Viscount Younger of Leckie
Main Page: Viscount Younger of Leckie (Conservative - Excepted Hereditary)
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie) (Con)
My Lords, let me begin this debate by setting out how important the Government’s consumer law reforms are for consumers, for businesses and for growth.
Consumer spending accounts for nearly two-thirds of the UK's economic activity. According to the British Retail Consortium, UK retail sales in 2013 were over £321 billion and the Office for National Statistics estimates that in quarter 1 of 2014 alone, household spending, when adjusted for inflation, grew by 0.8%—that is a growth of £2 billion just in that quarter.
Our aim is to foster high levels of consumer confidence so that people try new products and services and also shop around. This encourages businesses to enter the market and drives innovation, boosting competition and creating growth. However, in order for consumers to be confident, they need to know what their rights are and what they are entitled to if something goes wrong. Having clearer rights and remedies is also important for businesses because it means that they can more readily understand how they can best meet their responsibilities. Helping consumers to become more confident and businesses to become more responsive is the challenge that we face.
We have already taken action to reform the landscape of bodies which support efficient and competitive markets. Reforms announced in April 2012 have transformed the institutional landscape through, for example, the creation of the Competition and Markets Authority and the formation of the National Trading Standards Board. These reforms have made responsibilities clearer where previously they overlapped and have enabled consumer bodies and enforcers to be better co-ordinated, to identify and act on the real priorities affecting consumers.
We now have to get the legal framework right to make consumers more confident about the protection that they have and to reduce the costs to businesses of applying consumer law in practice—hence, the Consumer Rights Bill. The Bill sets out in one place key consumer rights and what consumers are entitled to if something goes wrong. It covers goods, services and, for the first time ever, digital content such as apps and film streaming.
The overall package of reform is estimated to be worth over £4 billion to the UK economy over 10 years. The Bill reduces costs for businesses and consumers by making it easier and clearer for people to understand what should happen when a problem arises. It will help to resolve complaints at an earlier stage and stop issues from unduly escalating into disputes, which are costly for all parties. It will also help create a fairer and more level playing field for businesses and enhance redress for consumers where problems emerge.
The provisions in the Bill have been carefully developed following extensive consultation, reviews and independent reports, including by the Law Commissions. The Bill was also published in draft last summer and received scrutiny by the Business, Innovation and Skills Select Committee. We are very grateful for the committee’s detailed consideration and we have accepted a good many of its recommendations. The Bill was then further improved following its introduction in the other place and I am confident that the Bill now before your Lordships’ House is stronger and better as a result.
I now turn to the main measures in the Bill. First, on goods, there are estimated to be over 350,000 retail businesses in the UK, making goods a critical part of the UK economy, yet much of the law on goods is over 30 years old. That is why the first part of the Bill sets out a simple legal framework to regulate the sale of goods in order to replace the current complexity that is, quite frankly, bewildering for consumers and which makes compliance so onerous for business.
We are setting out in one place the standards that goods must meet—for example, specifying that consumers have 30 days in which to reject substandard goods and receive a refund, to replace the current vague law that they have a “reasonable” time in which to return such goods; and making clear that, where the consumer prefers to have a faulty item repaired or replaced, this repair or replacement must remedy the problem the first time around or the consumer can insist on some money back. Currently it is unclear how many repairs or replacements of faulty goods a trader can give before the consumer can get some back.
Secondly, on digital content, because most consumer law has been in place for a long time, since long before the advent of digital content, there is significant legal uncertainty about what rights apply here. This uncertainty harms consumers and business, first, because consumers do not know how to go about resolving problems with digital content and, secondly, in contrast, some consumers may think that they are entitled to a remedy that the business does not think it is obliged to provide under the current law. This situation is unacceptable in a market that is both of a substantial size—around £200 billion—and still developing.
We are introducing a set of quality rights tailored specifically to digital content. For example, where a trader provides an update to digital content previously supplied, this update must not lower the quality of the original digital content. If it does, the trader must provide appropriate remedies to the consumer. Note that the onus in this example is on the trader because that is the person the consumer paid for the digital content. This in turn will raise consumer confidence to try new products, because consumers will be clearer about what they are entitled to if something goes wrong. This is good for businesses, too, because it makes it easier for new firms and innovative businesses to compete successfully for a share of the market.
