legal obligation on the seller to notify the buyer of any outstanding charges. The Bill covers business-to-consumer sales, and sales between individual consumers have the same level of protection under the Sale of Goods Act 1979, which provides that the seller must have the right to sell the goods. That applies to all contracts for the sale of goods, so it covers private sales, in addition to purchases of goods from a shop or a business. Goods must be free from any undisclosed charge or encumbrance, which applies to hire-purchase terms for goods sold on, as well as to logbook loans. The private seller is in breach of contract if they do not have the right to sell, or if there are undisclosed charges on the goods, which means that the buyer can get their money back from the private seller.
The Government are concerned about the impact of unscrupulous traders in all these areas. That is why we have taken so much action and given such strong powers to the Financial Conduct Authority, and I do not believe that the Opposition’s new clauses are the right way forward. The Government’s approach is the right one for protecting consumers, particularly the most vulnerable, and I hope the hon. Member for Walthamstow will withdraw new clause 6.
Stella Creasy
We have had an interesting debate. I acknowledge that there is interest in this issue, as well as experience and expertise, on both sides of the House, which has been reflected in most of the speeches. I pay particular tribute to my hon. Friend the Member for Makerfield (Yvonne Fovargue) who, for all of us, is a touchstone on issues involving the consumer credit market.
I put on the record my support for the work of the hon. Member for East Hampshire (Damian Hinds) on the credit union movement. However, I must say that I brook no argument from him when Government Members have had three chances—not one, not two, but three chances, or an almost biblical opportunity—to deal with payday lending and the cost of credit, but voted against it.
In 140 characters, the hon. Member for St Albans (Mrs Main), like Shelley’s grandmother, shed much heat but not a lot of light on what Government Members will do about the issues that are to come. Our new clauses are about the new forms of legal loan sharking and the new nightmares experienced by many of our constituents. The hon. Lady is making a tapping noise. Is that her calculating the amount of money people have to pay out to the debt management and logbook loan companies?
Jenny Willott
We have had a varied and wide-ranging debate this afternoon, so I shall do my best to cover as many of the issues that Members have raised as I can. First, however, I want to explain the Government amendments, which are designed to protect consumers from a delay in receiving a refund. We discussed the issue in Committee and although delay might arise only in a minority of cases, the Government are persuaded that the potential detriment means that this is a sensible change to make. We are ensuring that any refund must be made without undue delay and always within 14 days of the trader agreeing that the consumer is entitled to a refund. Since we discussed that in Committee my Department has been consulting business organisations and consumer groups to identify the best way to make the change without disadvantaging either consumers or businesses. I am glad that the Opposition support the change.
The Government agree that consumers should be protected from fraudulent, counterfeit and misleading ticket sales. I think that everybody in the House would agree with that. However, we also need to allow the market to operate for the benefit of consumers who would miss out on events without it. We have made new regulations that will come into force this year to empower and inform consumers. From June, traders will have to ensure that consumers have all the information they need before they buy. We published detailed guidance when the regulations were made in December 2013, but since then the Trading Standards Institute has been working on additional guidance. We have today updated our guidance on those regulations to make it clear what that means for ticket sales. That went live on our website this morning. It includes clarification that if the ticket is for a specific seat that information must be given, that the total cost, including delivery costs and other charges, must be given and that, depending on the circumstances, the face value may also need to be given.
In addition, from October of this year we are making it easier for consumers who have been misled by a trader to take their own action to get their money back and, if appropriate, to get damages as well. Armed with that information and access to redress, consumers will be empowered to make use of the market for their benefit and hopefully not fall victim to fraudulent, counterfeit or misleading ticket sales. There are also rules in place to protect consumers, and when a marketplace is aware of illegitimate activity on its site it might be in breach of the Consumer Protection from Unfair Trading Regulations 2008.
