PARLIAMENTARY DEBATES HOUSE OF COMMONS OFFICIAL REPORT GENERAL COMMITTEES

Public Bill Committee

CONSUMER RIGHTS BILL

Fourth Sitting Thursday 13 February 2014 (Afternoon)

CONTENTS

CLAUSES 3 to 16 agreed to. CLAUSE 17 under consideration when the Committee adjourned till Tuesday 25 February at five minutes to Nine o’clock.

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The Committee consisted of the following Members:

Chairs: †MR DAVID AMESS,SANDRA OSBORNE

† Baker, Steve (Wycombe) (Con) † Kwarteng, Kwasi (Spelthorne) (Con) † Chishti, Rehman (Gillingham and Rainham) (Con) McPartland, Stephen (Stevenage) (Con) † Colvile, Oliver (Plymouth, Sutton and Devonport) † McDonald, Andy (Middlesbrough) (Lab) (Con) † Munt, Tessa (Wells) (LD) † Creasy, Stella (Walthamstow) (Lab/Co-op) Newmark, Mr Brooks (Braintree) (Con) † Doughty, Stephen (Cardiff South and Penarth) O’Donnell, Fiona (East Lothian) (Lab) (Lab/Co-op) † Sandys, Laura (South Thanet) (Con) † Durkan, Mark (Foyle) (SDLP) † Willott, Jenny (Parliamentary Under-Secretary of Flello, Robert (Stoke-on-Trent South) (Lab) State for Business, Innovation and Skills) † Gilmore, Sheila (Edinburgh East) (Lab) † Glindon, Mrs Mary (North Tyneside) (Lab) John-Paul Flaherty, Georgina Holmes-Skelton, † Gyimah, Mr Sam (Lord Commissioner of Her Committee Clerks Majesty’s Treasury) † Harris, Rebecca (Castle Point) (Con) † attended the Committee 109 Public Bill CommitteeHOUSE OF COMMONS Consumer Rights Bill 110

We have already talked about how the Bill will simplify Public Bill Committee and codify existing pieces of consumer legislation. Bills of sale and the laws on which they are based predate that existing legislation. Without the amendment to Thursday 13 February 2014 clarify that the Bill covers that form of contract, the archaic bill of sale will remain. A bill of sale will cover (Afternoon) the transfer or purchase but will not offer simple protections, for instances when the borrower cannot repay the loan. [MR DAVID AMESS in the Chair] The lender will be able to repossess the vehicle without recourse to a court. They will not have to give the Consumer Rights Bill details to insurance companies. A number of people sell on cars with a bill of sale 2pm agreement—and, therefore, a debt—attached to them. The buyer of the second-hand car does not know that Clause 3 there is a debt attached to the vehicle and will then find the car repossessed. Often people who have taken out CONTRACTS COVERED BY THIS CHAPTER logbook loans sell their cars as a way of trying to get money to pay back those high-cost forms of credit. Stella Creasy (Walthamstow) (Lab/Co-op): I beg to The person who buys the car is unaware of the debt move amendment 2, in clause 3, page 3, line 1, at end and finds the car repossessed because the ownership of insert— the vehicle remains, through the bill of sale, with the person giving the loan, rather than, as one might expect ‘(e) financial services contracts which contain a bill of sale agreement regarding the ownership of goods.’. when buying the car in good faith, with the person who has bought it. We have tabled an amendment to a later Welcome, Mr Amess, to our Committee. We had fun clause address that issue of whether it is fair for someone this morning and we hope to have even more under to buy a vehicle or piece of property and not know about your jurisdiction this afternoon. I accept that my definition any outstanding costs or charges related to the asset. of fun might not be shared by everyone. With amendment 2, we want to bring bill of sale We want to discuss a particular form of contract that contracts under the auspices of consumer protection we want to ensure is covered by the legislation, because legislation, thereby ensuring that people have access to it seems to be an anomaly. Hon. Members will be aware the measures that the Bill offers. I shall give the Committee of my predilections regarding high-cost credit and my some examples of the kinds of problems that people get concern about some credit licensing agreements affecting into with logbook loans and show why addressing bill people in our communities. I welcome the Government’s of sale issues is so important. movement on the issue, so that there will now be a cap I see logbook loans in my constituency. I am sure on the cost of credit. others see them in their communities as well, when However, there is one type of credit, of which Members people in financial difficulty with such products come may not be aware, called a logbook loan, which is to them. Rather than give the impression that the problem underpinned by an agreement called a bill of sale. The is only in Walthamstow, as it might appear when I talk amendment addresses problems with bills of sale and about the problems of high-cost credit, I shall give national seeks to ensure that the Bill covers bill of sale agreements. examples from Citizens Advice. A citizens advice bureau I want to set out our concern about bills of sale and saw a 26-year-old man on jobseeker’s allowance who how they relates to logbook loans. I want to persuade lived with his parents and had taken out a logbook loan the Committee that it is important that they are covered of £1,500. The man already had debt issues, including a by this form of consumer protection. I will also alert the magistrates court fine of more than £300. The logbook Committee to further amendments that we have tabled loan was taken out to cover those other debts, but he to deal with other aspects of those loans. had no means to repay the loan and was worried that he A logbook loan is a loan secured against a vehicle. would lose his car. The logbook for the vehicle is given to the lender as an Under a bill of sale agreement, that person does not asset against which the loan is made. That means that have the same protection for that asset that he would have the organisation that offers the loan essentially owns had if he had taken out a payday loan, which comes under the vehicle. A bill of sale is often used to underpin the modern consumer protection law. We estimate that one contract. The loans are made at high rates of interest. in four second-hand cars in this country are sold with As I said, I welcome the fact that the Government are such a charge against them, but people would not know going to legislate for a cap on the cost of credit, which about it, and due to the bill of sale agreement they will affect those loans. I am hoping to see confirmation would have no recourse to the courts to challenge the of that from the Financial Conduct Authority. repossession of a vehicle that they bought in good faith. Logbook loans are often made to people in severe People are being lent money without the protection financial difficulty, whose car is the only asset against of existing financial services laws. For example, if someone which they can raise a loan. A logbook loan based on a is given a loan that they cannot afford to repay, they bill of sale is a particularly egregious piece of consumer have the opportunity to negotiate a repayment scheme. credit, because of how a bill of sale operates. Bills of We do not see that with logbook loans. If the gentleman sale are an anachronism. The nature of such contracts I mentioned had borrowed £1,500, and paid £55 a week goes back to the Victorian era, if not earlier. That they for 78 weeks with an average annual percentage rate of are used for logbook loans compounds the difficulties 400%, which is typical for a logbook loan, he would that many borrowers have, because they do not come have paid back £4,250 in total—that is more than with modern consumer protection. £2,750 in interest to borrow £1,500. 111 Public Bill Committee13 FEBRUARY 2014 Consumer Rights Bill 112

The sums are astronomical. A cap on the cost of logbook loans and claimed losses totalling £1.47 million? credit should begin to deal with the cost of such loans, Does she think it would be disproportionate to ban bills but the issue today is their egregious terms. The amendment of sale given those kinds of figures? seeks to ensure that bill of sale agreements are accountable, in the same way that other forms of consumer credit Stella Creasy: My hon. Friend is right. The House are. However egregious we might consider those other has moved on in how we deal with the high-cost credit forms of interest, we argue that logbook loan agreements market. We all recognise now that this market has a should be subject to the same protections on debt series of behaviours in it that are detrimental to consumers repayments, the courts, fair lending and other modern and therefore detrimental to our economy. It seems to forms of consumer protection. One must wonder why us that logbook loans will be the last vestiges of that lenders continue to use bill of sale agreements for such unreformed market. It is right to examine what we can logbook loans when they offer such detriment to consumers. do to protect consumers who take out such agreements. One can only conclude that it is because they are so I want to explain to the Committee just how it works. preferential to the trader. In a modern consumer framework, The Bills of Sale Act (1878) Amendment Act 1882 it is not right to allow such provisions to remain. only requires a creditor to serve a valid default notice I hope the Committee agrees that it is not contentious before taking action, which means that there is only a to want to ensure that all contracts in the UK are minor delay in taking possession for what could be a covered by modern consumer protection. A number of minor breach of the agreement such as a day’s delay in stakeholders would certainly support it. Citizens Advice repayment. That is a huge amount of pressure to place sees a huge amount of complaints about such loans on consumers, and it is not fair pressure, especially for and, unsurprisingly given the current financial crisis, people who are already in financial difficulty. I do not has seen what was a declining market rocket back up think any of us would counsel our constituents to take again, although not on the scale of payday lending or out a logbook loan were they short of cash, even if they pawnbroking. Its survey showed that 394 logbook loans had a car. We might suggest that they sell the car, but were reported to it, and found when we looked at the terms of those loans we would “evidence of irresponsible lending, poor practice when dealing not think that they were a positive, constructive thing with customers in financial difficulty, high default charges, irresponsible for someone in financial difficulty. debt collection and repossession practices”, The fact that we have a particular type of contract as well as instances of people buying cars that were against which such loans are based, which allows draconian subject to loans of which they were not aware. We are measures to be taken, further compounds the difficulties trying to separate people who might unknowingly buy a that they create. As StepChange, the debt counselling car with a logbook loan charge against it from the charity points out, such loans are practice of offering logbook loans with a bill of sale “a major driver of bad practice. Repossession or the threat of attached in the first place. Citizens Advice says: repossession of a good leaves financially vulnerable customers “We want to see protection for borrowers from unscrupulous open to abuse by creditors. The lack of any effective control on lending and repossession tactics, as well as protection for people creditor behaviour creates a significant imbalance in power between who unwittingly buy a car subject to a logbook loan.” parties that is inherently unfair to borrowers.” As with payday lending, I know that Government Although such loans have been around for a very Members might argue, “Hang on a minute, these loans long time, the industry has grown greatly, and the have been around for ever and bills of sale have been practices that it has undertaken by using consumer around for ever, so why didn’t the previous Administration credits of the type that I have described have expanded do something about it?” They were trying to. In 2009, rapidly because of the growth of the high-cost credit the previous Government launched a consultation with market in this country. Where once logbook loans were a range of options for dealing with such companies. It a relatively minor part of a deal, we now see logbook looked at reforming or abolishing bill of sale agreements. loan stores. I know that the Minister has one in her own The consultation reported back in 2010. Unsurprisingly, patch called Loans2Go, and in other shops we see the industry was against that. Why would turkeys vote logbook loans being offered as part of a portfolio of for Christmas? That is the question I always want to ask high-cost credit. Those loans will be addressed by a cap some of these companies. on the cost of credit, but the contracts that underpin them, the threat of repossession and the threat of I note that a year later, the Government decided that action at such short notice without recourse to a judge it was better to look for self-regulation of how contracts or an independent advocate will remain unless we ensure were applied to the logbook loan industry. I simply that these contracts are brought under the auspices of point out that the view taken about payday lending and modern consumer protection. high-cost credit to begin with was that to intervene to try to tackle some of the practices that existed would be I hope that Government Members will see that this is counter-productive. That the whole House has moved not a deliberate attempt to leave a gap for high-cost on this issue seems to be a compelling argument for credit to persist in this country and unscrupulous practices including bills of sale in our legislative update. to persist, but is more a recognition that an arcane piece of legislation—the 1882 Act needs to go or at least be brought under consumer protection. If the Bill is intended Mrs Mary Glindon (North Tyneside) (Lab): Specifically to simplify people’s rights, surely we should be able to on what my hon. Friend was saying about the Government’s tell people that whenever they take out a loan, for response to the consultation, the Government argue whatever purpose, and whatever the rate of interest, that it would be disproportionate to ban the industry there are some basic principles of protection against because of a few rogue lenders. Does she agree that in mis-selling, egregious practice and repossession without 2010 the Office of Fair Trading reported that more than independent scrutiny. I hope that Government Members 1,000 consumers had complained about the problems with will support us in that. 113 Public Bill CommitteeHOUSE OF COMMONS Consumer Rights Bill 114

