Summary
 consumer_law_review_call_for_evidence ( 150kb)
- New consumer protection legislation needs to be given sufficient time to bed in before further legal changes are considered. However, the process of amalgamating existing legislation that is clearly linked, such as that on unfair terms where we have both the UK Act and Regulations that transposed an EU Directive, should not be delayed further.
- The scope of the consumer law review should include all typical consumer purchases. Those currently outside scope, such as financial products and utilities, are often purchased with goods and services.
- We recommend a consumer protection law regime that uses both principles and prescriptive rules, so that the principles can be more widely understood by all but there is scope for detail where necessary.
- A single piece of consumer legislation which incorporated all consumer law in one place would help consumers, advisers, business and enforcer locates principles, such as the duty not to trade unfairly, and details that relate only to specific transactions.
- The language of consumer law should aim to be simple and straightforward.
- The reduction of burdens for business also requires a safety net for consumers, so that consumer protection is not reduced as a result of changes to the inspection work of enforcers. Enforcement priorities and prompt enforcement actions need to reflect trends in consumer detriment, so that lighter touch regulation is reliant upon evidence of better customer service.
- Funding for enforcement needs to be sufficient to tackle areas where consumer protection laws are not being delivered, such as Sale of Goods rights and scams.
- Provision for consumer advice and help to access consumer protection rights should include the needs of vulnerable consumers.
- Consumers should be given access to redress for unfair commercial practices, so that enforcement and redress can work together to tackle unfairness. Consumers should be compensated when businesses have broken consumer protection law and individual, collective and representative actions should be permitted.
- Consumers should not lose their deposits when businesses fail.
- A consumer ombudsman should be set up to provide ADR where none exists, as an alternative to redress through the courts.
Introduction
Citizens Advice and Citizens Advice Scotland (CAS) are pleased to have this opportunity to respond to the consumer law review call for evidence. We believe this is an opportunity to improve consumer protection legislation and to make this body of law more user friendly.
The service has two equal aims:
- to ensure that individuals do not suffer through lack of knowledge of their rights and responsibilities or of the services available to them, or through an inability to express their needs effectively;
- and equally, to exercise a responsible influence on the development of social policies and services, both locally and nationally.
In 2007 – 2008 Citizens Advice Bureaux (CAB) in England, Wales and Scotland advised on over six million enquiries. Nearly two and a quarter million of these enquiries concerned issues relevant to this consultation: debt; goods & services; financial products; travel, transport & holidays; and utilities including communication.
We provide free, independent and impartial information and advice from CAB, through outreach work in a range of health and legal settings and by phone, email, online and through kiosks. In a 2005 MORI survey 95% of the public had heard of us. Our public information and advice website  www.adviceguide.org.uk had 6.5 million visits in 2006/07 and includes a frequently asked questions section in Bengali, Chinese, Gujarati, Punjabi, and Urdu.
Overall comments
Overall we agree that consumer protection law is complex and that a more accessible regime is needed. We value this opportunity to feed into the policy options for consumer protection in the future. We have some general comments on the areas addressed by this review and an initial concern about the timing and the scope of this review.
Timing of the review
UK consumer protection legislation has undergone major changes recently with the 2006 Consumer Credit Act and the Consumer Protection from Unfair Trading Regulations (CPRs). In addition the Regulation, Enforcement & Sanctions (RES) Act, which will implement the Hampton and the Macrory agendas, will change the enforcement landscape. CPRs have required a major move to principles based regulation and involved some 23 pieces of more prescriptive law being revoked. The Services Directive is also being transposed which will involve checking the overlap between the Directive and UK legislation, with the potential for further revocations. The Consumer, Estate Agents & Redress Act extends the range of businesses that are required to join an ombudsman scheme to provide accessible redress. It is important that the consumer law review is considered in the light of new legislation and that the opportunity is allowed for reflection on how successful all these measures prove to be. We appreciate, however, that this call for evidence will help influence the direction the UK government might seek to adopt in influencing EU policy.
