Yvonne Fovargue
Main Page: Yvonne Fovargue (Labour - Makerfield)Department Debates - View all Yvonne Fovargue's debates with the HM Treasury
Consumer Rights Bill
Yvonne Fovargue Excerpts(10 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Stella Creasy
Indeed. “Take that” is the answer we would give on many of these things.
New schedule 1 looks at the cumulative impact of Government policy on households. Currently, among European nations only Estonia has a worse proportion of people struggling to pay their energy bills than the UK. Yet one of the issues that have been debated across the House is the impact of some of the long-term planning on the infrastructure building projects for our energy system in this country and the consequences for energy bills. Indeed, in November last year the National Audit Office published a damning report stating:
“Government and regulators do not know by how much overall expected new investment by the private sector in infrastructure will increase household utility bills and whether bills will be affordable.”
We know that the concept of affordability is contested by some, and we know from the evidence the Department for Environment, Food and Rural Affairs gave the Public Accounts Committee that it does not even have a target for affordability in relation to water bills. Yet many of us will have seen at first hand in our constituencies how people are struggling with those basic costs of living. We think that the Government should be able to publish an analysis of the impact of their own policies on the cost of living. Paragraph 7 of new schedule 1 asks for such a report to be provided by the Treasury. I am sure that Government Members who support transparency will want to support it.
I will say a little about new clause 2, which concerns implementation. After all, we think that with this framework we are offering the Government a way forward on information and advocacy, but we also recognise that it is no good having rights written on paper if they are not a reality in practice. One of the concerns that came up repeatedly in Committee—many of the Opposition amendments that the Government opposed related to this—is how consumers will actually access rights in practice. When will they know that they have a right to a repeat performance? At what point will the BBC tell us that we have a right to a price reduction because we did not like its commentary?
Those are all questions that the Minister said would be dealt with by the implementation group. It became a mythical beast in our minds, because it will cover so many issues, from point-of-sale information, information on remedies open to consumers, how businesses should be informed of these rights, the length of time before people can get a refund, the time limits people would get on a repair, replacement or repeat performance, or even testing consumers’ understanding of their rights.
Time and again the Minister said that we should leave it to a body of experts, which we believe—we are not entirely sure—includes organisations such as Citizens Advice, Which?, the Trading Standards Institute, the British Retail Consortium and even the Financial Conduct Authority. They are worthy bodies indeed to look at these issues, but we had some concerns in Committee, having seen some of the minutes of their meetings, which are not very frequent. Despite their good works, any recommendations they make would not be statutory guidance. Therefore, new clause 2 simply states that the recommendations they make about the rules on how the Bill should be implemented should have meaning, that they should have real teeth, that it is no good saying that it would be good for consumers to be informed of their rights if that does not actually happen at the coal face or at the shopping till.
In proposing this first group of new clauses, we are trying to make this Bill what it could be. We are trying to find the hope at the bottom of Pandora’s box. We are trying to ensure that consumers have access to the information and advice they need to make good choices the first time around. The old model of politics, in which progress depends on centralising these abilities, will no longer work with our communities. The task at hand, we believe, is to give the public more control and more power over their lives to enable them to make the choices that they want to make first time. As it stands, the Bill will leave citizens to navigate services alone, without the resources, either money or skill, to struggle to make them work.
We want to do something different. We want to reform the public sector by devolving power to people, investing in the prevention and co-operation they need to make services work for them, to stand shoulder to shoulder with every consumer and every citizen, not blunting the efforts of those who already fight for services, but enabling more people to give the feedback about the kinds of services we want in the public and private sectors. We believe that new clauses 1, 2, 3 and 5 and new schedule 1 will enable that framework to be put in place, and we hope that the Government will respond positively to the points that we have made as a result.