I turn to the services sector. There are no statutory remedies to ensure that matters are put right if there is a problem with a service contract. That is unacceptable in a sector that is worth over 75% of UK GDP. We are addressing this in the Bill by setting out new statutory rights and remedies. Our key new remedy is for consumers to have the right to request the reperformance of a service. Alternatively, reperfomance might just be the element of it that is just not delivered in accordance with the contract, but we recognise that there are circumstances where that simply is not possible, or where it could not be done within a reasonable time and without significant inconvenience to the consumer, and in those cases the consumer is entitled to a reduction in the price of the service.
I focus now on unfair contract terms. The law on unfair terms in consumer contracts is particularly complicated. We need to tackle the complexity and ambiguity in this area of law, which has led to costly disputes that have even been taken to the Supreme Court. These court cases have still not established sufficient clarity about what a court may or may not consider for fairness in a contract. Some protection in law is necessary because consumers understandably focus on the product or service that they are purchasing rather than the contract. They often cannot, or do not wish to, investigate the detail of every contract term before they sign up to an agreement. They need protection where the small print could trip them up. However, this protection needs to be balanced against businesses’ need to be able to trade without the prospect of every single term being open to challenge. Contracts are a necessary part of providing products and services, and should enable rather than hinder consumers and businesses in that market.
Therefore, these reforms will make clear what the courts can and cannot consider for fairness. In particular, we are making a key test that price and subject matter terms in a contract need to be transparent and prominent to ensure that it cannot be challenged for fairness in court. That will give important protection for consumers against the small print and will give more certainty for businesses about what they need to do to avoid a term being assessable for fairness by a court.
On Part 3 of the Bill and consumer law enforcement powers, investigatory powers of consumer law enforcers are currently scattered across some 60 different pieces of legislation. That makes it difficult for enforcers and businesses to understand what the consumer powers are and in what circumstances they can be used, which is why we are consolidating them into one generic set in the Bill. We also want to make it very clear in the Bill that trading standards can work across local authority boundaries to tackle rogue traders efficiently and effectively, which will help to get rid of the red tape that currently stands in its way and prevents it from getting on with its important role. These important reforms will save businesses and enforcers time and money. We estimate a net benefit of approaching £50 million over 10 years.
Part 3 also contains enhanced consumer measures. If a business breaks consumer law, it is right that action is taken, and trading standards does bring criminal prosecutions. However, while that punishes the miscreants, it does little to help those who lose out as a result of the breach. We are therefore giving enforcers more flexibility to deal with such breaches so that they have additional ways to achieve better outcomes for consumers and create a level playing field for compliant businesses where consumer law is breached. Those tools include new powers to seek redress for consumers, which will help people get some money back where they have lost out as a result of a business not abiding by consumer law. However, they also comprise powers to help prevent future breaches. That may involve, for example, a business putting in place a better complaint handling system or putting details of the breach on its website together with what action it has taken to put matters right.
However, the Bill is not prescriptive. Instead, it provides flexibility to enable the response to be tailored to specific circumstances. More than that, we want to encourage businesses to work with enforcers to propose and agree appropriate measures, although ultimately the enforcer can seek a court order. As a balance—and the Bill is all about providing an appropriate balance—we are including safeguards for businesses that any such redress or other remedy is proportionate, just and reasonable.
On lettings, the vast majority of letting agents provide a good service to tenants and landlords. However, we are determined to tackle the minority of rogue agents who offer a poor service. We will require all letting agents and property managers to belong to an approved redress scheme, which will give tenants an effective way to address complaints. However, I believe we should go further, which is why the Bill has provisions to ensure full transparency of lettings charges. That is effectively a ban on hidden fees, giving consumers the information they want and supporting good letting agents.
Lastly, the Bill reforms the regime for private actions in competition law. Anti-competitive behaviour can harm consumers by lowering output, increasing prices, and reducing choice and innovation. It is estimated that cartels can raise prices by between 20% and 35%. Despite the strong competition framework that the Government are putting in place, research by the Office of Fair Trading shows that businesses believe the current regime for private actions is too slow and too costly. As a result, businesses and consumers rarely get redress where they have been harmed by anti-competitive practice. It is particularly telling that in 10 years there has been only one collective action case, and only 0.1% of those eligible signed up to the action.