Scope of this review
The consultation does not cover food, financial products or utilities. However, both financial products and utilities are sold with other products. Insurances are subject to the provisions of the Consumer Protection from Unfair Trading Regulations (CPRs) so that it is already linked to a fundamental aspect of our consumer law. Bundled sets of products are common across the type of goods and services which are the subject of this review. For example, a boiler and a maintenance agreement may be sold together on a credit agreement or a telecoms provider may sell internet, mobile, landline and satellite TV together with a help line facility. Utility and communications purchases are also relevant to the discussions as to whether goods and services should have the same or different rights of redress. It seems far from clear whether fuel, for example, counts as goods or services. Communications services are often sold with goods, for example a ‘free’ laptop might be provided with an internet contract and a mobile phone handset is often provided as an adjunct to the air time contract.
The review should be widened to incorporate the whole range of consumer transactions with business, to avoid the potential for excluding important elements of bundled and linked transactions.
Current problem areas for consumers
Citizens Advice Bureaux (CABx) report examples of cases of consumer detriment to Citizens Advice and to CAS centrally and these cases inform our social policy work. In many of these reported cases consumers are not benefiting from existing legislation because:
- they are not confident of their rights;
- rights vary considerably between purchases due to the product, elements of bundled products such as whether credit is involved, and how the purchase was transacted, for example distance and doorstep sales;
- customers have been misled by a business’s policies which undermine existing consumer protection;
- consumers can feel inadequate to the task of achieving redress when the business has refused their request;
- there has been no legislation that addresses that problem;
- a business has found a way to avoid the intended provisions of legislation; or
- there is no redress available for that particular detriment.
We therefore agree that a simpler and more principle based regime could help simplify consumer protection and increase accessibility for consumers. We are mindful, however, that it is often the detailed requirements that do achieve the pathways to redress. Some detail is necessary.
Additional problems for advisers
Citizens Advice working with Citizens Advice Scotland produces an information system for CAB advisers to advise clients. It provides information on all the subjects bureaux give advice on, including consumer protection. Feedback from CAB advisers shows that advisers can find this area of law complex and that identifying consumers’ rights can be very difficult. For example:
- the consumer may have purchased more than one product and rights may vary such as where the purchase involves goods and services;
- legal rights vary in relation to the time that has passed since the purchase was made and whether the product has been used;
- layers of rights can be available because of the type of product, such as timeshare; whether credit is involved; circumstances of the purchase such as whether it was made at a distance, where cancellation rights are available, or in a shop, where the consumer buys having seen the product;
- who is responsible, for example the usual rule for the retailer to be liable may not be the only option where there are additional warranties, equal liability credit provisions, rights offered by manufacturers or trade association or other badge/ assurance criteria.
This means that an adviser will need to look at several sections of the information system when advising a client on what their rights are and how to deal with their consumer problem.
The danger is that rights can be missed, for example in rarely used pieces of legislation, such as the Torts (Interferences with Goods) Act, which for England & Wales details the procedure where consumers’ property has not been collected from a trader such as a dry cleaner or shoe repairer. Further, legislation that may help resolve a non consumer type problem, such as unfair terms in a tenancy agreement, may not be found and used during a housing enquiry.
Prescriptive verses principle based legislation
We recommend a mixed regime, so that the principles can be more widely understood by all but there is scope for detail where necessary in order to achieve information and redress requirements for consumers and clear and proportionate rules for business and enforcers.
We see great value in bringing consumer protection law together in one place. This does not necessarily require the loss of prescriptive detail where it is needed.
Citizens Advice believes that it is important that we retain those detailed consumer protection provisions that do work well. Many pieces of existing consumer protection are already principles based, including the main pieces of legislation on sale and supply of goods and services. The use of terminology such as satisfactory quality; fitness for purpose; to a reasonable standard/ for a reasonable price/in a reasonable time, for example is widespread.
