Consumer Rights Act 2015 and Consumer Ombudsman Scheme

Martyn Day Excerpts

Tuesday 11th February 2020 Westminster Hall

[Sir Roger Gale (in the Chair)]

In a half-hour debate, the hon. Lady or Gentleman in charge may give way to interventions as they please, but any speeches must be cleared with the owner of the debate, the Minister and the Chair.

[Martyn Day (Linlithgow and East Falkirk) (SNP)]

I beg to move,

That this House has considered the Consumer Rights Act 2015 and the Consumer Ombudsman Scheme.

It is a pleasure to serve under your chairmanship, Sir Roger. I thank hon. Members for attending. I thank the House of Commons digital engagement team for its contributions to this debate, in which I want to highlight a failing in the Consumer Rights Act 2015 and to call for its unambiguous enforceability in the future.

I have previously raised the 2015 Act on behalf of my constituents in a public petition more than two years ago, highlighting that it does not do enough to protect consumers against rogue traders who do not comply with the terms of the Act. To recap, the changes made by the Act give consumers the right to reject goods within 30 days and to receive a refund when the goods received are not as described or faulty. However, there is nothing built into the legislation to enforce the right to reject. Moreover, consumers cannot act against companies that do not participate in the consumer ombudsman scheme. Therefore, if the company does not co-operate, the only recourse for the consumer is to undertake the laborious and protractive process of raising legal action, either in a small claims court in England or via what is known as a simple procedure in Scotland, which is essentially the same process.

The petition I presented in December 2017 urged the UK Government to review the 2015 Act to ensure better protection for consumers. It also asked for a review of the terms of the Act, to make membership of a professional body compulsory for traders, thereby giving consumers the ability to pursue a complaint with the consumer ombudsman. In response the Government stated that

“if a consumer has a complaint and is not satisfied with the company’s response to it, they can go to an ombudsman or other alternative dispute resolution (ADR) provider.”—[Official Report, 4 December 2017; Vol. 632, c. 6P.]

[Sir Roger Gale (in the Chair)]

I call Margaret Ferrier to make an intervention.

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[Sir Roger Gale (in the Chair)]

Order. Interventions should not be fiddly, disguised excuses for speeches. The Chair takes a rather dim view of it.

[Martyn Day]

I agree with the course of action suggested by my hon. Friend. It would benefit consumers and traders.

As I have pointed out, membership of an ombudsman scheme is voluntary, and a company can refuse to participate in an alternative dispute resolution process. Even though it may be in the best interest of consumers and companies to deal with problems quickly, effectively and amicably, I am sure no one will be surprised that unco-operative companies prefer to be obstructive, to prevent a quick, effective and amicable resolution. That was the experience of a constituent of mine with one such company, which I will come to shortly.

The Government response conceded that

“there is no mandatory requirement to use ADR although it is available for any dispute should the business decide they want to use it.”

This debate and my prior petition are about the Consumer Rights Act 2015, so it does not compute that businesses can decide whether they want to use an alternative dispute resolution while customers’ wishes are overlooked. It would be helpful if the Minister could explain how that relates to consumer rights. The production of the consumer Green Paper—a positive outcome of my petition—was meant to

“closely examine markets especially those which are not working fairly for consumers.”—[Official Report, 4 December 2017; Vol. 632, c. 6P.]

The example I will give is a good case of that. As my constituent’s experience will show, there are markets that are not working fairly for consumers. Despite the Green Paper, no amendments have been made to the 2015 Act to address the situation.

Among other things, the Green Paper consulted on two matters directly related to my constituent’s case: how to improve the system of alternative dispute resolution, and how to support local and national enforcers to work together to protects consumers. I draw Members’ attention to “Creating a successful enforcement system for UK consumers”, a policy report published a year ago by Which? Among other things, it directly addresses those two relevant matters. It proposes seven changes to create a regime that will protect consumers effectively, because the current system is, unfortunately, too weak.

The report proposes:

“A robust and accessible ADR system is vital for people who have been unable to resolve their complaint directly with the business concerned.”

It further states:

“Key to a successful system is… fair and enforceable decisions by ADR bodies”.