To address that, first, the Bill will make it easier for settlements to be reached without costly court proceedings, by facilitating alternative dispute resolution. Secondly, it will create a more efficient and quicker process for private actions through allowing a fast-track regime for appropriate cases aimed at SMEs. Thirdly, it will introduce a limited opt-out regime to facilitate more effective collective actions for consumers and businesses where they have been harmed by an anti-competitive practice, with safeguards, to ensure the cases are appropriate and merit this approach.
This is the most fundamental reform of UK consumer law for more than a generation. It will streamline the law, and make it clearer and more accessible. It will enhance consumer rights and deregulate for business where appropriate. It will empower consumers and stimulate competition and growth. I beg to move.
Viscount Younger of Leckie
My Lords, I believe that there is still time to get hearts racing. We have an excellent opportunity before us to ensure that we have the best possible legal framework to empower consumers, drive competition and encourage growth. I am therefore very grateful to noble Lords for their wide-ranging contributions to the debate today on this important Bill. I appreciate the general support for its core elements that have come from so many Peers: from my noble friends Lady Oppenheim-Barnes, Lord Clement- Jones, Lord Stoneham and Lord Borwick, from the noble Lords, Lord Wills and Lord Alton, and even from the noble Baroness, Lady Hayter, although that was before she read out a full list of issues that means that I have much ground to cover. I also pay tribute to my noble and learned friend Lord Howe and my noble friend Lady Oppenheim-Barnes for their long contribution to consumer issues over many years.
I shall pick up on the specific points that have been raised today. The noble Baroness, Lady Hayter, and my noble friend Lady Oppenheim-Barnes, as well as the noble Baroness, Lady Drake, and the noble Lord, Lord Stevenson, talked about the importance of consumers knowing what their new rights are. I agree with that. Empowering consumers is a key objective of the Bill, and we have set up a group of consumer and business organisations that is working with us to develop a strong implementation programme to ensure that consumers and businesses are well aware of consumer rights. The group is considering the role of consumer rights information at point of sale, a point that my noble friend Lord Stoneham raised. I undertake to write to noble Lords before Committee to provide an update.
My noble friends Lord Clement-Jones and Lady Heyhoe Flint and the noble Baroness, Lady Hayter, and the noble Lord, Lord Stevenson, raised the issue of regulating ticket sales. I sympathise with cases in which consumers are misled about the nature of what they are buying. We have seen many excellent examples of event organisers controlling how tickets move from the primary to the secondary market, some of which were discussed in the other place at length. That good practice needs to be extended where event organisers have concerns. I reassure noble Lords that legislation is in place to protect consumers. It is already an offence for a trader to mislead a consumer. It is also a requirement that the main characteristics of goods and services, as well as the name and address of the trader, must be given to a consumer before they buy. For ticketing, I stress that the main characteristics should include the seat number, if one exists.
The Government are committed to ensuring that the law is enforced. In 2013 alone, the Advertising Standards Authority looked at 130 websites to ensure that pricing was accurate and not misleading, and this year it is reviewing 650 more. In addition, further legislation will come into force in October to give consumers who are misled better access to compensation. Therefore we are tightening consumer protections. However, industry best practice also needs to be extended. My noble friend Lady Heyhoe Flint, at least, recognises that particular point.
I very much appreciate and agree with the sentiments expressed by the noble Baroness, Lady Hayter, and the noble Lords, Lord Wills and Lord Stevenson, on the important point about unsolicited nuisance calls—or as the noble Lord, Lord Wills, put it, marketing calls—which can cause inconvenience, stress and anxiety for many consumers, in particular the elderly and the housebound. I am sure that we are all only too aware of situations when we could do without having to answer such calls. A phone ringing when you are making supper is very distracting even when you know who is calling, but when the call is unwanted and of no interest then it can be an unacceptable intrusion. However, I firmly believe that banning unsolicited calls will not solve the problem.
That is not only my view but the view of the Culture, Media and Sport Select Committee. In its report of 5 December 2013, the committee said that a ban on cold calling should not be introduced because there were many legitimate reasons why such calls might be made, such as by the emergency services, medical practitioners, pharmacists, even elected politicians, charities, and companies with which the recipient has a genuine relationship. For example, in its report the committee says:
“The National Autistic Society told us that the telephone is ‘the single most successful way that—as a charity reliant on public donations—we raise money from individuals’. The Society’s evidence ends with an appeal: ‘Please do not curtail our use of this marketing channel—I would implore you to fully consider the implications for society before making any changes’”.