The new Consumer Protection from Unfair Trading Regulations (CPRs) transposing the Unfair Commercial Practices Directive, are principles based. But they are designed to work with some specific and detailed pieces of law, such as those for distance and doorstep selling, timeshare, package holidays etc. Together, the principle based and the prescriptive legislation is designed to create a new mindset for business to consumer transactions and some specifics such as information requirements and cancellation rights.
A further example of this mix can be seen in the UK Consumer Credit Act 1974 (CCA), as amended by the 2006 Act. Definitions in the CCA have been wide enough to capture most of the pre 1974 reactive credit legislation and most of the types of credit that have evolved since. This was achievedby carefully worded definitions and provision for regulations as and when needed. But it was also recognised that there were cases where prescriptive versions of certain requirements were needed, such as for pawn broking, where the scope for detriment might be greater because the pawned goods are being held by the creditor.
Citizens Advice believes that a mix of principles based and prescriptive legislation remains necessary but by means of one piece of legislation so that there is just one starting point to discover the rules. Within that Consumer Act, concepts such as those used in goods and services law could be listed; relevant legislation such as that on unfair terms merged; and redress and enforcement clustered.
For business and for consumers the important new concept is recognition of whether the transaction, terms or treatment received is unfair. Where this is the perception, consumers can seek further advice to find out about detailed rights. Further, we do not accept that it is unreasonable for business to be required to adhere to the law, even where this may have a cost. We believe that businesses must be required to trade fairly, and help consumers make informed choices about the products they buy. If a business is proud of its products, then informing consumers about their features should be a selling point. Information and rights to redress are there to ensure that consumers do not lose out because of poor business trading practices.
There is the additional question, in relation to consumer protection that does not work well, as to whether this is due to the wording of that legislation being too complex.
Enforcement, redress and regulation
Where principle- based legislation is adopted, such as the CPRs, we believe that it will only be effective if there is swift enforcement action where detriment is identified. The action taken would help business interpret what is required. This raises the issue of enforcement costs.
If enforcers are funded adequately to respond promptly, there will be a number of benefits:
- the activity will be stopped quickly;
- businesses who trade fairly will not find that poor and unfair practices are able to give their competitors an unfair market advantage; and
- related publicity will help to alert consumers.
It seems unlikely, however, that enforcement will ever tackle all the failures to comply. This would be against the Hampton principles for proportionate enforcement/ regulation and beyond the remit for which most enforcement activity is financed. But proportionate enforcement practice has to be fair for consumers, as well as business. Where business has been unfair, it needs to be judged in relation to consumer detriment and at least offer the option for redress. Unfair commercial practices should attract a statutory right of redress and enforcement should be linked to compensation for consumers.
Self-regulation is a feature in the Consumer, Estate Agents and Redress (CEAR) Act, in that business in the fuel and postal sectors are expected to work harder to resolve consumer enquiries in order to avoid the need for them to be decided on by the ombudsman. Two issues arise here in relation to channels for enforcement, the adequacy of self regulation and whether ADR processes are accessible for vulnerable consumers.
Self-regulation is of particular value where it fills gaps between legal requirements and consumer expectations. But our experience on self regulation raises the potential shortfalls of either only being effective with businesses that want to offer more and are least likely to be problematic or ineffective compliance monitoring by regulators.
We have seen several examples of regulators interpreting the proportionate approach to enforcement as a requirement to try self- regulation first in all cases. For example, OFGEM agreed to a face to face selling code when competition led to fuel supplies switching scams and the Minister threatened action if the industry failed to address consumer detriment. The same sort of mis-selling then moved round to the communications sector. OFCOM chose self- regulation on land line mis-selling and only revised the relevant licence condition when this failed. When mis-selling became a huge area of complaint in the mobile phone market, again a self-regulation code was tried first and when that failed OFCOM consulted on a licence condition to tackle the problem. During all this time consumers suffered detriment and we have seen no evidence that CAB clients whose lives have been blighted by these uncontrolled market practices have received redress. All enforcers can learn from these examples.