I fully endorse and agree with those points. The report goes on to address the proposed obligation for an ombudsman scheme to be compulsory, stating that

“an obligation on sectors (particularly where significant or essential purchases are involved)”

should be “part of a scheme”.

[Yvonne Fovargue (Makerfield) (Lab)]

Does the hon. Gentleman agree that the landscape of ombudsman schemes is very confusing, and that a single access portal would help the consumer?

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[Martyn Day]

I fully agree. I hope the Minister will address that.

The Green Paper consultation closed on 4 July 2018, some 19 months ago. Despite the Which? report being published 12 months ago, the UK Government’s website advises me that the feedback is still being analysed. I ask the Minister: when is the analysis of the “Modernising consumer markets” Green Paper expected to be completed?

That brings me on to my constituent’s situation, which exemplifies the ambiguity of the 2015 Act and the failure to enforce it. In March 2017, my constituent Mrs Johnston and her husband purchased a new leather living room suite from R&J Leather (Scotland) Ltd, which is based in Uddingston. The suite duly arrived on Friday 30 June 2017 while Mr and Mrs Johnston were at work. A third party was at home to accept the delivery. However, when my constituents came home, it was evident that the type of leather used was not as agreed and the workmanship was unsatisfactory. Therefore, it fell far from meeting their expectations after making such an expensive purchase.

The very next morning, Mr and Mrs Johnston visited the showroom where they had purchased the suite, to say that they rejected it. They were asked to intimate their rejection to R&J Leather’s head office, which they did by telephone and email, including pictures of the faults. Subsequently, on 3 July R&J Leather telephoned my constituents to say that a driver would be sent to their home. My constituents believed this meant the suite would be removed. It did not. Instead, the employees of R&J Leather had been sent to correct another fault—a defective mechanism in the suite—so they left the home without uplifting the suite, fully knowing it had been rejected, while Mr and Mrs Johnston were on the telephone to their employer’s head office.

Mr and Mrs Johnston wrote again to R&J Leather on 6 July intimating rejection under the Consumer Rights Act 2015, and seeking an uplift of the suite and a refund of payment. R&J Leather rejected this letter on seven separate occasions. Frustrated by the lack of response, Mr and Mrs Johnston sought my intervention on 17 July. I sent a recorded delivery letter and two emails to R&J Leather but received no acknowledgement. My constituents sent another recorded delivery letter to R&J Leather on 22 August, offering alternative dispute resolution. Again, the company declined to accept.

My constituents were, therefore, left with no alternative but to raise a court action. R&J Leather did not defend the claim. The sheriff court made an order for payment in Mrs Johnston’s favour on 14 December 2017, some six months after the suite was delivered.

It would be understandable to think that that was the end of a stressful process, but that was not the case. Mr and Mrs Johnston still had possession of the defective suite, which was unused and restricted the use of another room in their home. Mrs Johnston had asked the court to order R&J Leather to remove the suite, but the order made was purely for her to receive a refund of her moneys. Believing that the matter had now ended in her favour, Mrs Johnston gave away the offending suite, so that her home could be restored to its normal living capacity, which I think was a perfectly reasonable position to adopt.

R&J Leather proceeded to lodge an application to recall the order. The order was duly recalled and led to a court hearing that took place over two days spanning June and July 2018. The decision held in favour of the Johnstons. R&J Leather then appealed against the order for payment, based on the point that my constituents no longer had the suite and therefore could not return it. As a result, the company questioned whether Mrs Johnston was entitled to a refund for rejection of the goods.

The subsequent sheriff appeal court hearing took place on 14 December 2018. R&J Leather’s legal representation argued that, based on a proper construction of subsections (5) and (8) of section 20 of the Consumer Rights Act 2015, the buyer was obliged to make the rejected goods available to the seller without limit of time, and that that applies irrespective of any intervening developments or actions of the seller. In other words, it was argued that R&J Leather was not obliged to make a refund if the suite was not available for return.

My constituents argued that they had done everything that they were required to do in exercising their right of rejection and had given R&J Leather many opportunities to uplift the suite. The sheriff appeal court decision refused R&J Leather’s appeal and held in favour of the Johnstons. The ruling stated that having properly exercised their right of rejection, my constituents were entitled to the original order granted by the sheriff, and that that right was not undermined by the unavailability of the suite.