Yvonne Fovargue (Makerfield) (Lab)
I rise to speak to new clause 10, which stands in my name. Although I support paragraph 5 of new schedule 1, it is not just the lack of consent that I think is the problem with nuisance calls. My new clause has been promoted by the huge growth in nuisance calls and messages. In fact, on each occasion when I have been out on the streets recently, at least three people have come up to me to talk about the explosion in unsolicited contacts and said, “Can’t something be done?” There is a weak data protection regime and consumers feel that they have lost control of their personal information.
I am convinced that if I was on a desert island the first call I would receive would be someone offering me a loan to get off the island. For people in financial difficulties, in particular, nuisance calls and text messages offering high-cost credit, such as payday loans or fee-charging debt management services, can lead to the temptation to take out products or services that, if mis-sold—they often are—could substantially worsen their situation.
StepChange has done some research that shows that 1.2 million British adults have been tempted to take out high-interest credit as a result of an unsolicited marketing call or text. There is legislation to protect consumers against these practices. Unsolicited promotional electronic messages are banned, but the ban is widely flouted and inadequately enforced. My new clause would lower the threshold for firms breaching the Act. At the moment, the Information Commissioner’s Office can issue enforcement notices against these companies only if “damage or distress” can be demonstrated. It can also issue monetary penalties to firms misusing consumer data or breaking the laws on electronic communication under section 551 of the Data Protection Act, but only if
“substantial damage or substantial distress”
to the consumer can be demonstrated.
I believe that those thresholds are far too high. They should be lowered so that firms can be issued with enforcement notices or fined for breaching the Act without the Information Commissioner having to demonstrate “damage or distress” or
“substantial damage or substantial distress”.
The current thresholds have resulted in a situation where it is next to impossible for the Information Commissioner to enforce penalties against these firms. A recent tribunal decision went against the Information Commissioner when a £300,000 fine was overturned despite the defendant sending hundreds of thousands of illegal text messages.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
I rise to speak in support of new clause 4, which is in my name. Unlike other Members present, I was not familiar with this Bill until recently. I did not serve on the Bill Committee. The Minister may recall that I asked her an oral question two or three months ago about issues relating to warranties and additional warranties sold by retailers. My question arose not only from a specific constituency case, but from the related concerns of a number of constituents who have contacted me over the past three or four years.
In her response, the Minister drew my attention to this Bill, which was in Committee at the time, and suggested that I should look to it for comfort, so I did. I also read the Committee’s debates on warranties. My hon. Friend the Member for East Lothian (Fiona O'Donnell) is in her place and I recall from my reading of the proceedings that she raised some issues relating to electronic goods. She mentioned her experience in the past and I think she said that the situation may have improved since then. However, I tabled new clause 4 because of an experience that demonstrates that that is certainly not true in all cases.
My hon. Friend the Member for Walthamstow (Stella Creasy) has already referred to the implementation group, which seems to be the catch-all for everything that is going to happen at some unspecified point in the future. I understand that the intention behind the group is that it will ensure that legislated rights are translated into something meaningful for consumers. It is entirely right and appropriate for the new clause to seek to ensure that the implementation group should provide, at a specific point after the Bill receives Royal Assent, guidance on some specific issues.
Constituents tell me that what they are actually sold often turns out to be very different from what they were told they were being sold, particularly on additional or supplementary guarantees and warranties. A retailer will often tell them that what they are being sold will enhance their consumer protection and enjoyment of the product and provide them with a safeguard. It then turns out, however, that there is nothing more in the warranty than that to which they are already legally entitled or what is included in the manufacturer’s own warranty.
Yvonne Fovargue
Does my hon. Friend agree that it is not just that the warranties are sometimes mis-sold, but that companies such as BrightHouse in the rent-to-own market make it compulsory for new customers to take out a warranty when they may already have their own household insurance on those goods?
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.
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.
Justin Tomlinson (North Swindon) (Con)
I have a huge amount of admiration for the hon. Member for Makerfield (Yvonne Fovargue), who tabled new clause 11, and who brings plenty of front-line experience to the House. She has taken a cross-party, constructive and positive approach on a number of issues, and has a good, strong record of influencing the Government’s opinions.