[Stella Creasy] good faith. That provision is similar to that found in the 1964 Act, but it does not apply to a bill of sale agreement. I know that other Members will have seen the effect Therefore, even if someone buys a car that has an of logbook loan companies in their constituencies. They outstanding bill of sale agreement against it from a will have encountered people who are frightened to seemingly reputable second-hand car salesperson and open their door. I have to do a distinctive knock on the says that they were not aware of the agreement, that will door sometimes in my community to make it clear to be no defence against repossession. people that I am not the bailiff coming. That is a The existing bill of sale agreements therefore create reflection of certain companies’ practices. huge vulnerability for people buying cars. We would like to see such agreements abolished, but, in the absence of 2.15 pm that, we would like to include such sales under the I also wish to draw the Committee’s attention to auspices of the Bill. The amendment would offer immediate clauses later in the Bill that relate to the practice of protection for both the consumers taking out those buying a car with a loan outstanding against it, which is loans and those who find that they have bought a car permitted under the 1882 Act. Some Government Members with a bill of sale charge against it. care about high-cost loans and have spoken out against payday lenders, and I urge them to see that issue in the I hope that Members of all parties will support the same vein. amendment or, at least, that the Minister will offer us a way in which we can ensure that that particularly arcane Bills of sale enable further bad practice on top of the form of contract is covered by modern consumer protection cost of the credit that is provided. Our problem with laws. Consumers, who may well end up paying a lower clause 17 is about what will be done for a consumer who cost of credit on such loans in the future, would therefore bought a car in good faith and did not know that there get similar forms of protection were they not able to was a debt outstanding on it. Surely they deserve our maintain their repayments. People who unknowingly protection, as do those who are in financial difficulty bought a car with a debt outstanding on it would also and find that a logbook loan is all that they can get. We be protected. I look forward to the Minister’s response. can all argue about whether we should have more credit unions, but if people have a car as an asset and take out a logbook loan, it is fair that they expect to get reasonable Sheila Gilmore (Edinburgh East) (Lab): I seek some protection. guidance, Mr Amess. I wanted to make some comments in relation to the definitions in Scottish law. Should I do Andy McDonald (Middlesbrough) (Lab): My hon. that now, or will there be a clause stand part debate? Friend is making an excellent speech and setting out her case extremely well. Is the other side of the coin not the The Chair: We are considering the amendment first, resulting lack of confidence in the market? There is but I was going to allow a stand part debate. enough trouble in second-hand car sales without this problem persisting. Is this not the opportunity to tackle that head on? Sheila Gilmore: Right, thank you. I want to say something about the amendment, and I will come to my Stella Creasy: My hon. Friend makes a strong point. other points later. Second-hand car sales might, in fact, be the biggest We have an opportunity to reform consumer law, so it source of complaints to groups such as Citizens Advice is important to update it and bring it into the 21st century. and Which?. Those who were in the Delegated Legislation Bills of sale and logbook loans are an old-fashioned Committee on Monday will know that I wagered that, way of dealing with matters. On Second Reading there in a pub on a Friday night, in a debate about a politician was a suggestion that if we keep adding more and more versus an estate agent, people’s idea of our reputations to the Bill, it will become an omnibus Bill—too big and would probably be even stevens. Second-hand car dealers unwieldy. However, if things need to be done and things may also come into the frame when we are thinking need to be changed, that is what legislation is for. We about those about whom we might want to say, “Have a should not aim simply to have as neat and small a piece pint with them and see whether you think they are of legislation as we can get, even if it leaves things a person worth talking to.” The industry obviously has hanging off the end, so the Bill provides a good opportunity a problem. There are some good second-hand car sales to look again at this issue. groups, but there is also some sharp practice. Scots law differs, because such contracts are not People who buy cars under hire purchase agreements, recognised in Scotland, but having talked to some of which are distinctive from bill of sale agreements, have my colleagues in the rest of the UK, I know that they different forms of protection. I will set those out to allow are a problem. They might become a bigger issue as the Committee to understand the point we are trying to people become conscious of them. The companies involved make with the amendment and why bill of sale agreements are keen to encourage people to come to them by saying should come under modern consumer protection law. If that they are not payday lenders. They claim to have someone buys a car through hire purchase, that is covered lower interest rates, which they might well in some by the Hire Purchase Act 1964, and therefore by clause 3. circumstances. They can have lower interest rates because It is stated that a goods title can pass to an innocent they have the car as security, but there is a clearly a purchaser, but that does not apply to bills of sale. downside to that. Current sale of goods laws, including section 24 of The companies’ advertising now claims that they can the Sale of Goods Act 1979, contain provision that supply loans in a way that will not affect someone’s where a person sells a good but remains in possession of credit history, because the loan does not go through it and subsequently sells it on to a third party, the third some of the same processes as others. The advertising party can take title to the good if it was purchased in says, “Come to us, rather than going to somebody else. 115 Public Bill Committee13 FEBRUARY 2014 Consumer Rights Bill 116

It will not affect your credit history, and if you apply for in 2009, as the hon. Lady mentioned. There have been a a mortgage or whatever in future, you will be unaffected.” lot of complaints about it over the years and there is It therefore might become an increasingly common clearly an issue of consumer detriment in terms of the form of borrowing. amount of money that people complain they have lost. I have had a quick look at some of the online advertising. The FCA will police the gateway to the consumer The bit about “We can take your car away” is in pretty credit market much more thoroughly than is done under small print or tucked away. It is certainly not on the the current regime. Firms that pose the greatest risk to front page with the advantages. In one case, I could not consumers, such as logbook lenders, will be among the find it at all. In another, I found it tucked in under the first to require full authorisation by the FCA. Logbook FAQ section, but I think there should be a big warning loans will be defined by the FCA as high-risk activities, about the implications of default. It certainly is not and as such the lenders will face closer supervision and clear from the advertising, which stresses the ease of the higher regulatory costs to make sure that they are loan, the interest rates, and the fact that people can get properly policed. Logbook loan providers will be required the money within an hour, which is always attractive for to meet the standards that the FCA expects of lenders, people who are in a panic. including making affordability checks and providing In that context, such a loan is appealing. The advertising adequate pre-contractual explanations to consumers as specifically says that the company will lend to people who well. For the first time, the FCA rules will be binding on have a bad credit history, so such loans attract people lenders, so the FCA has a wide enforcement toolkit to who have already had problems with credit, who have had take action if those rules are breached, and because financial difficulties, or who are in a desperate situation those rules are binding, the FCA will be able to take and think that it is a way of getting themselves out of it. action if they are breached. So consumers will be far They do not realise, as perhaps they should, that there is better protected under the new regime from 1 April. a downside. It would be helpful for us to make room in I hope that allays some of the concerns that hon. the Bill for something as important as this, and I am Members have about protecting some really vulnerable interested to hear the Minister’s view on that. people. The FCA will monitor the market, and if it finds that there are further problems, it has been made very clear that it will not hesitate to take robust action. The Parliamentary Under-Secretary of State for Business, However, we are hopeful that this approach, with much Innovation and Skills (Jenny Willott): Across Government tougher enforcement, may make a difference to consumers’ we share the concern of the hon. Member for Walthamstow experience. to protect consumers entering financing agreements that involve goods. No doubt we all have examples from As for some of the other issues mentioned, the hon. our constituencies—the hon. Lady mentioned Loans 2 Member for Edinburgh East referred to small print and Go, and there is a branch round the corner from where I how difficult it is for consumers to understand exactly live; I see it all the time. This is an issue in many what they are signing up to. That would be covered by constituencies, particularly those with urban communities the unfair terms element in this legislation—the rules where these lenders tend to be focused. around making sure that things have to be prominent and transparent and to be assessable in court for fairness I will come to the specifics of the amendment in a and so on. second. First, I will describe how the Bill will help to protect consumers where a trader supplies goods to Sheila Gilmore: Without wishing to pre-empt the them, which is tied up in this. The goods must meet the provisions around unfair terms, clearly there have been quality standards and the consumer has appropriate provisions in the law about unfair contract terms for remedies if they do not—we have already discussed this some considerable time, yet this still continues. Perhaps and I am sure we will come back to it throughout the the Minister will explain why she thinks the Bill will Bill—and those protections apply to goods regardless improve on this. of the method of payment, so they apply to goods supplied under a finance agreement, as well as goods Jenny Willott: I am saying that there is a different that are simply purchased for cash. What the Bill covers enforcement regime coming in on 1 April with the is quite broad. Financial Conduct Authority. After the consultation in 2009, a voluntary code of practice was established. Of Clearly logbook loans are an issue in our communities. the reputable lenders—and there are some reputable I know that the hon. Lady has worked on these matters ones—the vast majority signed up to the code of practice. for a number of years and has done some really sterling What is different is how it is being enforced and the fact work on it. It is probably also fair to say that people who that these types of lender are counted as high risk, so access logbook loans are often among the most vulnerable they will be among the first to go through the full in our society, because for many it is the only legitimate authorisation process. The FCA has a much tougher way that they can access credit. It is important that we regime to take action against those organisations that bear that in mind when we look at the protection we can do not comply with the rules. If that does not work, it give those people, to make sure that we take into account will consider further measures. However, it is hoped the particular vulnerabilities that they may well have. that having a tough regime and that authorisation process As hon. Members will be aware, responsibility for will make a difference. consumer credit regulation will transfer from the Office of Fair Trading to the Financial Conduct Authority on 2.30 pm 1 April. The FCA will focus its resources on the areas of Andy McDonald: Should we not prevent the regime’s consumer credit regulation that are most likely to cause not working by including the amendment, and then we consumer harm, and that specifically includes logbook would get the best of all worlds? There seems to be loans. There is consensus that there is a problem there, which doubt in the Minister’s mind about whether the FCA’s is why the previous Government started a consultation regime will be effective, but perhaps I misunderstood. 117 Public Bill CommitteeHOUSE OF COMMONS Consumer Rights Bill 118

Jenny Willott: No, I do not have any doubt. The code Many of the concerns relate to consumer credit and the will be tightly enforced; it is not voluntary and it will be way it is enforced through the FCA, but that is not a legally binding on the companies providing logbook matter for this Bill. Those elements that are relevant, loans. There will be a different regime in place to ensure such as unfair terms and clarity of ownership of goods that people are protected. There are problems with before sale, are covered elsewhere in the Bill and we will banning the practice outright. The individuals affected debate them later. are very vulnerable, and evidence received by the previous Government’s consultation suggested that, if one of the Stella Creasy: I agree with the Minister. I said that last legitimate routes to credit were removed, more clause 17 would be where we discussed somebody people may be forced into taking out loans with loan unknowingly buying goods with a charge on them. sharks. There are concerns that it may be slightly counter- Clause 3 sets out the kinds of contracts to which the productive. The FCA has made it clear that a priority consumer protections will apply, but the Minister must will be to ensure that the system works much better, be clear about how the Bill will cover bill of sale with the people making these loans being properly agreements. Subsection (3) states: authorised and tightly regulated. We hope that will take “It does not apply…to a contract intended to operate as a out a lot of the rogue elements in the sector. mortgage, pledge, charge or other security”. Another issue is the protection of people buying It therefore leaves a gap in which bill of sale agreements, second-hand cars while not being aware of a charge on which are about the ownership of a good as an asset them. That situation is covered by clause 17. Rather against which a loan is secured, are open for continued than rehearse the arguments now, if you are amenable, exploitation. Mr Amess, I would like to reserve that debate until we reach that clause. The matter raised by the hon. Member We can argue about how to ensure that people have for Walthamstow and others will be covered by that access to alternative sources of credit, although I agree clause. with the Minister that the Bill does not deal with that. However, it does cover contracts offered for goods, and Stella Creasy: I thank the Minister for her reply and a bill of sale agreement is a contract offered for goods. acknowledgment that there is a problem here. I think Our amendment seeks clarity. If the Minister is going to she slightly got the wrong end of the stick regarding bill say on the record that bill of sale agreements are explicitly of sale agreements. I cannot let her get away with what I covered, she must clarify why there are exceptions in call the minimum wage myth. She may smirk but this is subsection (3). We all recognise that these organisations an important point. The industry around high-cost have a lot of money and lawyers, and if there is any credit argued for years that if anyone tried to deal with opacity they will continue to offer bill of sale agreements. the price they charged for credit, they would be driven out of business. There is no evidence for that—in fact, Jenny Willott: My understanding of how the Bill the evidence is to the contrary: in countries that have relates to bills of sale is that the provisions would apply caps on the cost of credit, there are lower levels of when a consumer’s car transfers back to the consumer illegal lending and personal debt. There is recognition when the loan is paid off, because that transfer is from of that evidence. the trader to the consumer. However, if the consumer agrees to transfer their car to the trader, that is not a The Lord Commissioner of Her Majesty’s Treasury supply of goods from a trader to a consumer, so it (Mr Sam Gyimah) indicated dissent. would not be covered.

Stella Creasy: I see the Whip shaking his head but his Stella Creasy: So in fact the Bill will not cover bill of Government’s policy is now to have a cap on the cost of sale agreements. It is therefore possible that those kinds credit. Perhaps he should have a word with the Chancellor, of contracts will continue. Is that what the Minister is who has agreed with that evidence. suggesting? The idea that reforming what could be charged for high-cost credit would somehow drive people out is flawed. We are not talking about ending logbook loans. Jenny Willott: Clearly, the terms of the contract will The amendment is about bill of sale agreements, and be covered by the unfair terms provisions, which cover that is what I want the Minister to clarify. It is no good issues such as the small print, the consumer’s understanding just saying it is for the FCA. I have worked closely with and the prominence and transparency requirements. the FCA on its regulatory powers and it is going to do The contract element would therefore be covered by some good and important things, but if it is legal to legislation. The transfer of goods, as defined at the remove somebody’s car without recourse to other, more beginning, is the transfer of the car back to the consumer modern, forms of consumer protection, such as going and would be covered because it is transferred from the to court, lenders will continue to use that method and trader to the consumer. That is how that example relates the FCA will not be able to act because it will still be a to the clause, which specifically addresses the transfer of legal activity. Lenders will be able to use that pressure goods, rather than the contract terms. on people. Stella Creasy: The Minister is carefully ignoring the Jenny Willott: The hon. Lady will be aware that the first part of the equation, which is when the owner of reason I was talking about logbook loans was that that the good, the consumer, chooses to transfer ownership exact subject had been raised. It is slightly disingenuous of the property to the trader, the lender, to facilitate the to suggest that it was not. We are not discussing the cap, loan. We seek to include that transfer and that contract because that is an issue of consumer credit and, as the in the Bill. We cannot allow bills of sale to avoid all hon. Lady said, the Government are acting on that. other forms of modern consumer protection. 119 Public Bill Committee13 FEBRUARY 2014 Consumer Rights Bill 120