Interestingly, when reaching that decision, the sheriff appeal court made several observations. The first was that the argument that there is an unqualified duty, without limit of time, to retain the goods has a superficial attraction, given the wording of the Act, but such an interpretation has the potential to lead to both unfairness and absurdity. Secondly, when a consumer exercises a right to reject faulty goods, there is no duty for them to return the goods to the seller; all the consumer needs to do is make the goods available to the seller. This imposes an onus on the seller to come and collect the goods. Thirdly, the duty to make the goods available cannot be construed as being without limit of time or unqualified. In considering the nature and extent of the duty to retain goods that have been rejected, the court is entitled to take account of several factors, including the timescale within which rejection was intimated; the nature of the goods; the practicality of providing storage; the nature, extent and frequency of communications sent by the buyer to the seller; any response, or lack of response, by the seller; the length of time for which goods were retained; and whether proceedings have been raised. Perhaps unsurprisingly, the sheriff appeal court judgment remarked that R&J Leather had

“only themselves to blame for their inability to recover the item”.

Even after that court ruling, Mrs Johnston still had to pay for the services of a sheriff officer to obtain a warrant before the money was eventually refunded on 15 February 2019, which was nearly two years after the original purchase was made. No one should have to go through such a long, drawn-out process, which in this case involved spending four separate days in court and the associated stress and expense that that experience involved, and neither should anyone have to go to such lengths to exercise what are their basic consumer rights.

Furthermore, besides the direct financial implications for the consumer and the business involved, this single case used significant public funds—in the form of court facilities, time and staff—over four days. Those costs would not have been required if the Consumer Rights Act 2015 was clear about the consequences of non-compliance.

This single case that I have highlighted shows undeniably that the Consumer Rights Act 2015 does not do enough to protect consumers against rogue traders who do not comply with or seek to obscure the terms of the Act. My constituents were lucky, in so far as they had the intellectual and financial resources to see this matter through to a conclusion that forced R&J Leather to abide by the law. I suspect that many other people would have given up long before then, or would not have had the time available to spend days in court or the money to pursue the action. However, the Johnstons were still out of pocket, due to loss of work and other expenses, such as for the engagement of the sheriff officers. Can the Minister tell me what would happen to other consumers who do not have such assets?

If businesses were obligated to join an ombudsman scheme, the process would be simplified for both consumers and businesses. If that obligation was brought into force, an independent assessment could be made, which could rule in favour of either the consumer or the business, without the stress and the expense that my constituents had to endure to get what they were legally entitled to.

Such cases are brought every day throughout the UK, and the court costs must be astronomical. I do not know what the numbers are, but I dread to think. Yet a simple change to the Consumer Rights Act 2015, with an obligation for a business to participate in an ombudsman scheme, would substantially mitigate the need to bring such cases to court.

Of course, it is fortunate for other consumers that Johnston and Johnston v. R&J Leather (Scotland) Limited [2019] SAC (Civ) 1 is now a case in law and will set a precedent to help other Scottish consumers who find themselves dealing with an uncooperative company. However, my point is that people should not have to go to court in the first place.

I am a Scottish MP and this debate centres on my constituent’s Scottish legal case, which has no binding effect on English claims. However, the Consumer Rights Act 2015 applies throughout the UK, and given that the ultimate decision was made by the Sheriff Appeal Court, this ruling has the potential to be highly persuasive to county court judges in England and Wales, where similar issues are regularly raised.

To summarise, I find it deeply regrettable that the situation that I have highlighted, and the other situations that I have recently been made aware of through the efforts of Parliament’s digital engagement team, clearly indicate that the Consumer Rights Act 2015 is not working fairly for consumers in some markets. Based on the case that I have discussed, I hope that the Minister will agree that the Act needs to be reviewed, due to its legislation being ambiguous and, I believe, unenforceable.

[Sir Roger Gale (in the Chair)]

Before we proceed, I apologise to Ms Gibson for incorrectly identifying you when I called you for an intervention earlier.