As for new clause 12, when there are concerns about the secondary ticketing market the first port of call should be for the industry to source a solution. Some of the larger event organisers, as has already been mentioned, already have refund procedures in place and we welcome that. However others, including smaller players, have chosen not to, for very good commercial reasons in many cases.
The hon. Member for Shipley (Philip Davies) highlighted the importance of industry-led action, and we agree with that. The hon. Member for Walthamstow (Stella Creasy) and a number of other Members mentioned the rugby world cup in 2015, and that is a great example of industry-led action. The organisers’ 10-point plan lists many of the actions suggested by the hon. Member for Shipley, including the release of tickets in batches and the late issue of tickets.
All that is being industry-led. I hope that what I have said has reassured members of the all-party group that we share the concerns that they have highlighted and that we have looked carefully at the best way to take on board the group’s recommendations to try to protect consumers. I hope that they are reassured by what I have explained about the information on the website and in the guidance.
On halal meat—a completely different subject—we want people to have the information that they need to make informed choices about the food that they buy. Many retailers or restaurants and fast food outlets already voluntarily provide information on whether meat is halal or kosher. As we have seen from the debate today, this is a complex and sensitive area. There is no single clear definition of halal meat. The majority of halal meat produced in this country comes from animals that are stunned before slaughter, whereas kosher meat all comes from unstunned animals. That is just part of what consumers want to know, as we have heard in the debate today. We already have powers under the Food Safety Act 1990 to make domestic regulations to introduce a requirement to label with the method of slaughter. However, we do not consider at this stage that regulation is the best approach. Primarily, food businesses should provide consumers with the information that they want and need. If there is to be compulsory labelling, we believe that this would best be done at a European level. That would be best for consumers and also ensure that we do not put our food industry at a competitive disadvantage.
Jenny Willott
I will not give way, I am afraid. I have no time.
My hon. Friend the Member for Shipley said that there was widespread customer demand for labelling of the kind that has been suggested. An EU study is currently being undertaken on precisely that question, so we are waiting with interest the publication of the study so that we have full information on what consumers want. We will review all our options at that point.
We had a good debate about product safety in Committee and we have discussed it recently in the Chamber. There is already legislation on product safety recalls, which places strict duties on producers and distributors to ensure the safety of products. These regulations also provide trading standards with comprehensive powers to enforce them. As the hon. Member for Foyle (Mark Durkan) said, we need to improve the effectiveness of product recalls. The traceability of products after sale is a real challenge, as he said, but I do not believe that introducing new reporting requirements or a new overarching agency is the right approach. The vast majority of businesses take the safety of their customers very seriously and I believe that the best approach is therefore for us to continue to work with representatives from industry, consumer groups and enforcement agencies to ensure that the system is as effective as possible.
The issue of lettings has also excited people this afternoon. Most letting agents offer a good service. A blanket ban on fees, as new clause 22 proposes, cannot therefore be the answer to tackle a minority of irresponsible agents. In addition, banning fees will not make it cheaper for tenants, because tenants will just end up paying through higher rents rather than upfront fees. The hon. Member for Walthamstow highlighted the example of Scotland. My understanding is that in the first quarter after the change was introduced rents rose significantly in Edinburgh and Aberdeen, and in the year to March rents rose by more in Scotland than in England and in Wales. In fact, the rate of increase in rents was double that in Wales. So it is not quite as simple a picture as the hon. Lady highlighted.
We are already changing the law to require all letting and managing agents to belong to an approved redress scheme, which will give tenants an effective way to make complaints. Last month the Housing Minister approved three redress schemes that all letting and property management agents will be required to join later this year. This will ensure that tenants and leaseholders have a straightforward way of holding their agents to account. The three compulsory schemes, which are the property ombudsman, ombudsman services: property and the property redress scheme, will offer independent investigation of complaints about hidden fees or poor service. Where a complaint is upheld, tenants and leaseholders could get compensation.