I appreciate that the Minister recognises that there is The Chair: Order we cannot have an intervention on a problem with the way in which bill of sale agreements an intervention. are used. Our amendment is designed to ensure that they fall within the scope of the Bill. The Minister has Stella Creasy: Let me try to see whether I can understand not yet satisfied me that she will ensure that traders the Minister’s point from another perspective. Would cannot say, “I will give you a loan, but the quid pro quo she be happy to buy goods, not necessarily a car because is that you give me ownership of your vehicle and I will we know that bill of sale agreements are used for cars in be able to reclaim that vehicle at any time without any particular, under the auspices of a bill of sale agreement? recourse to the traditional forms of consumer protection.” [Interruption.] I am asking the Minister a question. I That is what we are trying to do. have to be clear with the Committee. I would not because it would not come with the requisite consumer Jenny Willott: But that transfer would be covered protection that I have come to expect as a 21st century with the FCA’s requirements. The lender would have to citizen. Therefore I am asking the Minister why she go through the authorisation gateway and would have persists in not clarifying that these kinds of contract to be signed up to the legally binding code of practice. should be covered by 21st century protection. Those consumer credit protections would cover that Jenny Willott: I have explained about three times now contract. However, the example of an individual who that this is because the clause relates to a goods contract— transfers ownership of their car to a trader, as we the purchasing of goods. There may well be an argument discussed this morning ad nauseam, is about the relationship for updating the legislation, but this is not the Bill to do between a consumer and a business, and a trade taking it in. The issue she raises is around consumer credit and place. A consumer transferring his car to a trader does that is not a matter for the Consumer Rights Bill. not fit into that category, but he is covered by a lot of other protections in the Bill and the consumer credit Stella Creasy: The Minister is misrepresenting my regulations. This chapter relates to the purchase of position. I am not sure whether she is doing so wilfully goods, which does not take place in that example. or not. The matter is not about consumer credit. It is about the existence of bill of sale agreements and the Stella Creasy: I think the Minister needs to look at lack of consumer protection that they enable as a result. what the FCA can actually do. If a transfer is made The fact that they are used in consumer credit agreements with a requirement, such as a bill of sale that includes a particularly for vulnerable people on low incomes only provision that allows for the repossession of the car, serves to underline why they are exploitative and need that is legal. Although the FCA is tightening up how reform. This is about the transfer of goods. A logbook logbook loan companies operate and how they deal loan agreement is about the transfer of goods. Therefore with debt, if people’s cars can be repossessed legally we are seeking to ensure that that contract, which without recourse to a court, that practice will continue, involves the transfer of goods, cannot be underpinned because the FCA has law enforcement powers, not by a piece of legislation from the 1800s that denies law-making powers. There is a distinction there. people who undertake those loans, often because it is Our amendment is intended to deal with the fact that the only loan that they can get, the forms of consumer such contracts are being offered and say that whenever protection that those of us who take out other forms of they are offered, they should be covered by the same consumer loan would enjoy. That is the issue here. It is forms of protection as other forms of credit. Some not about consumer credit. I hope the Minister can get Members may have bought a car using a hire purchase that. It is about the existence of bill of sale agreements agreement. They would have that form of protection. I in themselves. do not understand why the Minister wants to enable Jenny Willott: The issues around consumer credit and this little loophole to continue. As we have all agreed, it access to consumer credit are not a matter for this Bill is being exploited by certain companies to exploit people either. The hon. Lady says she wants to see the same in financial distress. The clause lists very clearly the protection for bills of sale as for other forms of consumer kinds of contracts that would be covered by this; surely credit. This is a Consumer Rights Bill; it does not relate it makes sense to make it explicit that Parliament intends to consumer credit. The issue we are talking about here that people taking out any form of contract in the is the type of contract that enables someone to purchase 21st century should get 21st century protection? goods from someone whether with cash or through a finance agreement. The question whether the contract Jenny Willott: Chapter 2 of the Bill relates to goods is fair in the bill of sale would be covered in the unfair contracts, so the purchase of goods, whether with cash terms part of the Bill but not in this part of the Bill. There or through a finance agreement. If someone is borrowing will be consumer protections for those individuals under money, whatever the arrangements, they are not purchasing clause 17 and contract terms but not under this clause. goods, so the contract would not fall under clause 3. Only when the trader sells the car back to the original Stella Creasy: Let me try one last time. This is not owner by the pay-off of the loan would it count as a about consumer credit. Let us have a look at bill of sale good being transferred. In the original part they are not agreements. Bill of sale agreements can be used for a buying goods. It is money lent so it is covered by charge. I hope the Minister can accept that. The clause legislation, but not by the Bill because it is not a states specifically that this consumer legislation will not consumer purchase of a product, a good or a service. It apply to those kind of contracts; ergo, any of the would be covered by consumer credit legislation. It is protections that she argues would exist under the unfair definitely an issue for the FCA and for its legislative contract terms provisions would not apply as well. This framework but it is not an issue for the Bill. amendment is about bringing bill of sale agreements into the later clauses about unfair contract terms. We Andy McDonald rose— accept that it is an unfair contract term for somebody 121 Public Bill CommitteeHOUSE OF COMMONS Consumer Rights Bill 122

[Stella Creasy] the provisions in chapter 2 apply to a mixed contract, where the goods are supplied together with a service, not to be able to repossess your car without recourse to digital content or both, as part of the same contract. the courts, for example, but as this clause is drafted, it leaves a legal loophole where bill of sale agreements can be retained, so those clauses do not come into play. Stella Creasy: We have expressed our concern about That is the challenge we face here. the one issue that we thought was outstanding in the clause. I am conscious that other Members have important 2.45 pm points to make about how this provision will be applied in other jurisdictions, and I will give them time to Jenny Willott: I will say for absolutely the final time, discuss them. the unfair contract terms part of this Bill applies to those contracts. I do not know how much clearer I can say it. The hon. Lady just said there was a gap and they Sheila Gilmore: Will the Minister indicate the do not apply. To make it as clear as I can: they apply to Government’s view on the point raised in our evidence these contracts. session about the wording of clause 3(3)? It outlines clearly in most regards the types of contract to which Stella Creasy: That is wonderful to hear. In which the provision will not apply, but clause 3(3)(e) excludes case, why does the Minister oppose ensuring that it is “in relation to Scotland…a contract for which there is no explicit in this section of the Bill that bill of sale consideration.” agreements are covered by this legislation? The issue raised by the witness from the Scottish Law Commission was that, slightly oddly, in seeking to make Jenny Willott: I have made my case very clear. that particular paragraph apply to Scotland, the Bill does so in language not applicable to Scotland. Consideration, in relation to a payment or equivalent, is Stella Creasy: Then we have no choice but to press not a recognised term; the suggestion was that a “gratuitous the amendment to a vote, to make it clear that we would contract” would be the appropriate term. That may like to see watertight protection for consumers from bill seem a minor matter, but in a paragraph that applies of sale agreements. specifically to Scots law, not to use the appropriate The Committee divided: Ayes 6, Noes 8. language is wrong in principle and could give rise to Division No. 2] issues. Litigation in what we used to call mercantile law in AYES Scotland, from which legislation such as the Sale of Creasy, Stella Gilmore, Sheila Goods Act 1979 emerged, can be obscure and turn on Doughty, Stephen Glindon, Mrs Mary the use of words. No one wants to see a situation in Durkan, Mark McDonald, Andy which the use of an inappropriate term gives someone the opportunity to argue the opposite of what was NOES intended. That might be a relatively minor matter but, by consulting with the Scottish Law Commission and Baker, Steve Harris, Rebecca returning on Report with an amendment, it could be Chishti, Rehman Munt, Tessa corrected simply. Colvile, Oliver Sandys, Laura Gyimah, Mr Sam Willott, Jenny Jenny Willott: My understanding is that the wording Question accordingly negatived. was agreed with the Scottish Law Commission. Question proposed, That the clause stand part of the “Consideration” is used in the Supply of Goods and Bill. Services Act 1982 and we intend to be consistent with that. When the discussions took place, we understood that to be an understood phrase in the law. Therefore, to Jenny Willott: Clause 3 is essential to the chapter ensure continuity and consistency, we used that in the which follows. It sets out the types of goods contracts to Bill. which chapter 2 of the Bill applies, under which a trader agrees to supply goods to a customer. The scale of the As the hon. Lady said, the legislation covers different domestic trade for goods in the UK is enormous. In jurisdictions. There are, therefore, examples of phraseology 2012, consumers spent around £418 billion on goods that may not have originally appeared in Scottish law and there are an estimated 335,000 goods retail businesses but they have been agreed and, over time, used in that in the UK. As such, it is essential that we have a clear context. That wording is in the existing legislation and it and modern framework of consumer protection in this is transposed into the Bill. area. Question put and agreed to. As part of creating a clear framework for consumers Clause 3 accordingly ordered to stand part of the Bill. and businesses, chapter 2 aligns the rights and remedies for different contract types under which goods are supplied to consumers. However, because goods can be Clause 4 supplied in different ways—for example, sold outright, by hire purchase or merely hired—it is important that some provisions reflect these different ways in which HIRE-PURCHASE AGREEMENTS goods can be supplied. The clause enables this operation Question proposed, That the clause stand part of the of the chapter. Importantly, it also makes it clear that Bill. 123 Public Bill Committee13 FEBRUARY 2014 Consumer Rights Bill 124

Jenny Willott: The clause clarifies what is meant by goods can be supplied, so a clear definition of each “ownership of goods” in chapter 2 of the Bill. That is a contract type is necessary. If ownership of goods transfers key concept, as most of the contracts to which chapter 2 to a consumer in exchange for a price, it is a sales applies involve the consumer obtaining ownership of contract. A contract is also a sales contract if the goods goods. are to be manufactured or produced and then supplied The clause defines ownership of goods—this is slightly via a trader to a consumer. That makes it clear that the techie, so bear with me—as consumer has protection if the finished product does “the general property in goods”, not meet the statutory standards, rather than protections applying only to the materials used. For example, when which means full rights over those goods. That is a baker designs and makes a wedding cake to order for distinguished from situations in which a person can use a consumer, the contract between the baker and the those goods but does not have full rights of ownership. consumer would be a sales contract for the finished That is technically called “special property.” The clause cake, not just the ingredients that went into it. The ensures that the Bill’s concept of ownership is consistent clause sets out that definition, so it is important to with the concept of property in goods under the Sale of make the subsequent clauses work. Goods Act 1979. That means that existing legal rules regarding the passing of ownership or property continue to apply to certain contracts that are also covered by Stella Creasy: The Opposition do not believe the the Bill. clause to be contentious and we have no concerns about it. The clause acts as a signpost to specific provisions in the 1979 Act about the passing of property. That will Question put and agreed to. apply for determining when ownership of goods is Clause 5 accordingly ordered to stand part of the Bill. transferred under a contract of sale of goods. Clause 6 Stella Creasy: The Opposition do not have any concerns about the clause. Some people have expressed confusion CONTRACTS FOR THE HIRE OF GOODS about some of the language and terms used in the Bill. Question proposed, That the clause stand part of the Therefore, will the Minister set out why the Government Bill. adopted some phrases from existing legislation when they changed the language in other parts of the Bill? It would be helpful if she set out the thinking behind that Jenny Willott: The clause defines a contract for the discrepancy. hire of goods as it applies between a trader and a consumer. The Bill aligns rights and remedies across Jenny Willott: In some areas, in order to ensure goods contracts, so that most of chapter 2 applies to all consistency across legislation, we have maintained the contracts in the scope, but some provisions need to same language, particularly in those areas where we reflect the different ways in which goods can be supplied, know that a generally understood concept exists. The so a clear definition of each contract type is necessary. Law Commissions, both in England and Wales and in A contract is a contract for hire if a trader gives a Scotland, have said that well-understood and well-argued consumer possession of goods with the right to use concepts exist that people understand. To ensure them for a given period, but the consumer does not consistency, we have continued to use them. One purpose obtain ownership of the goods. of the Bill is to make the system easier for people to understand. Where the language is not bound up with Steve Baker (Wycombe) (Con): I thought I would clear past definitions and it is possible to make it take this opportunity to tell the Government that they slightly easier to understand without losing some of the seem to have made an omission in the Bill. It does not legal background, we have endeavoured to do so. include the reverse of the clause—where the consumer transfers ownership of goods to the trader, such as in a Stella Creasy: It is helpful to put that on the record. deposit cap contract in banking. I hope the Minister As my colleagues might point out, lawyers might will not mind if I table amendments on Report to understand, but those of us with a different background rectify that omission, and I hope she will look at it could struggle. between now and then. Question put and agreed to. Jenny Willott: I am more than happy to look at it. Clause 4 accordingly ordered to stand part of the Bill. Question put and agreed to. Clause 6 accordingly ordered to stand part of the Bill. Clause 5

SALES CONTRACTS Clause 7 Question proposed, That the clause stand part of the Bill. HIRE-PURCHASE AGREEMENTS Question proposed, That the clause stand part of the Jenny Willott: Clause 5 defines a sales contract for Bill. the purposes of the Bill. The Bill aligns rights and remedies across goods contracts, so that most of chapter 2 Jenny Willott: The clause defines what is meant by a applies to all contracts within the scope, but some hire-purchase agreement for goods for the purposes of provisions need to reflect the different ways in which chapter 2. A contract is regarded as a hire-purchase 125 Public Bill CommitteeHOUSE OF COMMONS Consumer Rights Bill 126

[Jenny Willott] Jenny Willott: I think that I covered that in my response to the previous questions asked by the hon. agreement if two conditions are met: first, if under the Member for Edinburgh East, who raised the issue of contract the goods are hired to the consumer by the consideration and the use of language. trader in return for periodical payments; secondly, if ownership of those goods will transfer to the consumer, Sheila Gilmore: The answer that the Minister gave providing that the terms of the contract have been earlier appeared to say that everything had been resolved, complied with and that the consumer exercises their but, given that the issue was raised recently in the option to buy the goods or some other condition is evidence session, it may not have been resolved. satisfied. Jenny Willott: I said that consideration is used in the Stella Creasy: Again, we do not believe that this is a existing legislation, so we are trying to ensure consistency contentious part of the Bill. in legislation where there is a well recognised legal Question put and agreed to. understanding and interpretation of the phraseology; Clause 7 accordingly ordered to stand part of the Bill. in the previous case, that was in the Supply of Goods and Services Act 1982. This relates to the previous point that the hon. Lady raised. On occasion, it is possible to Clause 8 simplify the language; at other times, it is important to ensure that we have consistency in the wording where a CONTRACTS FOR TRANSFER OF GOODS legal interpretation is behind it. Question proposed, That the clause stand part of the Bill. Stella Creasy: I thank the Minister for that reply. In her own example of a car being given in part-exchange, Jenny Willott: The clause defines contracts for the can she explain how that would work north of the transfer of goods by a trader to a consumer. A contract border, given that they do not have the concept of for transfer is a contract under which the consumer consideration? Does she believe that the law as currently becomes the owner of the goods, but which is not a drafted would deal with the anomalies that the Law sales contract or hire-purchase agreement. By defining Commission picked up on Tuesday? this category, the clause ensures that such contracts benefit from the provisions in chapter 2. An example of Jenny Willott: The Bill applies to England, Wales and a contract under this category could be where there is Scotland. Following a legislative competence order, it no monetary value assigned to the goods. For example, will apply to Northern Ireland as well. My understanding if a trader offers a car in exchange for the consumer’s is that there is no difference in how the Bill applies. present car plus £100, as no monetary value is assigned When it is enacted and becomes law, people will have to either vehicle, the contract would therefore be classed the same rights in Scotland as in England and Wales. as a transfer of goods, despite some money changing hands. A contract could also fall under this category if Stella Creasy: The clause talks about consideration it is a mixed contract—for instance, a contract for both as a noun that would be applicable to agreements. Can the supply of goods and the performance of services the Minister set out for the record, so that people can where, although goods are supplied, the transfer of have confidence, that the concerns raised on Tuesday goods is not sufficiently central to the contract to make have been addressed? How will hire purchase agreements it a sales contract. work in Scotland, as opposed to England where the concept of consideration applies? 3pm For example, if a consumer contracts with a carpenter Jenny Willott: They will work in exactly the same way to fix a shelf and the carpenter provides the wood and as in England. We have considered this. The Law nails, those goods are being transferred, but they are Commission has been involved. We have consulted the not central enough to the contract to make it a sales Office of the Advocate General on the application of contract. The contract between the consumer and the the law in Scotland, and everyone is happy. carpenter is for service, with the supply of wood and Question put and agreed to. nails being a transfer of goods. Clause 8 accordingly ordered to stand part of the Bill. Stella Creasy: The only thing that I want Ministers to consider is the issue about the different terms, which Clause 9 was raised with us on Tuesday by the Scottish Law Commission. The clause refers to the concept of GOODS TO BE OF SATISFACTORY QUALITY consideration as a noun rather than the adverb. My colleague from north of the border might have more to Stella Creasy: I beg to move amendment 3, in say on this. I think that we are all looking for what the clause 9, page 5, line 28, after ‘goods’, insert witness called “jurisdiction neutral” terminology in the ‘, or any claim made as to the outcome goods will achieve,’. legislation, so that there is no expectation that, when someone gets to the border, somehow things will change. The Chair: With this it will be convenient to discuss Some thought is required to make sure that the concept amendment 4, in clause 10, page 6, line 14, at end of consideration and how it is portrayed in the Bill are insert— consistent. Has the Minister had any further discussions ‘(3A) In assessing whether goods are fit for purpose any public with the Scottish Law Commission about the concerns claims made by the trader as to the purpose of goods shall be that it raised on Tuesday? taken into account.’. 127 Public Bill Committee13 FEBRUARY 2014 Consumer Rights Bill 128