We also have the example of other jurisdictions as further evidence that a ban does not actually work in practice. For example, Germany has a system that prohibits direct marketing calls unless an individual positively opts in to receiving such calls. Yet according to a study undertaken by trueCall Ltd in 2011, the level of complaints about nuisance calls was found to be broadly similar to the UK.
Despite what the noble Baroness, Lady Hayter, says, we need to focus our efforts on catching those that break the law—I believe that she did say that—which is why the Government’s action plan, published in March, focuses very firmly on improving enforcement. For example, we will shortly be consulting on lowering the legal threshold to allow more enforcement action, including penalties, to be taken. I make the point that some action is taking place.
The noble Lord, Lord Wills, spoke about consultation —a point which was well made. As I said, we will shortly be consulting on lowering the legal threshold to allow more enforcement action, including penalties, to be taken. Only last week this House approved an order that enables Ofcom to disclose information to the Information Commissioner’s Office about organisations that break the rules.
Lord Wills
I am grateful to the Minister for giving way. On the specific point about consultation, can he undertake that the consultation will take no longer than three months and that his officials will process the results of it as quickly as possible? I am not quite sure what the timetable for the rest of the Bill is, but can he make sure that, if at all possible, the Government will bring forward amendments to deal with this, as a result of the consultation, while there is still this precious legislative opportunity to do so?
Viscount Younger of Leckie
I am very happy indeed to write to the noble Lord to provide some precise timetable information on that point. We would wish for this to be taken forward as soon as possible as well, but I will furnish him with some more information. There are regulations in place that offer protection for consumers. I would very much encourage consumers to report such calls to the relevant regulator so that action can be taken.
At this point I would like to address a point raised by the noble Baroness, Lady Hayter, on energy bills. We know that rising energy prices are hitting many households hard at a difficult time. We expect energy companies to justify commercial decisions on price changes openly and transparently. We have delivered a £50 reduction in energy bills by driving down the cost of the green levies on consumer bills. We are reforming the retail energy market by making it simpler for consumers to understand. We are ensuring that everyone is on the cheapest tariff their supplier offers that meets their preference. Our policies are keeping bills lower—by an average of £65 for a typical household—than if we did nothing.
The noble Baroness, together with the noble Lord, Lord Stevenson, and the noble Baroness, Lady Drake, asked why the Bill does not contain an outcome-focused test for services. We are strengthening consumer rights for consumers of services where a trader promises something about the service. If the consumer relies on that promise they can hold that trader to account; if not, they are entitled to statutory remedies, which are also introduced for the first time in the Bill.
My noble friend Lord Stoneham and the noble Lords, Lord Whitty and Lord Alton, raised the issue of the alternative dispute resolution, as did the noble Baroness, Lady Hayter. As the noble Baroness knows, the consultation seeking evidence about whether any kind of simplification of the ADR landscape is necessary or viable in the future recently closed. Although it focused on immediate action to implement the ADR directive, we understand that stakeholders from many quarters have views on how the current ADR landscape might be improved. Some have suggested creating a consumer ombudsman. We have therefore used the consultation as a call for evidence about whether any kind of simplification of the ADR landscape is necessary or viable in the future.
The noble Baroness, Lady Hayter, asked about giving consumer rights to small businesses, and particularly to the smallest micro-businesses. The Government are committed to helping SMEs, of which there are 4.9 million in this country, to grow. However, we are not convinced that it is in the best interests of small or micro-businesses to be defined as consumers in the Bill. To take a step back, the Bill is about consumers. As soon as we start including rights for other parties in the Bill, we believe that that core purpose will be diluted and we will risk losing valuable clarity.
Baroness Hayter of Kentish Town
The Commons made a welcome amendment to the Bill to make letting agents put up their table of fees. Those fees will apply also to landlords, and landlords are a business. Does the Minister mean that landlords do not also have the right to see those fees displayed simply because they are a business?