Vulnerable consumers
CAB clients are disproportionately likely to have a disability or long-term health condition, to live in social housing, and be in social groups C2, D or E. They typically have multiple, inter-related problems.
Vulnerable consumers are often less empowered. This can be the result of a whole range of issues that may be temporary or permanent, such as problems with health, finances, or a lack of knowledge. It is important that consumer protection is available to all consumers.
We believe that some consumers will need help to access their rights and that it is necessary to make a range of advice provision available. In addition to Consumer Direct’s mainly phone line advice, sites such as our AdviceGuide web site provide on line access to information and details of local CAB should more be required. CAB are also the largest UK face to face advice provider and our clients include many who cannot easily use a call centre help line due to technical ability, mental health, cost, language skills or personal preference.
Citizens Advice and CAS also takes the CAB service to specific groups of consumers. Many CABx have outreach advice provisions in health settings such as doctor’s surgeries and courts desks. In addition we have a wide range of projects that deliver to the needs of potentially vulnerable groups. We have explained four of these projects that are pertinent to consumer issues in an annex. These projects addressed switching energy suppliers and accessing the best fuel tariffs; supporting one parent families to make the transition out of poverty; financial skills training on tax for older people; and short term savings for low income families affected by the collapse of Farepak, the Christmas savings and hamper business. The overall objective has been to reach as many people who are vulnerable to the problems experienced by these targeted groups as possible. The projects empower people to achieve the best results for themselves and their families.
Gaps in consumer protection
CAB evidence illustrates an imbalance between a company’s ability to fail and walk away and the consumer’s unprotected status in the event of the same business failure.
A CAB client in Oxfordshire received an email to say that the dating agency to whom she had paid £450 had gone into liquidation. They had supplied no service at all. On the same day she was contacted by a very similar sounding company offering the same service. When she contacted the Official Receivers they had no record of the initial company being in liquidation and she suspects she had been duped.
CAB clients from Lincolnshire could not believe that the company they paid to build a conservatory could go into liquidation and reinvent themselves with the same people in charge. There are faults with the conservatory and the new company say they are not responsible for completing the work or for the 10 year guarantee. The clients have spent £1,000 on solicitor’s fees to no avail and have a loan they took out independently to pay for the conservatory which they are still liable to repay.
A CAB client in Hertfordshire sought advice about a faulty sofa she had bought from a furniture company that had gone into administration. She had bought a five year warranty for peace of mind but when she needed a repair she had to contact the administrator, the warranty company, the insurer who backed the warranty, and the manufacturer in her search for somebody to take responsibility. Each contact passed her on and eventually she was left as an unsecured creditor.
Consumer deposits, such as those made to Farepak, the Christmas savings club, mean that consumers fund business but are often left without protection when a business fails. Detriment to consumers is huge and the losses are devastating, even where there are appeals for donations for example:
A CAB in Berkshire reported losses of £111,000 by 192 families in their area, following the collapse of Farepak, the Christmas savings club. The average loss for Farepak customers who had saved all year towards Christmas expenditure was £500. A local campaign raised £3,500 but that only provided £18 per saver.
Citizens Advice believes that, as a minimum, a legal requirement to protect consumer deposits is essential to increasing consumer confidence. We see examples that this is possible in aviation; package travel; and FSCS rules as applied to Northern Rock. The concern of consumers about business failures and loss of deposits is recognised in self-regulation models. Protection of deposits is a key element in the core criteria set by OFT for their business to consumer codes approval scheme. TrustMark, the government sponsored scheme for trustworthy traders in the home repairs and improvement sector, tests financial probity and provide an insurance backed warranty against business failure. A legal requirement for better consumer protection when businesses fail would help trade associations applying for these badges to attract members which in turn would deliver the wider good practice these schemes offer.
consumer_law_review_call_for_evidence ( 150kb)
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