Stella Creasy: We come to what I like to call the slightly different decision. It felt straightaway that there Rolling Stones element of this afternoon: the concept should be an outcomes-based test for these purposes. of satisfaction. I could make another joke about being We understand the Minister’s concerns about that. fit for purpose, but there is a watershed in this country We are concerned about advertising that makes particular for a reason. claims. For example, Lucozade for a while was advertised The amendments are designed to tease out the nub of as hydrating and fuelling people better than water. The many consumer complaints: how can someone be confident Advertising Standards Authority held that that claim that what they have bought meets their aspirations? was too far removed from the approved statement and That has been the subject of various debates in the that it should not stand. We think that if a consumer Business, Innovation and Skills Committee and more buys a bottle of Lucozade and thinks it will have that broadly in society. How can someone be confident that effect, that should be taken into account when deciding something is of satisfactory quality? whether it is satisfactory or fit for purpose. Clauses 9 and 10 are about goods being fit for purpose, There is also a question of parasitic packaging. I do and the amendments are probing. I hope that the Minister not know whether the Committee is aware of that will accept, in good temper and spirit, that there is a concept. It concerns a number of brands and how their genuine debate about how to decide whether something branding might be used. Advertising and packaging, is satisfactory. The disagreement has been about whether such as home brands, can seem similar to very famous that should be an outcomes-based test or left to the brands, and the claims are made through that. By being trader to determine what is satisfactory. We recognise very clear about explicit terminology in this part of the that there are arguments on both sides. What might be Bill, we can be confident that consumers base their satisfactory to one person might not be to another. decisions on accurate information. That is why we welcome clarification. For us, the moot We want the role that such advertising issues play in point is how to determine whether something is satisfactory the decisions that consumers make to be made explicit or fit for purpose every single time. in the legislation. There have been concerns about the Our amendments are designed to get to some of the enforcement of rules on parasitic packaging. That is an aspects behind those decisions. The aim is to get behind issue for brand competition. We think that this is relevant people’s thinking about what constitutes satisfactory or to the decisions that consumers will make about whether fit for purpose. That could include claims made to them a good is fit for purpose. If they act on one piece of about a particular good and what it will achieve. The information but are getting another, it is not clear to point at which a trader makes a claim about a good and them whether their rights are being infringed and whether what it might achieve should be taken as a measure of they can assess whether something is spotless. If my satisfaction. We have read the description that the Minister home-brand mop claims to keep my floor spotless and a gives in the clause—I welcome her clarification on that well-known brand does not but looks so similar that I but that is slightly different from the law as it currently cannot tell from the adverts, where do I stand? It would stands. There is a margin of disagreement in which clarify matters if I could say that an advertiser had many consumer complaints could be generated, with promised spotless floors, so that was part of the contract regard to what people consider satisfactory or fit for with which I had engaged and therefore that I had a purpose. reasonable expectation about satisfaction and spotless floors. That would also stop the erosion of confidence If somebody has made a claim that has influenced in certain brands that occurs when it is not clear what the consumer in good faith to buy, that should be taken claims are being made or why that makes a difference in into account. The amendment would simply set that out terms of consumer rights. as an explicit standard that consumers should expect. If a trader has told someone that a mop will clean floors I am sure that people have complained to other so that they are spotless, and they are not, the consumer members of the Committee about the quality of goods should be able to say that the product is not satisfactory that they have received and the difficulty of proving to a and does not meet the test that the trader set. That trader that those goods were not sold as seen and that would be enshrined in law and not be an after-the-fact they did not receive what they expected. We think that matter. The trader said that is what the product would there is a balance to be struck between requiring a good do; it is not satisfactory because the trader said it would to deliver exactly the same outcome every time and do this and it has not done so. leaving it up to traders to determine what constitutes satisfaction and fitness for purpose. The test of whether Without the amendment, the risk is that a trader goods are satisfactory and fit for purpose should hinge could argue that they believed the floors to be spotless on what a consumer was told at the time of purchase. I or that, even if they are not spotless, the product has hope that the Minister can give us further detail on how made a good attempt at cleaning, so why complain those issues will be dealt with. about the mop? We are all concerned about ensuring that we have mops that make our floors spotless when I recognise that satisfaction is slightly different from we are told that they will. I saw an advert the other day fitness for purpose, and I will provide an example to that seemed to suggest that and I was tempted. illustrate how our proposals would apply to fitness for purpose. Let us imagine that a customer walks into a The amendments would clarify for consumers and hardware shop during a rain storm and says that they traders the nature of the claims that they make and how need something to keep them dry, and the trader explains they would influence, when assessing whether rights that they do not sell coats or umbrellas but they sell have been infringed, whether the product is not fit for waterproof bin liners. If the consumer buys those bin purpose or satisfactory. The Business, Innovation and liners for the purpose of keeping dry but they turn out Skills Committee looked at this in detail and came to a not to be waterproof, they would not have fulfilled the 129 Public Bill CommitteeHOUSE OF COMMONS Consumer Rights Bill 130

[Stella Creasy] but were he to buy it, his satisfaction would be based on the outcomes that it would generate on the basis of the requirement that they be fit for purpose. That requirement claims that had been made to him about what it would would not exist if the consumer had not stated or do for him. So some clarity and honesty is needed about implied a desire to keep themselves dry. what the product would do, and therefore that influences The question in clause 10(4), which amendment 4 is whether or not he really could go back to a trader. designed to probe, is whether the consumer could reasonably be expected to rely on what the trader says. If a trader 3.15 pm tells someone in good faith that something will keep The amendments are as much about trying to tease them dry and it does not, does that mean that it is not fit out protection for the traders as for the consumers. For for purpose even if that was not its original purpose? traders to be confident that if someone came to them Government Members are looking a bit confused, and and said, “I am not one of the 50%”, they would want so were we. We felt that what someone was told at the to have a reasonable expectation of saying: “Actually, time of sale should be the test of whether those requirements we never claimed that you would be, but we claimed have been met, and the amendment is designed to tease that half the people involved in this sale would experience out the Minister’s thinking on the matter. this level of satisfaction. That you are unsatisfied is sad, but it is not a reason for returning the product and Andy McDonald: I have another example of entirely therefore getting your money back.” I hope I have set misleading claims being made for the qualities of products. out why we felt it was important to clarify those things. Flora pro.activ claimed that no other food lowers cholesterol more. Not only is that an issue of quality, but it is a Mark Durkan (Foyle) (SDLP): I thank my hon. Friend dangerous claim to make in an attempt to impact on for giving way. It is a not a voice-activated intervention people’s health choices. We should take the matter on the basis of the grey and disappearing hair. Going extremely seriously and ensure that products produce back to the typical claims made, a leading brand might the outcomes that they claim in their advertising puffery. be well known for the claim of killing 99.9% of all known germs. Many other chain brands and lots of Stella Creasy: My hon. Friend is absolutely right. His other derivative brands use exactly that same claim. example touches on advertising regulation, which is not Recently, at a BT young scientist exhibition, a number the subject of the Bill, and on concerns about the of schools proved that none of the brands actually did impact that such messages have on consumers’ choices. so. In some cases the leading brands performed least We must ensure that consumers have appropriate redress well. locally. It is no good for companies to be able to make persistent misleading claims—the Advertising Standards Stella Creasy: My hon. Friend proves the point. Authority does an admirable job of tackling such things— There would be a distinction between a false and misleading that influence consumers’ purchasing decisions, and for advertising claim, which would be an issue for the consumers to have no clarity of redress. In such a Advertising Standards Authority, and a consumer’s right, situation, a trader would be able to say, “We think that having bought a product thinking it would kill 99.9% of no other food attacks cholesterol more than this. You germs on the basis of seeing the advert and the claim may think that that is unsatisfactory, but we disagree.” that the trader made at the point of sale. All we are If a claim has been made, that should be taken into trying to say with these amendments is that where such account, because a consumer bought something in good claims have been made, they should be relevant to tests faith on the basis of that claim. We think that that is of satisfaction and fitness for purpose. different from saying, “It has always got to be that This is completely separate to whether or not such someone’s cholesterol is reduced, and if their cholesterol claims should be made in the first place. We accept that is not reduced, the good is not fit for purpose.” That this is not within the scope of this Bill, but what we feel recognises the distinction between a consumer’s reasonable is in its scope is the idea that consumers’ rights should expectation about the quality of a good, and their be dependent on what information they have been provided reasonable expectation about the quality of a good with. That is where these amendments seek to get to. based on a claim that was made to them. If a trader has With that in mind, I hope the Minister will engage in gone so far as to provide such information, the consumer’s that debate and give us some clarity about where she rights should be based on that. We should not wait for sees some of these issues of the claims that traders misleading advertising to be dealt with nationally; we make and how they fit into questions about satisfaction should give consumers clear powers to challenge it, and fitness for purpose. For most consumers who have because it affects their purchasing power. that quibble, this would be very welcome.

Andy McDonald: The 50-plus male population seems Steve Baker (Wycombe) (Con): This is a fascinating to be the target of many such products, including foods debate and I am glad the hon. Lady has opened this that claim to lower cholesterol or hair restorative products subject. I was particularly glad that she began with a that claim to target 100% of grey hair. A caveat that degree of humour about satisfaction, because it raises explained, for example, that while the hair restorative the question of what really is satisfaction when consumers might target 100% of grey hair, it was likely to miss 50% buy goods. I think we could agree that satisfaction is a might provide a bit of clarity for everyone. subjective thing. While I would rarely consider buying a motorcycle with less than 750cc, or 100 horsepower Stella Creasy: My hon. Friend makes the case for the perhaps, others might think that it would be an entirely amendments by emphasising the need to be honest satisfactory motorcycle. We are always going to look for about what a product might actually achieve. Far be it 100 horsepower per driven wheel, as anybody might from me to suggest that he would need such a product, reasonably expect on the public highway. 131 Public Bill Committee13 FEBRUARY 2014 Consumer Rights Bill 132