Viscount Younger of Leckie
We still want to make a distinction between consumers and businesses. We think that if we were to cherry pick and bring certain groups in to allow businesses to be included as consumers, that would cause confusion. However, I am very happy to talk to the noble Baroness again about letting agents and the specific point, as I know that she is much exercised by the issue.
The noble Baronesses, Lady Hayter and Lady Howe, my noble friend Lady Bakewell and the noble Lord, Lord Alton, raised the important issue of the effect that advertising has on children as regards payday loans. First, let me be very clear that consumers will be far better protected under the new FCA regime. Logbook loan providers and other high-risk lenders are required to meet the standards that the FCA expects of them, including making affordability checks. The FCA rules are binding on lenders and the FCA has a wide enforcement tool-kit to take action.
My noble friend Lady Bakewell and the noble Lord, Lord Alton, raised the issue of advertisements. The FCA will not hesitate to ban irresponsible adverts, and it has a strong record of doing so. The Broadcast Committee of Advertising Practice is reviewing the extent to which payday loan adverts feature on children’s TV. Separately, the Financial Conduct Authority has set out new rules for consumer credit adverts and it has powers to ban misleading adverts which breach its rules.
The noble Lord, Lord Wills, asked about payday loan firms and cold calling. The FCA is committed to ensuring that cold calling by phone or e-mail makes clear the identity of the firm and the purpose of the communication so that the consumer can decide whether to proceed.
I thank my noble friend Lord Borwick, who raised an important point about consumers being made aware of the country in which a seller is based. Under the consumer contracts regulations 2013, traders in distance contracts, such as online sales, must make available information on their geographical address before a consumer buys from them. I have been in correspondence with my noble friend concerning his recent purchases with Amazon. I cannot comment on the experience of the particular transaction that has been raised but I can confirm that obligation, which I hope goes some way to answering his questions.
My noble friend Lord Clement-Jones asked about exempting intellectual property contracts from the Unfair Contract Terms Act 1977. I sympathise with the situation in which some creators find themselves, but we have not yet seen evidence that amending that Act would address the issue. First, we would need substantial quantitative evidence of a problem and, secondly, we would need to be sure that any such amendment would solve that problem without unintended negative consequences.
My noble friend Lord Clement-Jones also asked about brand owners protecting themselves against misleading look-alike packaging—an issue that I know we have spoken about in the past—on the grounds of intellectual property infringement and the common law tort of passing off. As he will be aware, my department, BIS, is reviewing the case for granting brand owners a civil right of action against copycat packaging and it is aiming to report in the autumn.
There has been some discussion today about the vital role that trading standards officers have in protecting the public. Issues were raised in this respect by the noble Lord, Lord Whitty, and the noble Baroness, Lady King. The Government strongly support the work that trading standards does to protect consumers from rogue traders and scammers. We have better equipped trading standards to take greater responsibility for consumer law enforcement by transferring central government funding to the National Trading Standards Board and Trading Standards in Scotland. Last year, we invested £14.5 million in these bodies to fund co-ordinated enforcement action across the UK.
We also want to develop a better understanding of the impact that trading standards services have on our economy at both the local and national level. Therefore, 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 a piece of research on which to build an evidence base on the economic, social and environmental impact of trading standards work, the impact that budget cuts have had on enforcement activity, and the efficiency of trading standards services across England, Scotland and Wales. The project will conclude in the autumn and the outputs will inform future policy considerations.
The noble Baroness, Lady Crawley, raised the question of trading standards publishing data. Trading standards will be able to name and shame a business, giving consumers more information to make better purchasing decisions. That is a key element of the new enhanced measures.
The requirement in the Bill for trading standards to provide 48 hours’ notice of a routine inspection was raised by the noble Baronesses, Lady Hayter and Lady Crawley, among others. I emphasise that this is about routine inspections; it is not about situations where there is any concern or suspicion that a trader is breaking the law. Other powers in the Bill can be used to check letting agents’ compliance with the duty to display fees. I also want to reassure the House that the powers and safeguards are designed to strike a balance—and it is a balance—between protecting civil liberties, reducing burdens on business and enabling enforcers to tackle rogue traders. Businesses, and particularly small businesses, welcome the requirement for notice. The Federation of Small Businesses has said that,
“booking inspections in advance … will allow the business to make the necessary arrangements … so that everyone gets the most possible from the inspection”.