We are going further. Today, in a move that ensures a fair deal for landlords and tenants, I am pleased to announce that we will be amending the Bill to require letting agents to publish full details of the fees that they charge. Currently the Advertising Standards Authority requires letting agents only to list charges to the tenant up front in their advertisements. Those letting agents who are found to have imposed hidden charges face little more than being named and shamed on the authority’s website. We want to go further to require all letting agents to publish a full tariff of their fees both on their website and prominently in their offices. Anyone who does not comply with those new rules will face a fine that is a much stricter penalty than currently exists. While every business remains free to set its own fees it has to be transparent, so competition will ensure that letting agents will have to justify those fees to tenants.
Today’s plans add to the work that the Government have already done to offer stronger protections for landlords and tenants in the private rented sector while avoiding excessive regulation, which would force up rents and reduce choice. We intend to review the requirement for greater transparency after 12 months of operation to confirm that it is delivering the expected benefits. If not, the Government will consider whether the proposals need to go further.
We have discussed micro-businesses in an earlier debate, so I will briefly state that we do not support extending the consumer protections in the Bill to smaller businesses. The provisions in the Bill have been designed for consumers, and we cannot and should not assume that they can be applied as successfully to small businesses as they can to consumers. As the Select Committee on Business, Innovation and Skills acknowledged, all business groups that responded to the Government’s 2008 consultation preferred to retain the clarity of the current distinction between business and consumer.
Finally, on Government amendment 14 and Opposition amendment 5, I am happy to change the process from a requirement for the negative to the affirmative procedure, and have tabled a Government amendment to that effect. I therefore hope that the hon. Member for Walthamstow will not press her amendment.
Philip Davies
I did not hear the Minister make any remarks about new clause 14, which appeared to have cross-party support. Will the Government support it too?
Jenny Willott
Given the time restrictions, I shall say that we support the intention behind the new clause but not its wording, as there are a number of problems with it. I am happy to discuss with the hon. Gentleman after the debate the points that he has made to see if there is a way forward. With those remarks, I hope that hon. Members are happy that I have covered all the issues that were raised in the debate.
Stella Creasy
A number of issues have been raised. I am conscious of the time so I shall be brief and discuss the two new clauses that we want to push to a vote because we are not satisfied with what the Government have said. First, on new clause 22, which deals with letting fees, the Government should realise that it is not a small minority of letting agents charging fees. Indeed, good landlords do not want to lose tenants who cannot afford those fees.
The hon. Member for St Albans (Mrs Main) was disrespectful about the idea that tweeting in the Chamber was a good idea. Let me tell her that in the past hour we have had an example of a fee of £1,300 to change the names of two tenants on a tenancy agreement. Those are the sorts of fees that we are talking about. Shelter disputes the evidence that the Minister gave about there being no impact on rent inflation in Scotland since the measure was introduced. Members have to make a decision about whether they are on the side of the consumer or on the side of business. We are firmly of the view that we need to be on the side of the consumer in this instance in changing the way in which the rental market works. Rental fees are anti-competitive, and there is a conflict between who acts for the landlord and who acts for the agent. We need to change that, so we want to push new clause 22 to a vote.
We also want to push new clause 16 to a vote, because it is clear that Members across the House want to see action on ticket touting. New clause 16 puts into practice the amendments that the Government proposed on consumer information and consumer evidence. The Minister discussed the rugby world cup, but it is clear that tickets are already being sold on secondary sites, so the measures that she discussed have not had an impact. We need to make progress on that too.
We are happy to take advice on amendments on businesses, and we are happy to accept the Minister’s assurances about refunds. We are seeking more Government U-turns, but on letting agent fees and ticket touting it is time for action, and that is exactly what the Opposition seek in the amendments. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 13
Goods to be as described: meat products
‘(1) All products containing halal and kosher meat shall be labelled as such at the point of sale by retail and food outlets.
(2) A food outlet is anywhere where food is served to the public.’.—(Philip Davies.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.