What is important to recognise is that consumers will outcome but an attribute of the product. The phrase is have different needs in the goods that they select. The therefore designed to cover a wide range of different hon. Lady brought forward a particularly objective things that might influence someone to purchase something. example, the notion that a floor cleaner must achieve the object set out in the advertising. When I look at the Andy McDonald: Does the Minister agree that this is Bill, I notice that clause 9 subsection (2)(c) talks about: really a Ronseal concept? We want products to do what “all the other relevant circumstances”, they say on the tin. That is what it is all about. People and refers to subsection (5). This then talks about the making extra-special claims that are most unlikely to be “characteristics of the goods”, and subsection (6) states: fulfilled is surely what concerns us in these circumstances. “That includes, in particular, any public statement made in advertising or labelling”. Jenny Willott: Yes, there is a balance to be struck. So although she said clearly that this is not a Bill about The phraseology is wide enough to capture a lot of advertising regulation, the Bill has given her a bit of an things. One issue that a number of hon. Members have open door in saying that the relevant circumstances raised is misleading claims. Misleading advertising is include public statements being made in advertising. already illegal. It is caught by consumer protection Where I am cautious about this amendment, is that it regulations. There is also the Advertising Standards seems to indicate some of the Marxist roots of the Authority. There is protection built into other legislation Labour party. It seems to suggest echoes of the mistaken to ensure that. Labour theory of value, the idea that one can objectively determine whether something is worth a particular price Sheila Gilmore: I think that the Minister is saying that might be paid, or any other particular means of that these matters are already dealt with and perhaps it exchange. is not necessary for the individual to be able to seek The amendment says: redress in some of these circumstances. If the current “or any claim made as to the outcome goods will achieve”. law is so good, why is it that the claims that my hon. If only buying and selling was as simple as whether or Friend the Member for Foyle mentioned and that had not the objects of your desires met particular outcomes. been tested are still capable of being made? I feel sure we will all have watched the Lynx adverts and I doubt very much whether any of us seriously expects Jenny Willott: Currently, consumers do not have an angels to fall. I look at this clause and think that, in so individual right to redress under the consumer protection far as it is necessary to deal with this issue, the Bill regulations, which are the regulations that cover misleading already deals with it; and in a good liberal and conservative and aggressive practices—that would cover many of the way, it deals with it in such a manner as to have a issues that have been highlighted today. However, I am subjective theory of value and, thank goodness, rejects glad to be able to reassure hon. Members that the the old, out-of-date, 20th-century, neo-Marxist objective Government will amend those regulations to enable theories of the other side. consumers to take action if they have been misled or coerced into a contract in a particular way. I hope that Jenny Willott: Claims about the outcomes that goods that addresses the point that the hon. Member for will achieve often influence customers. We have heard Edinburgh East has just made. about my hon. Friend the Member for Wycombe The Bill also enables claims made by a trader regarding purchasing Lynx in vast quantities as a result of the the outcomes that the goods will achieve to be taken adverts that he has seen. As has been said, those claims into account when assessing quality, because outcome are a key standard against which consumers measure claims are likely to be a relevant circumstance in someone’s the performance of the goods as well. Therefore it is decision as to whether to purchase a good. However, right that claims about important outcomes—key not every claim about outcomes is intended to form a outcomes—may be taken into account when assessing standard against which goods should be assessed. Public whether a good is satisfactory. Those sorts of claim can statements in advertising can be humorous and not already be taken into account under clause 9. designed to be taken literally, as we have already heard The clause ensures that, where a consumer contracts with the example of Lynx. For the women in the room, with a trader to supply goods, the goods supplied must Herbal Essences shampoo provides another example. If be of satisfactory quality. The goods should meet a what the makers claimed was true or what they depict in reasonable person’s expectation of quality, taking into the adverts was true, no other shampoo would ever be account factors such as any description of the goods bought by a woman. Clearly, a lot of these things are and the price paid for the goods. But also taken into designed to be humorous, rather than to be taken account are “relevant circumstances”, as the hon. Member literally, so we have to be careful about how we phrase for Walthamstow highlighted, which the legislation in order not to catch that too much. “include any public statement about the specific characteristics of The health claims on products were mentioned earlier. the goods”. If the health claims induced a consumer to buy something The phrase “specific characteristics” is deliberately wide. that they would not otherwise have bought, that would It would capture specific aspects of the goods that were be covered by the legislation that I mentioned earlier as referred to in publicity.That could include key outcomes— well. The legislation would also cover parasitic packaging, for example, that a washing-up liquid will remove grease which was another point made by the hon. Member for and that people will get 100 washes from one bottle. It Walthamstow. It would be covered by the consumer could be something to do with the cleanliness of people’s protection regulations, because the claims are misleading. floors. However, it could also cover other attributes. For Everything such as that would be covered under existing example, the bottle could be eco-friendly. That is not an law. 133 Public Bill CommitteeHOUSE OF COMMONS Consumer Rights Bill 134

[Jenny Willott] they are buying the real deal and so attribute a similar level of satisfaction or fitness of purpose to the general Amendment 4 would take into account any public branding. We would like some clarification as to whether claims made by a trader as to the purpose of the goods the clause is about the specific product, bottle or mop when assessing whether they are fit for purpose. It is that someone might buy, rather than in the general definitely important for consumers to be protected if sense of buying something in the same colour scheme. goods are not fit for their advertised purpose, and the That would be helpful for consumers in untangling Bill provides that protection in clause 9. The standard what this might mean for people when the clause is of “satisfactory” quality can include goods being fit for enacted. their usual purpose, which takes into account public Will the Minister be able to say that? It is helpful for statements made around that. The purpose of clause 10, the record if that can be set out, whether the clause is however—still on amendment 4—is to ensure that where about general or specific claims, given the problem to consumers make known to the trader that they intend do with parasitic packaging. to use the goods for a specific purpose, the goods must be fit for that particular purpose, if the consumer makes that clear before purchase. This is the bin liners and rain Jenny Willott: Misleading packaging is a matter for example given by the hon. Lady. Clause 10 protects the the consumer protection regulations. If someone if misled consumer even if the intended use is not the normal use. and the overall presentation is misleading, that could If that has been made clear to the trader beforehand, well be a breach of the consumer protection regulations. the goods must be satisfactory in that context. Public claims about the purpose of the goods may not therefore 3.30 pm be relevant, so requiring public claims to be taken into Stella Creasy: My point is slightly different. If a account could cut across the public protection provided consumer buys a mop in a red colour scheme that turns by clause 10. We therefore do not think the amendment out to be a supermarket own brand mop rather than is necessary. one made by a well-known national mop maker, does I hope that I have satisfied the hon. Lady that her the fact that that person thought that they were buying the concerns are already covered by the Bill and that well-known national mop maker’s brand supersede the amendment 4 could undo some of the protection that fact that they bought a product in the specific packaging we have built into clause 10. of the own brand mop, when it comes to that person’s rights with regard to the product being satisfactory or fit for purpose? It would be helpful if we set out that, as Stella Creasy: I thank the Minister and several of our I suspect is the case, the actual mop that the person colleagues for their comments. I am pleased that we are bought and the packaging it was in would come into opening up a debate about Marxism. I draw the attention play for any claim that was made, and not the person’s of the hon. Member for Wycombe to Habermasian intent to buy a well-known brand of mop rather than theories of critical dialectics, because we are talking the own-brand mop that they have bought in error about the information that each partner is able to bring because the packaging is so similar. to communicative acts. Far be it from me to suggest that Hayek would not have recognised the value of the consumer in that relationship, because he would not Jenny Willott: The hon. Lady raises two different have argued that the importance of individuals being issues. One is potentially misleading packaging that able to take part in a communicative act took precedence could encourage somebody to buy a product without over their role within the market. I am sure that the hon. realising what product they were buying. The other is Member for Spelthorne has views on that as well. the quality outcomes of the product that they buy. That is a different issue. Those would be covered by quality What matters is the information provided at the point standards. Consumers do not get rights associated with of sale. That is the point at which a consumer could be what they thought they had bought but with what they misled by a claim. That was what lay behind our probing have bought. amendment. It is helpful that the Minister has set out for the record that advertising is included. The only issue outstanding for the Opposition is whether labelling Stella Creasy: I think that is what we are trying to get and advertising would have priority over other forms of at. If the hon. Member for Wycombe buys an own claims made by traders—the point about parasitic brand deodorant but thinks that angels will fall because packaging is whether people buy something on the it looks very similar to a national brand deodorant, his basis of general claims made about the quality of rights of satisfaction will relate to the own brand deodorant another product. that he bought. They will not relate to the fact that he To go back to our mops, which clean floors simply, if might think that angels will fall because he thinks that, people buy one thinking that it is the red brand—a in general, somehow a particular smell emanating from particular type of mop—but they are actually buying him would generate such an experience—something an own brand and had not seen the packaging clearly that I am sure is much the case. enough, would the packaging for the own brand take precedence in that instance? The mop might not offer as Steve Baker: I never said any such thing about myself. clean a floor as one would have seen in the general I merely referred to the advertising and said that none advertising for the original product—that is the concern of us would be taken in. brought up by parasitic packaging. Some of the own brands supplied by supermarkets, Stella Creasy: As someone who has to spend the next for example, are strikingly similar to well-known national few weeks in a room with the hon. Gentleman I am brands, so consumers might buy them thinking that pleased to hear that. 135 Public Bill Committee13 FEBRUARY 2014 Consumer Rights Bill 136

With that in mind, we are happy to withdraw the Stella Creasy: I think that our amendments have amendment. I am grateful to the Minister for her teased out the things that we are slightly concerned clarification. I beg to ask leave to withdraw the amendment. about in this clause, and we are grateful for the Minister’s Amendment, by leave, withdrawn. comments. We have no further comments to make. Question proposed, That the clause stand part of the Question put and agreed to. Bill. Clause 9 accordingly ordered to stand part of the Bill. Jenny Willott: Where a consumer contracts with a Clause 10 ordered to stand part of the Bill. trader to be supplied goods, whether buying or hiring the goods or under hire purchase, those goods must be Clause 11 of satisfactory quality. The consumer must be able to rely on the fact that he or she will get the quality that GOODS TO BE AS DESCRIBED they paid for, and if the goods are not up to scratch, the consumer should be entitled to a remedy. Stella Creasy: I beg to move amendment 5, in clause 11, page 6, line 24, at end insert— Satisfactory quality is judged by what a reasonable person would expect of the goods in question, taking ‘(1A) Where a trader is selling goods that have restrictions on who can purchase them, public communications about those into consideration the price, description and anything goods, including promotional material and any promotional said in advertising or on labelling. For example, a lower activities shall be required to reflect these restrictions.’. standard might be expected of cheap or disposable There are several amendments to this clause. Because goods when compared with an equivalent item that they address slightly different issues, it would be helpful costs more or is advertised as being particularly durable. if we debate them in turn. I will take the Chairman’s Let us go back to kettles. With a cheap kettle, a reasonable direction as to whether he wants to go through each person might not expect it to last very long in the first amendment individually or wait until the end to see place, so if it stops working completely after four years whether any other amendments will be considered by of frequent use, the statutory right might not be breached the Committee. and a consumer probably could not successfully seek a remedy, as the fact that it has stopped working could be The title of the clause alone would explain to many seen as reasonable. If, however, a top-of-the-range kettle consumers what the problem is. The title is: was purchased but after six months the heating element “Goods to be as described”. failed, a reasonable person could consider that to be Therefore, all the amendments to the clause that we unsatisfactory and so the consumer could successfully have tabled and the debate that we want to have on the pursue a remedy. clause are about these descriptions and what kind of If a consumer is made aware of a defect before information a consumer would need in a description to buying a product that defect cannot be grounds for make a confident purchase. Perhaps we are back to finding the good to be unsatisfactory, a matter raised in those questions about communicative acts and angels. the evidence session on Tuesday with Martin Lewis. For example, if a consumer buys a T-shirt from a shop and Steve Baker: I am grateful to the hon. Lady for when they go to pay the shop assistant explains that the drawing my attention to Habermas, because as a humble T-shirt has a small hole in the armpit, the consumer aerospace and software engineer I do not have the would have no grounds to seek a remedy for a breach in benefits of a Cambridge doctorate in social psychology. this statutory right for that specific defect. Likewise, if a Consequently, I am also very grateful to her for confirming consumer has had a chance to examine the goods, a my impression that the Labour party is, indeed, of defect that should have been revealed by examination Marxist roots. would not be grounds for finding the goods to be unsatisfactory. The same applies if goods were supplied Stella Creasy: I look forward to explaining to the by sample: a defect that would have been clear on a hon. Gentleman precisely Habermas’s critique of Marx, reasonable examination of the sample will not be grounds why he was not a Marxist and why, in fact, he was for finding the goods to be unsatisfactory. part of a new school of progressive thinking about The statutory right could be breached if the goods do communicative acts and the role of the individual. I not meet the standard or description of the product contend that that thinking goes to the heart of the made in a public statement, as we have been discussing, clause, because it is the role of the individual to evaluate such as in advertisements or in the labelling of goods. critically the information provided to them, which implies For example, if a TV advert for a washing powder states they would have equality of information to be able to that it is guaranteed to remove tar from clothes at 30° do that. but a consumer finds that that is not the case and they Not all consumers are created equal; Labour Members are left with stained clothes, they could pursue a remedy want to do our best to help consumers to get there. as the product did not live up to the statement that was Therefore we hope that, in the amendments that we advertised. However, such statements are not considered have tabled and the critique that we offer, we can relevant if the trader was not or could not reasonably encourage those on the Government side to join us in have been expected to be aware of them, nor if the using their best progressive instincts to think about how statement was withdrawn or corrected before the contract to empower consumers to take part in the communicative was made. Nor should such a statement be considered if act of buying a good and having a conversation with a a consumer’s decision was not influenced by it. trader. The clause is important as it continues this existing However, in order for a consumer to do that, any consumer right and assists in streamlining key consumer purchase needs to be informed by a series of pieces of rights for goods into one place, providing clarity and information. Our amendments to the clause try to get balance for consumers and businesses. to that concept of description, and what might be 137 Public Bill CommitteeHOUSE OF COMMONS Consumer Rights Bill 138