However, I underline again that we have no intention of weakening the powers of consumer law enforcers to investigate rogue activities. That is why the Bill contains a number of clear exemptions from giving notice, such as where doing so would defeat the purpose of the visit—for example, when investigating the sale of illegal tobacco or the production or transit of fake food. Consumer law enforcers will still have more powers to enter premises than the police.
I turn now to an issue I know exercises a number of noble Lords, which is the right to receive bills in paper format. It has been raised today by the noble Baroness, Lady Hayter, and I know it certainly exercises my noble friend Lady Oppenheim-Barnes. I have heard the views expressed in this debate, and empowering consumers is a key objective of the Bill. My department is in the process of commissioning research regarding the issues that help and hinder the empowerment of consumers. We aim to use this research to identify the key target groups of consumers in need of greater assistance and the best ways to reach out to them. I can reassure the House that we will consider the comments made today alongside the conclusions from the research and act accordingly if this suggests the need for further thinking. Let me make one thing clear. There is no penalty for choosing paper—instead, people simply do not receive a discount. Choosing paper bills retains an additional service for those who wish not to take a paperless bill discount.
Baroness Oppenheim-Barnes
I apologise but I must interrupt my noble friend. That is not true. Clearly, at the end of a BT bill there is an item called, I think, charges for processing this bill. That means sending a piece of paper.
Viscount Younger of Leckie
I know that this is probably going to lead to some more discussions offline about this issue. My answer is that my noble friend then has the right to change supplier if she is not happy with that particular supplier.
Viscount Younger of Leckie
It sounds to me as if she has done so. We must also remember that many hard-pressed households welcome the opportunity to save money that paperless bills offer them—which is the other side of the coin—and the Government want this option to be available to consumers.
My noble friend Lord Clement-Jones, the noble Lord, Lord Stevenson, and the noble Baroness, Lady Howe, spoke eloquently about the important new statutory rights for consumers buying digital content. As has been shown, there are competing arguments and a balance to be struck. The digital content provisions are reasonable and principles based. They require that traders put right faults free of charge or, failing that, give some money back. That is what reputable digital content businesses already do. Not all bugs would automatically render digital content faulty, as the magazine Which? recognised:
“consumers are very accepting of updates and patches”,
and,
“would be able to tell the difference between a faulty piece of software and one that is just evolving”.
The noble Baronesses, Lady Hayter and Lady King, and the noble Lord, Lord Stevenson, asked about the impact of the services provisions, especially on public services. This point was quite strongly made. As Peers will know, this issue was discussed at length in the other place. My colleague Jenny Willott has written to set out the position, which is that where a public service is provided by a trader to a consumer under a contract, the services chapter of this Bill applies. That is why our impact assessment of this part of the Bill was comprehensive and covered all sectors. That assessment shows significant benefits—of £33 million per annum—to consumers.
The noble Lord, Lord Alton, raised an interesting point—and at this point I hope my noble friend Lady Oppenheim-Barnes can be persuaded to listen carefully—about the safety of embryos, if I can paraphrase the points the noble Lord raised. We are considering the report mentioned and we will announce our plans as soon as possible. My honourable friend in the other place, Jenny Willott, has already assured the other place and I can assure noble Lords that any proposed regulations on this matter will be subject to debates in both Houses under the affirmative procedure.
The noble Baroness, Lady Howe, asked about an update on the voluntary agreement on preventing unlicensed gambling providers. I will ask my noble friend the Minister for Culture, Media and Sport to reply directly to the noble Baroness.
The noble Baroness, Lady Drake, said that prominence is not sufficient to ensure that consumers understand the terms. We agree that terms should be written in language that consumers understand and that is why all terms must be written in plain and intelligible language. We will be giving guidance on what prominence requires and how it is defined. Business prefers this guidance to detail on the face of the Bill.
The noble Lord, Lord Whitty, who spoke in the gap, raised the issue whether consumers have access to collective redress for breaches of consumer law. Our proposals on enhanced consumer measures offer a more flexible, balanced and proportionate approach with a wider range of remedies.
I am fast running out of time. I will write to noble Lords whose questions I have not managed to answer. I conclude by underlining once again how vital this Bill is for empowering consumers, promoting competition and encouraging growth, which so many Peers have emphasised today.