The new clause is, in effect, the BrightHouse clause, and I was moved to come and speak about it because I had seen the company’s recent television advertisements displaying the cost of renting washing machines, televisions and even the sofas on which people could sit while using the other articles they were renting.
There are two parts to the proposals that I urge the Government to seriously consider. The first concerns displaying the total cost, because often the weekly or monthly repayments seem relatively reasonable but once we translate them over the entire period of the loan, we start to realise they can be a very expensive way to purchase an item. The work I have done on the all-party group on financial education for young people was centred on empowering consumers to make informed decisions, and that should also be a priority in respect of consumer credit regulations. It is all about making sure consumers can make an informed decision, and when the facts are displayed in cash terms even those with limited financial ability are able to make a relatively informed decision.
The point about protecting consumers by making sure they can afford the products is also important. We are moving towards that in the high-cost lending market. It is what we do with bank loans, for instance, and I do not think it is unreasonable to have it in this context, because this is in effect a loan, as until the person has completed the purchase—until they have paid 100% of those monthly or weekly costs—the item is not theirs. If they fall over at the 99% stage, it is returned. It is therefore in effect a loan that gives the person something at the end, so there should be protection because all too often consumers who have no chance of completing 100% of the payments are getting themselves into an expensive way of accessing items. There is merit in those two particular areas and I hope the Government will give them serious consideration.
Yvonne Fovargue
I am chair of the all-party group on debt and personal finance and we have done constructive work on many of these issues. I support the new clauses and I am pleased that new clause 23 addresses the Victorian practice of bills of sale. They are used for a purpose for which they were never intended. That does not just affect those who take out a loan by using them; it also affects people who do everything they can to check hire purchase information and the credit agreement on the car in question but who do not know their car can still be taken at any time.
I want to speak to my new clause 9, which deals with the problem of credit broking firms. I believe they are the new wild west in this area. They offer, for a fee, to find consumers a loan. In too many cases they take the fees from the consumer and do not give them a service at all, or they find them an unsuitable loan that they do not want. Under some circumstances consumers can get a partial refund, but they often struggle to get these firms to give the refund.
There was a super-complaint by Citizens Advice in 2011 and the Office of Fair Trading concluded:
“At the first available opportunity, the Government should carry out an impact assessment to establish whether legislative change would effectively address the consumer detriment caused by upfront fees in the credit brokerage sector both in the immediate and longer term, including considering a ban on credit brokers charging upfront fees”.
The Government declined to do this, saying that the new OFT guidance issued in response to the super-complaint should be given time to work. It has had two years to work and I am still getting evidence of problems.
I would like to mention a recent constituency case that caused me to look into the practice of one particular company, Myloan. The 18-year-old daughter of a constituent tried to get a loan; unbeknown to her mother and father, she was desperate. She went to Myloan in January. She completed the process and was advised that it could not loan to her, but she had given it her bank account details because it said it would find her a loan. It took the 16-digit number, the security number and an application fee of £68.99. It then processed the application. It sent her details off to 13 other companies. No companies offered her a loan, yet every company took an application fee, and she ended up a further £375 in debt. The majority of that money was taken within nine days of the initial approach. She was 18 and she did not know what would happen if she did this. It is clear that she was taken advantage of by this company.
I looked into this company and there were pages and pages of complaints on the internet of it taking fees and people not getting loans. We need to act now to stop vulnerable consumers being cheated by these companies.
I now wish to deal with the BrightHouse clause, which was mentioned by the hon. Member for North Swindon (Justin Tomlinson). It deals with companies that offer household goods to customers on a rent-to-own basis, whereby, again, they make weekly payments and own the product only once the final payment is made. I am using BrightHouse as an example because it is the largest rent-to-own company in the United Kingdom. It has more than 270 stores and plans to expand at a rate of about one a fortnight. These stores have become a common feature on the high street and tend to be found in more deprived areas. Indeed, it has been remarked that having a BrightHouse store is now a signifier that the area could be deprived, not that BrightHouse’s stores are downbeat or shabby—they look really good.