[Stella Creasy] Stella Creasy: I know my hon. Friend feels strongly about that, because I believe his own local club was also included in a description to enable a consumer to make involved— a good purchase. We then want to look at how that might affect the way that goods are marketed, because Stephen Doughty: No. as I think we saw in our previous debate there are questions about marketing and how it plays into the expectations that consumers have. Stella Creasy: No? Good consumer legislation would not simply wait, perhaps in a draconian way, for state intervention. Stephen Doughty: It was trying to stop them. Those of us who are Habermasians believe very strongly in the collective empowerment of the individual, and Stella Creasy: It was involved in challenging that, therefore we do not merely want to wait for regulators certainly, because of concerns about how consumer to act to ensure that issues are dealt with but want to see protection is linked to advertising. Again, we have set that consumers have the rights to empower themselves out clearly that we believe the ASA has a role to play. It to address issues. is shocking that whereas the drink and gambling industries Descriptions are at the heart of that process. If someone have recognised their role in not infringing on our is sold something and the description of it is not clear, children’s consumer rights by advertising to them, the they will not have made a choice based on the information payday loan industry did not see such a case. We know that they wanted to make such a choice. Therefore, that 500,000 payday loan adverts were shown to children amendment 5 is about trying to ensure that where in the past year alone. That means that the average child descriptions are given they accord with the wider context has seen at least 70 of these adverts in a year. in which a purchase is made. It is about where advertising Martin Lewis, who came to speak to us on Tuesday, is is used, and what advertising it is reasonable to expect passionate about this subject because he sees it as people to have seen and therefore to take into consideration infringing on the ability of young people to make in any purchase they might make. effective choices about purchasing loans. His research If that sounds rather dry—perish the thought, in suggests that one in three parents with children under terms of consumer rights legislation—this amendment the age of 10 have heard their children repeat payday is about trying to understand the connection between loan slogans from TV adverts. It has also been found the purchases that we might ask people, of any age, to that 14% of parents polled said that when they refused undertake and the material and information, including to buy something for their under-10s, they had been a description, that they are given. The best example of nagged to take out a payday loan for it. this—again, I am afraid that I am going back to my We can change the advertising guidelines, but we specialist subject—is payday lending, and in particular should also consider the rights of the child in their the concern that payday lending advertisers were marketing experience of advertising and their ability to make and targeting their products at children. effective decisions. Information transfer is a key part of This amendment is designed to test how we can consumer rights legislation, so amendment 5 is intended address that issue, which we think is also a consumer to equalise the law on advertising with people’s consumer rights issue, if not in the broadest sense. Any good rights, especially where there are restrictions on selling Gramscian would think about the right of a child to go goods. through an education system and learn about compound If we say that it is not in the interests of a child to be interest before being bombarded with adverts telling able to buy a payday loan, surely it is not in their them to take out a payday loan. In a simpler sense––perhaps interests to be marketed a payday loan. That is what the Hobbesian, as the hon. Member for Wycombe is so amendment is getting at. It is intended to ensure that inclined to have a philosophy lesson on a Thursday the law on selling is mirrored in the law on marketing, afternoon in a Committee Room— which is a clear part of the selling transaction. It would be helpful if the Minister could set out how she sees Steve Baker: Delighted. that. Obviously the amendment is not just about payday lending advertising, but that is the most obvious example of where egregious behaviour has taken place. How Stella Creasy: I am sure that the hon. Member for does she see the connection between the information Spelthorne would be more than happy to help. Cambridge provided to a consumer and the way in which marketing doctorates are liberally sprinkled throughout the Committee. is undertaken, given the Bill’s provisions on the concept We think that the guidance on advertising, and therefore of goods being as described? Obviously if the good is the information that consumers have, needs to be consistent. described as a good type of loan, as in the “Mr Sandman” Although payday loans are not supposed to be for advertisement and as in the payday lenders’ advertisements, under-18s, that they are being marketed for under-18s there is clearly an issue about whether that is misleading. creates an anomaly that impinges on their consumer It is unfair to expect a young child to have the same rights. knowledge as an adult about terms and conditions, or to be able to read the small print of a logbook loan or Stephen Doughty (Cardiff South and Penarth) (Lab/ whatever—children are being advertised logbook loans Co-op): My hon. Friend makes an excellent point. She as well. Is there a case for equalising the way in which will be aware that Wonga was advertising its services to we protect them offline and online? Although there babies, or so it seems, on baby-grows at Blackpool might be work that we can do on broadcast advertisements, football club and some of the other clubs that it has we know that companies are also continuing to target been sponsoring. games that might be marketed at children online, 139 Public Bill Committee13 FEBRUARY 2014 Consumer Rights Bill 140 particularly on laptops, iPads, and iPhones. Where does Advertising restrictions on gambling and alcohol are protection begin for our young people in that situation? matters of self-regulation. Those industries have been I should be interested to hear the Minister’s thoughts on responsible in recognising that it is not appropriate to that. I do not know whether other members of the advertise alcohol to young people and that it should be Committee want to echo the concern that there is a clear that people have to be over the age of 18 to consumer protection issue here as well as an advertising purchase such a product. Consumers therefore have the issue that we need to address. appropriate information about the goods that they can purchase. It is not so with the payday lending industry, which has not been responsible in its advertising and Jenny Willott: The amendment would require all marketing. Hon. Members who have dealt with anyone public communications about goods that are subject to who has had payday lending problems will be well restrictions on who may buy them to state that restriction. aware of that. Public communications would include any promotional material or activity. As the hon. Lady said, adverts I am a little bit confused. I understand that the either in print or in the media would be required the Minister is concerned about this cross-cutting amendment, state the restriction. but will she give the Committee a bit more insight into whether the Government intend to deal with the industry in other ways? We Opposition Members are clear that 3.45 pm we need to deal with how it markets its goods. The Committee will appreciate that, where such I am sure that the Minister will not suggest that the restrictions exist, they are found in sector-specific legislation. evidence from people such as Martin Lewis, about That makes sense. The fact that special rules are needed young people seeking to buy payday loans because they in such sectors shows that those rules are best placed in are marketed to them without any evidence of their legislation that is specific to those sectors. The Bill will ineligibility to have them, is not a concern. The amendment set the basic level of consumer protection for goods in would require companies to be clear that people have to general. Where sector-specific legislation applies, it will be over 18 to have such a loan. I have had cases of operate above the Bill, adding additional protection. people under 18 getting such a loan. One could argue The advertising regulatory system is flexible and that they did not know that they were not supposed to responsive. It would not be proportionate or necessary have it, because it is not clear in the advertising, and to set out in primary legislation such a sweeping, cross- that the loan was therefore not goods as described. Will cutting requirement on all traders to carry messaging in the Minister say a little more about what she intends to association with all restricted products, particularly where do, given that there is a consumer detriment here? It is there is no evidence that traders and manufacturers legal for companies to advertise in that way, and they alike are not already carrying responsible messaging. will continue to do it? For example, advertising for age-restricted products, including alcohol, gambling and foods high in fat, sugar Jenny Willott: I am not commenting on whether they and salt, is covered by a range of strict rules, specified in should be advertising to children. Clearly, that would the codes for broadcast and non-broadcast advertising, concern a lot of us. I am saying that that is not for the which are set, respectively, by the Broadcast Committee Bill, which relates to the sale of goods. Issues to do with of Advertising Practice and the Committee of Advertising advertising standards should not be in primary legislation; Practice. they are part of the advertising codes. Those codes are Accepting this broad-ranging amendment would not flexible and can be adapted quickly because they are take account of the existing protections for consumers not in primary legislation. The advertising of payday that are in place and enforced by the regulator. I am loans might need to be tightened up, but that would be concerned that the amendment would not allow suitable done more effectively by working with the Financial flexibility for the future. As technologies change, consumer Conduct Authority or through the advertising bodies’ expectations evolve and new products and means of codes of practice; it is not an issue for the Bill. advertising them are always entering the market. Those can far more easily be captured in the relevant advertising Stella Creasy: The Minister’s answer makes it clear codes when evidence of harm is presented or when due that she has not been working on this. Given that the precautions need to be taken to prevent potential harm. information is relevant to a transaction, it would be Establishing such requirements in the Bill could risk relevant for a child to know whether they are able to cutting across individual pieces of legislation and adding buy the good as described. A child would not, in theory, complexity to the law and, ultimately, would benefit no be able to buy the good as described, because it is not one, as appropriate restrictions and requirements already supposed to be advertised to young people, who are not exist in sectors where they are needed. The amendment supposed to be able to take out such credit. It is could undermine that, so I ask the hon. Lady to withdraw it. disappointing to hear that she has not particularly engaged with this issue, which concerns many people. Stella Creasy: I am not sure that the Minister is If the Minister really wants to address the matter, she suggesting that it is acceptable for payday lending companies is perhaps selling short the capacity of this debate on to target children—we are talking about children who consumer protection issues. After all, we are talking have not yet even learned about compound interest in about the cost of credit, the information provided at the school—as we know some companies have been doing point of sale and whether the good is as described. Is and have admitted doing. From what she says, she does someone buying a payday loan with the intention of not believe that there is evidence of any problems. There paying it back, or are they buying a payday loan to get is no sectoral restriction on their doing that, which is into the levels of debt that we are seeing? That is the why they have been able to do it. way these things are marketed, and I am disappointed 141 Public Bill CommitteeHOUSE OF COMMONS Consumer Rights Bill 142

[Stella Creasy] then had to go through the rigmarole of recouping the cost knows that, if the cost was clearer at the point of that the Minister does not feel that she can do more to sale, people would make a more informed choice. protect our young people from misleading advertising that might influence their decisions on the goods that Stephen Doughty: My hon. Friend makes an excellent they buy. point. I had the same experience. I discovered that I had Opposition Members may want to reflect on that and effectively signed up for a monthly rolling contract. I consider whether we can press our concerns elsewhere had to give 31 days’ notice to avoid paying a higher cost in the Bill. I urge the Minister to engage on the issue the next month, so I cancelled the service on the same because, if it is not payday loans, it will be other day that I purchased it. Luckily, I worked that out, but I industries that seek to exploit gaps in the advertising am sure many people would not work it out and would regulations to the detriment of the consumer. I hope find themselves locked into a contract for a number of she will take that seriously. I beg to ask leave to withdraw months at a much higher rate than they thought they the amendment. were paying. Amendment, by leave, withdrawn. Stella Creasy: Given the frustration, cost and time Stella Creasy: I beg to move amendment 7, in caused by that, a case can be made for getting a ticket clause 11, page 6, line 24, at end insert— for the game the next time round, as that would be ‘(1A) The trader is required to provide full details of the total simpler and quicker. Not all of us can do that, however, cost of the goods prior to sale, including any additional service so we might want to sign up to a subscription service or fees or charges that could be incurred by the buyer in purchasing buy tickets for things. Anyone who has bought train the goods. This information should also be portrayed in all tickets or theatre or gig tickets online might have found public communication. themselves suddenly being charged an extra fee that The amendment follows amendment 5 by probing the they had not factored into the cost of the good—it was issue of information that should be provided at the not as described to them. In those cases, what seemed point of sale. We have all been frustrated when we like a great deal or a straightforward price is not as clear commit to paying one price and suddenly another booking as was thought. fee, advertising fee or admin charge is added afterwards. The amendment is intended to get to the heart of that Many Members may have seen adverts recently for, say, problem. Whether something is a good deal is a separate broadband and thought they were being offered a fantastic matter. If the consumer knows the full cost of something, deal only to read, at short notice, the on-screen small however, they can make a more accurate and informed print outlining the extra fees. Inevitably, for a consumer assessment. Surely that is what a good as described to be able to buy a good as described—if it is described should be. From conversations with the Advertising as a good deal—they need to know the price of the deal Standards Authority, we have some examples of some that they are being offered. of the practices that exist. It has a role to play in how The amendment demands that traders provide the promotions are undertaken, but that is a general action total cost of a good that people will have to pay, which that is not about specific rights when a consumer clicks should be part of the description. I would hope that the button for a game and actually discovers that they that is not contentious. We have seen a number of have signed up for something else at a much higher cost practices that undermine the provision of such information, without realising it. which is why the amendment would be worth while. All The ASA found against the Old Vic theatre, because public communication should be clear, because just a cursor hovering over “stalls” on their website stated: having the information in the small print takes us no “Stalls £16 to £70 standard”, further forward. but made no reference to a £1.50 booking fee, even though that would only have been applied only once Stephen Doughty: I was glad to put my name to the regardless of the number of tickets bought. The ASA amendment. I had such an experience the other week would have been happy if the wording on the website with Sky. I wanted to watch the Cardiff versus Swansea had said “plus booking fee”, or “plus one-off booking football match—I do not know why I bothered—and I fee”, or “£1.50 booking fee per transaction”, which is was offered one price on the screen, but I discovered effectively what the amendment would make companies afterwards that the monthly cost is a lot higher. I do. The fact that that information was not provided cancelled the additional subscription as a result. The changed the price of the product on offer. Therefore, information on the screen was not clear, and the purchase consumers were not getting the good as described, can be made with the click of a button. I endorse what because the price was different. A £1.50 charge might my hon. Friend is saying. not seem like much, but for consumers who have to sign up to particular contract terms, such as for broadband Stella Creasy: As a Manchester United fan, I share offers that require six-month commitments for a good my hon. Friend’s pain. I wonder whether it is worth deal, such charges should be factored in. purchasing some of the games that I might want to If such information were provided, it would allow watch. consumers greater transparency on pricing and greater My hon. Friend makes an interesting point: it is there ability to compare and contrast the deals that were at the click of a button. I know people might argue that offered. That seems like a simple request, yet that is a contract can always be cancelled and that people can clearly not what many vendors want to do, because it is always try to reclaim their money, but anyone who has easier for them to say that they are offering a good deal ever had to do that knows how frustrating it can be. on a partial pricing strategy than on a whole pricing Anyone who has ever mistakenly bought something and strategy. 143 Public Bill Committee13 FEBRUARY 2014 Consumer Rights Bill 144

The ASA has set out some guidelines intended to heard radio adverts for financial services will be familiar ensure that, from the start, any extra fees relevant to a with the babble of barely comprehensible jargon at the price are always included. That is partly a consumer end, which is the audio version of small print. I am interest issue. If a consumer has, in good faith, signed concerned that the way that the amendment is worded up for something and then seen that an additional would make that a requirement for everything. charge is being applied, they might find out that they were not given the full details not straight away, but Mrs Glindon: I am reminded that the issue is more only when the bill arrives. In that case, how might they one of consumer rights than of the potential costs get redress individually? It is one thing to ask the ASA incurred by businesses. Some such costs would be to look at adverts on the Old Vic website, but it is inconsequential to companies such as Sky or other another thing for a consumer who might have booked broadband companies, to which my hon. Friend the tickets—In this job, I am envious of anyone who has Member for Walthamstow referred. Would the Minister time to go to the theatre—to get redress directly. not agree that how we get things over to the consumer The amendment would require a total cost to be must be the paramount consideration? presented. That would also have an impact on things such as payday lending and high-cost credit, because the total cost of a loan or hire-purchase agreement would Jenny Willott: I completely agree with the hon. Lady, need to be provided. I will wager that anyone who has and I will come on to misleading information in a ever dealt with BrightHouse and seen its contract offers moment. However, the cost to businesses does have on white goods, with the mark-up and extra fees on implications for consumers as well. As I have just said, I those, would welcome consumers being given greater am concerned that requiring that all the information be information before signing up to such a good. provided every time might prevent traders from doing special deals and so on, because it would make it more I hope that the Minister will accept that the amendment expensive for them to provide the information all over tries to get at something that is a real concern to many again. That would actually be to the detriment of of us and that she will set out how she thinks total cost consumers. will be portrayed, so that consumers can be confident that a good is as described—in other words, they know it is a good deal, because they know what they are Mark Durkan: Does the Minister accept that the paying for and when they will pay. effect of the amendment might be not so much to ensure that all the gobbledegook is rammed in at the end of the advertisement as to remove the propensity Jenny Willott: Amendment 7 relates to communication for hidden charges and all sorts of surreptitious riders about costs that consumers would face. The Government that are attached to contracts? are committed to providing clarity and transparency to consumers on cost. As I am sure we are all aware from our constituencies, the lack of such clarity irritates Jenny Willott: The amendment says: people intensely. That is an increasing problem as people “This information should also be portrayed in all public purchase more things online, because it is often in communication.” online purchases, such as complicated mobile phone Providing such information in all public communications contracts, that people might not be completely aware of could be particularly burdensome and would probably all the details. That is why the Government have already lead to an increase in the amount of gobbledegook. legislated to tackle some of those issues. Mark Durkan: It might actually encourage providers 4pm to go for less complicated offers and bundles and simply The Consumer Contracts (Information, Cancellation make their offer more straightforward and clear so that and Additional Payments) Regulations 2013 contain people know what they are buying, how much it is going provisions that require a trader to make the consumer to cost them and for how long they are going to be stuck fully aware of the total costs before a sale is made. The with it. regulations come into force in June 2014 and will operate alongside the Bill once it is enacted. The main body of Jenny Willott: That might be the case in certain areas, the amendment is therefore not required, because the but we are talking about an incredibly wide range of matter is covered by those regulations. goods—basically, anything that is a good. It is possible However, the requirement in the amendment for to simplify things in some areas, but in other areas the information to be included in all public communication contracts people are signing up to are very complicated is new, and the Government believe that that would be a and not possible to simplify. [Interruption.] Well, a lot bit problematic because it could be enormously burdensome of services—for example, mobile phone contracts or to businesses. For example, every time a price was altered, bank accounts—require consumers to be given an awful all associated communications would have to be altered. lot of information so that they can judge whether The wording of the amendment concerns me, because if something is a good and appropriate deal for them. a trader had to provide information about all the costs, There is a limit to how far prices can be simplified. in some instances that might put them off lowering a In 2007, the National Consumer Council conducted price or offering a special deal because they would have research into the amount of information given to consumers to change all the associated communications. and the impact that that had on their behaviour. The Furthermore, the provision of such additional report was entitled “Warning: too much information information would also have a direct cost to businesses can harm” and showed that if people are provided with that use TV and radio adverts. Those of us who have too much information, it just becomes white noise and 145 Public Bill CommitteeHOUSE OF COMMONS Consumer Rights Bill 146

[Jenny Willott] be difficult for that company to change information quickly on its website, or on a couple of leaflets that it they do not take it in. We must be more selective about might have sitting around in the office, for the benefit of ensuring that the information that consumers really consumers so that they can understand what they are need is available. I will address that issue in a moment. engaging in.

Sheila Gilmore: I understand the Minister’s point Jenny Willott: That is already going to be set out about there being such a thing as too much information in the regulations that will be out in June. They will require because we have all seen examples of that in the details information to be provided to consumers so that they we receive from banks and insurance companies. Far will be fully aware of the cost before the contract is from making it easier to understand, the information agreed. That is already happening. The provisions will given can make it more complicated. The key point is to be in place by June and will run parallel to the Bill. have the total cost somewhere—at the top, as it were. Some of that might have to be broken down in more Mark Durkan: The Minister must know that some of detail later, but the key point that people want to know the firms we are talking about send people information is what it will cost them to make the purchase. That is a every couple of weeks, in their name, saying “This offer quite simple statement, not a complex one. is addressed to you,” or “Here is your new phone” and so on; and it is still complicated information. If those Jenny Willott: I totally agree with the hon. Lady; a firms can change those leaflets, which seem costly enough, provision later in the Bill, about unfair contract terms, to include people’s names, and target streets with different has a requirement for price and other terms to be prices by the fortnight or the month, why is it so prominent and transparent, to be assessed for fairness. complicated to accept the thrust of the logic of That is the hon. Lady’s point: that the price should be amendment 7? up front in one place where it is easy to see. It should be prominent and transparent. The provision I have mentioned is meant to tackle that and the hon. Lady is right to say Jenny Willott: I hope I have made it clear that we that that approach would make things much easier. accept what is probably intended by the amendment, and that the Government are already bringing in regulations The amendment, however, does not say that. The to achieve that. The Consumer Contracts (Information, important factor is that the individual needs certain Cancellation and Additional Charges) Regulations 2013 information before entering into the contract; they need will be implemented in June, and will require the trader to know what they are letting themselves in for. That is to make the consumer fully aware of the total cost provided for in regulations that I have already mentioned. before the contract goes ahead. That is not necessarily There is also a requirement for advertising in other the same as ensuring that that information goes into media to include appropriate information. every single area of public advertising. Work has been done on hidden costs, particularly We know that providing people with too much those that appear when people purchase something information makes it more difficult for them to understand online, on the basis of a cost that is shown up front; what they are letting themselves in for. The gobbledegook when they get to the end credit card charges and booking at the end of radio adverts does not help consumers. We fees are added on, so the deal does not look as good as need to ensure that when consumers are getting into a it did at the beginning. That is being tackled in the contract, they are given the information that they need consumer contract regulations. Organisations will have beforehand in order to ensure that they are properly to set out charges up front, and not hide them at the informed and that they sign up for the deal knowing end. Which? has been running a successful campaign what they are getting into. with ticketing websites, in particular, to make sure that booking fees and so on are given up front. Stephen Doughty: Is the only reason why the Minister objects to the amendment that it is about providing too Stephen Doughty: I want to understand a bit more. much information to the consumer? I appreciate what The Minister talks about it being burdensome for business she is saying about the regulations, but surely the to change pricing and give the public more information. Government should be on the side of providing more Many of the examples that we see are online, and information to the consumer, not less. changing information online is relatively easy and straightforward, and not particularly costly. I do not understand how the approach in question would be an Jenny Willott: The Government are on the side of additional burden to businesses. making sure that consumers have the necessary information before entering into a contract. Evidence also shows that providing too much information to people is completely Jenny Willott: That is not what the amendment says. counter-productive. Think about the amount of small It specifies “all public communication”. That might be print that we have in vast contracts that we sign up to. easy in some ways, but the amendment does not refer to When people shop online, they get pages of tiny print all online communication, or certain circumstances. I and they have to click the little terms and conditions. am responding to the amendment that has been tabled. That does not assist people making a decision to know what they are signing up for. With the regulations, we Stephen Doughty: Indeed; but we have considered are ensuring that the information people really need many examples, such as logbook loans, and I have just about the total cost will have to be provided, and under been looking at the website of Loans 2 Go, based around the unfair terms part of the legislation the price has to the corner from both of our constituencies: it would not be transparent and prominent for it not to be assessable 147 Public Bill Committee13 FEBRUARY 2014 Consumer Rights Bill 148 for fairness. That is a way of making sure that the The ASA is asking advertisers to be more transparent. information that people need is provided, rather than When the Minister talks about the regulation, she cannot there being the complete blanket provision that the answer how people will get the information. She is amendment proposes. looking incredulous, but she cannot answer a simple question: if she thinks it is right that people should have Stephen Doughty: The Minister is trying to suggest information about the charges and fees, when will they that, in some way, loads of additional pages of contract get that information? She has not answered a simple, information and so on would be provided. I agree that basic question. It is not good enough to say that, in they are confusing, yet we are regularly required to have theory, people should get that information. When will it them—from banks, for example, when they change happen? At what point in the sales transaction will terms and conditions. The amendment clearly states people have the details of the prices they will be asked that it would be the to pay in order to be able to make an effective decision? That seems to be the nanny state, suggesting that people “full details of the total cost” should not have that information freely and fairly to be —just the cost, and that that should be able to make those assessments. “portrayed in all public communication.” What is so difficult about that? 4.15 pm Jenny Willott: At no point have I said that people Jenny Willott: A lot of that is already required, should not have that information. In fact, I said that the particularly on websites if people are purchasing something. Government have already legislated to ensure that the We have already taken action to ensure that hidden information is provided. The regulations require that costs cannot be included at the end. We are saying that the total cost and charges—for example, delivery charges— ensuring that that information is provided across the must be made clear to the consumer before the contract board on every single good in every public communication is made. What the hon. Lady is asking for is already is too draconian a measure. We think that it would provided in the regulations. However, that is not what potentially end up to the consumer’s detriment. Legislation the amendment would do. I have in no way contradicted is being introduced—it will be in force from June—to anything that the ASA has suggested. I welcome what it tackle what is at the nub of the issue, rather than it is doing, because it is playing an important part in being done through the wording in the amendment, ensuring that the regulations are implemented effectively. which we think is unnecessary. I hope that the hon. Member for Walthamstow will withdraw the amendment. Stella Creasy: The Minister seems to be wilfully ignoring the issue, which is not whether the information Stella Creasy: We have had a fascinating afternoon. I should be provided, but how it is provided. She seems to am sorry that the hon. Member for Wycombe has only object to the idea that it should be communicated just come back in, because he missed a great example, if publicly. Under the current regulations the booking fee we are going to talk about philosophers. I cannot tell will be provided in small print, but it must be provided whether it is an example of a kind of Marxian clearly. The Minister has not satisfied us on this simple approach—or rather, Adorno, who believed that the change. We thought she would be able to tell us how public was too stupid to be able to evaluate critically the people will be able to access information, but she has information that they were provided with and therefore not. We will therefore press the amendment to a vote. it was for the state to be overthrown by the elite who Question put, That that amendment be made. were able to understand such things. It sounds like the nanny state to say that we could not possibly be clear The Committee divided: Ayes 6, Noes 7. with people about the fees and the charges when they Division No. 3] are buying something. The Government, having said, “Yes, people ought to have that information”, cannot AYES answer when they should have it. Creasy, Stella Gilmore, Sheila In terms of saying that it should be in all public Doughty, Stephen Glindon, Mrs Mary communications, we can look at the impact that that Durkan, Mark McDonald, Andy would have in another way: perhaps traders would be simpler and clearer in their advertising about what their NOES costs were, which would benefit us all. I am very concerned Baker, Steve Kwarteng, Kwasi to see the Minister dismissing financial information as Colvile, Oliver Munt, Tessa gobbledegook. As a psychologist, I have looked at a lot Gyimah, Mr Sam of work about how people critically evaluate information, Harris, Rebecca Willott, Jenny and it is not uniform. People require different types of information. However, arguing that giving people the charges, fees and total price that they might pay for a Question accordingly negatived. good is gobbledegook does not stack up. Stella Creasy: I beg to move amendment 6, in That also seems rather to undermine the work of the clause 11, page 6, line 36, at end insert— Advertising Standards Authority, which states: ‘(4A) Prior to exchange of the goods or agreeing the contract, “In future we expect these”— whichever happens first, the trader will explicitly provide the consumer with relevant details of their statutory rights under as in, the prices of these sections 20, 23 and 24 of this legislation.’. “to be advertised from the start. For example a £25 ticket with a £2.50 per ticket booking fee should be advertised as £27.50. The The Chair: With this it will be convenient to discuss advertiser may include a breakdown of the cost.” amendment 8, in clause 12, page 7, line 9, at end insert— 149 Public Bill CommitteeHOUSE OF COMMONS Consumer Rights Bill 150