A TV researcher contacted me about BrightHouse because she had gone into one of its stores to look for a bedside cabinet and was appalled by the amount BrightHouse was charging a week. People who are unable to pay outright for goods and may previously have gone to get a social fund loan now cannot get one and have to use these weekly repayments. They allow customers to pay in small weekly chunks, repayable over several years. That can be convenient but there is a catch or two—if we include the insurance that is included, there is a catch or three. BrightHouse defends adding everything together by saying, “Our target customers are mostly women and they like things simple.” Well this is one woman who does not agree with BrightHouse on that one. Not only do its customers pay a higher price—often higher than is paid in Harrods—but at a typical APR of 69.9% the loan is extortionate. For example, customers can buy an HP Envy 120 all-in-one printer from BrightHouse for £322.23, which will end up costing £520 by the time they have paid £5 a week over 104 weeks, whereas John Lewis has the same product for £149.99.
Justin Tomlinson
Obviously, I support the principles being expressed here. The key thing is that the vast majority of consumers would not be able to calculate the total cost with an APR—even Treasury Ministers would struggle to do that—which is why it is so incredibly important to have everything displayed in cash terms. That is the simplest form for any consumer, allowing them to make an informed decision.
Yvonne Fovargue
I totally agree with that. I do not believe many customers know how over the odds the costs are. They cannot use a comparison, because they do not have the £150 to go to John Lewis to pay the cost straight off. They think that they are paying a bit more, but they are paying a fortune more—they are paying nearly five times as much. My new clause would require stores to set out all the costs, and I make provision in respect of similar goods because BrightHouse has occasionally changed one figure or a letter at the end and said, “There isn’t a comparable good.” There is a comparable good, but BrightHouse has just changed an X or a Y at the end of the goods.
Customers may still choose to shop at BrightHouse —I would not stop them shopping there—but they need to have the full facts. Clearly, low weekly payments are what make BrightHouse seem attractive to so many, but that does not mean they are affordable. BrightHouse encourages its customers to take on more and more loans; I have had reports of people being rung at home with tempting news of the latest in-store arrivals, keeping the customers in a constant cycle of debt. Small weekly payments quickly mount up and become unaffordable. There is talk about people buying the big TVs, but the other problem is that that is the only option in BrightHouse. It does not have the smaller goods; it has the big plasma TVs. BrightHouse does not stock the range of goods that people can shop around for.
I have encountered a case of a customer making weekly payments of £75 to BrightHouse, from a benefits payment of £100 a week—it is no wonder people cannot survive in such circumstances. My new clause would ensure that BrightHouse has to carry out proper affordability checks. We are asking payday lenders to do that, so why should the rent-to-own companies not have to do it as well? Including the insurance does not provide value for money, but people will not challenge it under the unfair contract terms because, in general, the people who go to BrightHouse do not want to challenge and go to court, as it is a frightening experience. So my new clause will ensure that these companies cannot enforce taking out the cover.
The last part of my new clause deals with repossession, because a lot of evidence shows that a missed payment or two leads to the loss of the goods concerned, often without a court order, despite the fact that the customer has paid the true cost of the goods several times over. BrightHouse says that that is done only with the customer’s consent, but many people have been left in dire straits when essential items such as their fridge or washing machine have been taken, often at short notice. The company has a perfect right to take the goods, but there are ways of doing it fairly. My amendment ensures that proper procedures are followed, and that customers are not pressurised into giving back goods for which they have paid a considerable amount. I am not against the services that BrightHouse offers, but I am against a business model that is so stacked against the customer that it amounts to little less than exploitation. There is a huge irony when the poorest in society pay the highest prices. BrightHouse and others like it should give thought to their customers and their ability to pay. Hopefully, this amendment will concentrate their thinking.
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.