[The Chair] businesses will be consumers—we know that in time, the Government will come round to our position—we ‘(2A) Prior to sale all traders must provide consumers with an do not want to miss the opportunity on point-of-sale appropriate point of contact and their contact details. information. The amendment is simple. It sets out that (2B) Consumers may only contact traders on the contact the trader must be explicit about what people’s statutory details provided under subsection (2A) for the following rights are at the time of exchange or prior to agreeing purposes— the contract, so that before people enter into an (a) to confirm ownership of the goods with the trader as arrangement, they know what they can do if something set out in section 17; or goes wrong. (b) to identify a trader against whom the consumer can I hope that amendment 6 is not controversial and will exercise their rights under this Act. receive the support of Government Members. I recognise (2C) Where sale of goods is facilitated by intermediary that the Minister may want to do it in other ways within services it is the responsibility of the trader of the goods using these services to provide this information to the consumer.’. the Bill, but we are looking not to miss the opportunity to put it into law so that it covers everything and everyone. We would like to hear from her on this. If not Stella Creasy: Amendments 6 and 8 address two in this amendment, where else in the Bill will issues related issues about goods. Amendment 6 pertains to involving the provision of point-of-sale information be point of sale information, an issue about which my hon. resolved? Friend the Member for Middlesbrough feels strongly. Amendment 8 is about a related issue. When something He is not alone in thinking that the phrase “Your goes wrong, especially for people buying online, from statutory rights will not be affected” does not mean whom might they seek redress? At this point in the much to many people; we were told on Tuesday that the Committee—we have a mere 40 minutes to go—I will research also shows that people do not know what their share a personal story, because I feel strongly about it. I statutory rights are, so they do not know what will not finally managed to get a holiday with my partner last be affected. The question for us today is, how do we year in order to get away and get some respite, which I improve the situation so consumers have better information? am sure we all recognise is important in this job. Having The nanny state should not decide what consumers do booked a hotel online, I found that it was not as I had and do not need to know; rather, we should enable them been given to understand by the broker through which I to make the choice for themselves. booked it. Members can imagine my distress. I am sure The amendment would require that that I was as distressed as the wife of the hon. Member “the trader…explicitly provide the consumer with relevant details for Plymouth, Sutton and Devonport might be about a of their statutory rights under sections 20, 23 and 24 of this loft conversion that was not suitable. We wish and hope legislation”, for a wonderful experience, and then it does not turn which we will come on to later. We think that could be out as we wished. done very simply. Citizens Advice, which is a strong proponent of the proposal, has come up with suggestions Oliver Colvile (Plymouth, Sutton and Devonport) about the kind of information that could be put on the (Con): I have to say that they are doing an incredibly back of a receipt, for example. People should be told good job. I am very grateful to them for doing such a what their statutory rights are, not just that their rights good job. will not be affected. The Bill contains some proposals that we support. It Stella Creasy: If we get nothing out of today, the will, for example, clarify the consumer’s right to return reassurance that Mrs Colvile is reassured will make us a good and what the time limit is. We recognise that we all feel better. [Interruption.] I apologise; I thought in need to inform consumers and traders about those the acoustics of the Boothroyd room that the hon. rights, but we must surely also recognise that it is best to Gentleman said that somebody else had been involved inform people of their rights at the point of sale. in the transaction. I did not hear him clearly. Nevertheless, Everybody should know from the get-go that they have I am pleased for him about his loft conversion. Had he 30 days to return something if it is not acceptable. Later been as upset and distressed as I was to discover that the in proceedings in Committee, we hope to encourage the hotel was not as I had expected, he would have been Government to go further to clarify the time limits for further frustrated, as I was, to discover that the company repairs and refunds. If that basic information is provided through which I booked the hotel said that it had no in a clear format to the consumer, they will know responsibility for the quality of the hotel, and eventually whether it is affected by the good that they are sold. that if I were to take up my rights of concern about the That should be a no-brainer. That is certainly what quality of the hotel provided, I would have to e-mail Citizens Advice thinks. I know that the Government are somebody in America. All of us recognise that that is a discussing this matter with Citizens Advice in the dead end in terms of getting redress or seeking implementation group. However, there is a risk, because compensation for a poor experience. it is one thing to say that it would be good to provide Alas, such experiences are not confined to me. The that information, and another to make sure it happens. ability to exercise one’s rights requires direct contact Good traders want people to know their rights, because and somebody to take responsibility for the protection they also want people to know when they are pushing of those rights. That is what the amendment seeks to their luck. However, bad traders do not want people to do. In particular, it seeks to address something that know their rights and do not want to recognise that this concerns many of us: ticket touting. We know that is now a statutory provision. The amendment is about ticket touting causes huge problems for fans of music, recognising in the legislation, as it stands before us, how stage theatre and sport alike. Ticket touts rely on the best to do that. Just as with the debate about whether opaqueness of the sites that they use to sell their goods, 151 Public Bill Committee13 FEBRUARY 2014 Consumer Rights Bill 152 and on the use of technology to buy up tickets at short twilight zone of rights. Amendment 9 would help address notice. It is incredibly difficult to hold them accountable. that problem while ensuring that real fans can access There is an all-party group on the issue, and I pay the tickets they want. tribute to the work done by my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) to make progress on it. One way that such companies Oliver Colvile: The curious thing is that from time to get away with what they do is by not providing the name time, I have to buy things online as well, and my of the seller of the goods, so that one cannot tell, for difficulty is in ensuring that I have done it properly. example, who is reselling a ticket, especially a ticket not [Interruption.] The hon. Lady laughs, but it is an meant for resale. important issue for an awful lot of people who are not as IT-aware or as IT-compliant as they might be. There Such companies also buy up all the tickets available has to be a way of ensuring that we protect them, so for sale straight away. They use botnets to buy them all that they do not, after they have pressed the “send” up. We saw that with Monty Python, if anyone tried to button, find that they have contributed towards something buy tickets for that. All 20,000 tickets were bought that they did not mean to do. within three quarters of a minute, only to reappear on the secondary market at 15 times their face value. We saw it with tickets for the Teenage Cancer Trust event. I Stella Creasy: I apologise for laughing. It was simply was devastated about that, having seen that The Cure, when the hon. Gentleman talked about buying things one of my favourite bands, was playing. The chances of “properly” online, he echoed something that my mother getting a ticket at any reasonable price is well beyond all has often said. For the avoidance of doubt, I do not in possibility now. any sense compare him to my mother, but he hits the Such companies get away with selling tickets that are nail on the head. If someone has bought something in meant to be sold for a particular price at a much more error, they need to be able to return it, just as they inflated price, at great detriment to the consumer, because would offline. For example, two people might buy the they are not named sellers. The ability of any trader to same book for someone at Christmas, so one of them avoid responsibility for infringing someone’s rights is a would want to return that book to the shop. That is loophole that we want to close. Amendment 8 is about harder online, because there is—not in every case, but in someone taking responsibility for being the trader when some cases—not necessarily a named seller, and that a product is purchased. The trader is the person against illustrates the problem we are trying to address. whom the purchaser’s rights would be exercised, so long There should be someone who takes responsibility in as the product is not sold as seen. For touts, that would that contract for ensuring that a consumer’s rights, such mean that those selling tickets would need to identify as the right to return a good, can be exercised. I hope themselves. If they have permission to sell, that is one that the hon. Gentleman will support the spirit of the thing, but if they do not, that clearly infringes rights, amendment, which seeks to ensure just that, as well as because it raises the risks of buying a fake ticket. our recognition that a consumer’s rights would not be Anyone who has ever not got into a gig would have been against Google, Chrome or iTunes, but the person selling horrified by that experience. the good. It is also about whether the sale was conducted The amendment would also clarify whose responsibility appropriately. it is to provide that information, and that is incredibly If we can address ticket touting, it will not only have important in this age of online sales. When I booked a an impact on consumer rights, but on organised crime. hotel through a third-party brokerage site, both the We know that ticket touting is connected to a large hotel and the brokerage site avoided accountability for amount of serious organised crime, because it is so the hotel’s quality by blaming each other. It ended up profitable. It is estimated that organised criminal networks with me being told, “Try and e-mail someone in America make £40 million a year from touting. The Metropolitan and try your luck.” Just as someone would not blame police have said: the telephone if they were rung about a misleading sales “The lack of legislation outlawing the unauthorised resale of offer, we should not say that it is the online trader tickets and the absence of regulation of the primary and secondary organisations that are the problem; the problem lies ticket market encourages unscrupulous practices, a lack of with the trader and the rights someone would have transparency and fraud.” against them. The amendment would ensure that the We will come to discuss the particular protections that named trader who gave their address is the person we want to introduce around prices for events of national selling the goods and not an intermediary. That would significance when we come to clause 17, but the amendment ensure that consumers can enforce their rights and that is about getting to the heart of how companies are able we recognised the world of online sales in the Bill. It is to tout tickets and trying to close loopholes around not about Google or eBay; it is about people using sales. We want to be confident when we book a hotel those services to sell goods and mislead people in how with a certain facility that it actually has that facility, they operate. and that if it does not, we can secure redress, however it Amendment 9 relates to clause 17 and is about ticket was booked. I hope that Government Members will touting and protecting particular prices. The amendment support both the intent and wording of amendments 6 is about how sales happen, rather than prices, which we and 8. will come on to later along with what we might do to protect some of our national games. Many will have 4.30 pm seen what happened with the Olympics two years ago—it feels so long ago—in protecting against these practices Sheila Gilmore: I am pleased to have the opportunity and protecting the online sale of tickets. The market is to speak about point of sale, and perhaps to pre-empt estimated to be worth £1 billion, and it is operating in a or anticipate what the Minister will say. 153 Public Bill CommitteeHOUSE OF COMMONS Consumer Rights Bill 154

[Sheila Gilmore] On the purchase of white goods—this relates to our earlier discussions—warranties are often made available The only argument that I have heard against the to people at the last minute. We discussed the singularity proposal is not that it is not a good idea, but that the of cost; I think the consumer would benefit immensely implementation group will look the detail and deal with from a singular statement of the likely cost of any good the issue. I see no contradiction between putting the at any time. On the issue of statutory rights, when I get measure in the Bill, so that it is clear that the change will to the checkout and am offered an additional service at actually be made, and the implementation group’s looking some extortionate cost, I have always been content to at the detail. If this is going to happen, I cannot really say that I, like Martin Lewis, am quite happy to rely on see any objection to putting it in the Bill and reassuring my statutory rights, and do not require £70-worth of everyone that it will happen. The issue is not exactly warranty for parts and labour. new; there has been a gap in consumer rights under the I encourage the Minister to be open to this reasonable Sale of Goods Act 1979 for many years. It was an issue and modest amendment. We are trying to address the back when I worked for the Scottish Consumer Council— fact that people do not know their statutory rights; we more years ago than I care to say—and it comes up heard in evidence that the phrase can be confusing and constantly, and has been raised by many campaign and off-putting. Few people come away from reading such representative groups. notices thinking, “I have the right to reject goods and How to tell people what they need to know without have them repaired”, and the rest of it; they do not overkill is a challenge, but nobody wants something mean anything to them. written in tiny, unreadable script on a receipt, or some This sensible amendment would set out with great notice in a shop that will not be read. I was struck by the clarity a person’s rights at the point of sale, because that work of Citizens Advice, which has given good examples is where it matters. This issue can be addressed simply. —we have all received the briefings—of how information We stand in queues at various emporiums; signs could could be provided in a way that is not so obscure. Some be established there, or at the checkout desk. There are organisations are good at dealing with people who are endless ways to address the issue. It would be a positive returning goods, or questioning whether something is step in educating the purchasing public to say, “You satisfactory or fit for purpose, but many retailers, smaller have heard about your statutory rights; here they are,” ones in particular, either misunderstand the situation or and to set them out with clarity. The transaction would deliberately appear to misunderstand, in the hope that be infinitely improved, and people would know what to the consumer will go away thinking that there is nothing expect when they purchased goods. that they can do. Even after such a long time, during which much Mrs Glindon: I want to speak briefly on amendment 8. legislation has been passed and much work has been It is very simple and would make such a difference to done by many organisations, disputes still arise over the trade of ticket touting. It affects hard-working people whether something is fit for purpose, or when something who spend their money on holidays or concerts. It breaks after a short time. People may ask retailers, covers all ages; everybody is exploited under the system “What are you going to do about it?” but they are of ticket touting. It is right and proper that if someone often fobbed off with “It’s too late,” or “It’s not right.” cannot use a ticket, they should be able to sell it on. Unless people are insistent and clear, they do not always I did not realise that viagogo was a ticket-touting succeed. They may then go to a citizens advice organisation. Unfortunately, I have a season ticket for bureau, or call the helpline, to get information, but they Newcastle United, and “Wonga” is displayed on the should have had that information first of all. If they shirts. People say that it should be, “It’s just wronga that had it to hand, they would not have to go on a long, it’s Wonga”, which is fair. The message goes round the complicated journey, in which they are rebuffed by the ground that we can sell our tickets on viagogo, if we retailer, go to seek advice, and have to go back to the do not want to use them. When I see those adverts while retailer and say, “I was in last week; you told me I could watching the depressing games I have seen lately at not return this, but actually I can.” That could be Newcastle United, it depresses me even more. I appeal short-circuited for everybody if there was that information to the Minister to consider adding the provision. It up front. would give hope to those trying to tackle the unscrupulous We are not asking for this wording to be in the Bill, or —there is no other way to describe it—selling of tickets for the full detail to be worked out at this stage. However, at exorbitant prices. That is all that I appeal to the if it is the Government’s intention to make this change, Minister for on that issue. it would be of little harm and some positive good to accept the amendment. Jenny Willott: What the hon. Member for Middlesbrough said is key: he is right that people do not know their Andy McDonald: Before I make a few brief remarks rights. One reason for the Bill is to try to make the on amendment 6, I stress that other products, in addition system simpler, so that people can understand their to the one I mentioned, are available for fine wood rights much more easily. If people do not know their varnishing and staining of other materials; I say that consumer rights, they will not try to enforce them. It is before anyone accuses me of bias. critical that we do as much as we can to simplify the It has always struck me as rather peculiar to say that system, make it as easy as possible to communicate, and one’s statutory rights are unaffected. I realise that it is ensure that the communication is right, because that is probably a statutory requirement that such a statement key to making the entire system work. be made, but it is an offence to try to inhibit anybody’s I shall respond to a couple of the issues raised by statutory rights, so that has always struck me as a hon. Members before talking about the generalities of strange statement. the amendment. My hon. Friend the Member for Plymouth, 155 Public Bill Committee13 FEBRUARY 2014 Consumer Rights Bill 156

Sutton and Devonport, who is no longer here but can from day one, but consumers might be a bit confused if read my response in Hansard, talked about buying they start getting information about new rights a long things properly on the internet, and not knowing what time before they come into force. So there is definitely he was buying. I am sure that he will be absolutely work to be done with the different bodies that need to delighted to know that the consumer contract regulations, know the information about the regulations and the which I mentioned a couple of times, require websites legislation. to make any payment obligations clear up front. Traders The implementation group is also considering will need the active consent of the consumer for all where detailed guidance will be needed—presumably, payments. Websites will no longer be able to have pre-ticked for businesses—and, if something goes wrong, how boxes that add things without the consumer necessarily consumers will access the detailed guidance that they noticing; that will make it easier for people who are not need. There will also be a need for easily understood IT savvy, or do not catch the things hidden away in the bite-size information that people can use. If something corner. Websites will have to make it very clear when has gone wrong, they will not want to wade through all someone has to make a payment, with a “pay now” the detail in the Bill; they will simply want to know the button. That will make it easier for people in the headline stuff about what their rights actually are. circumstances he mentioned. So the implementation group is looking at what the The hon. Member for Walthamstow told us an upsetting messaging needs to be, the different channels, the time story about a holiday in a hotel that was not as advertised. when it can be provided, what level of information, and There are already measures that apply in such circumstances. how best to provide that to businesses and consumers. For example, if the hotel is part of a package deal, the We must get that bit right. If we do not get the information package travel regulations apply, and rights are associated and that side of it right, the legislation will not make as with that. In fact, a person would have the right to much of a change as I think we all want to see. The compensation under those regulations. If the hotel is group is also looking at point of sale, mobile phone not part of a package, the holiday should be covered by apps and suchlike. It is trying to find different ways and the consumer protection regulations. I shall come on to to be imaginative about how we can ensure that people the point about information. There are ways that that know what their rights are. situation could be caught and compensation could be Adding a requirement in the Bill is not the right provided. Working the hours we do in this place, I approach. We need to make sure that the information completely understand that a holiday is critical, and it sharing is right, but, at the moment, there is no consensus would be upsetting if it did not turn out as planned. about the most effective approach to that. The Amendment 6 would require the trader to make the implementation group is working hard on it. consumer aware of their statutory rights before the contract was made. That is critical, because information will be important in making the measures work. As we Andy McDonald: I do not think that the amendment discussed, the Government have legislation requiring impacts on that in any way; it simply states that information traders to remind consumers that it is their right to have will be explicitly provided. How that is done is left open, goods that conform to the contract. That is in the so there are no shackles or restrictions on how that consumer contract regulations. The reminder must be information is communicated. It is simply a principle given before consumers are bound by a contract, but that the consumer be given the information. I think we that in itself will not solve all the problems if people do would all agree on that. not know their rights. We heard repeatedly in the evidence session on Tuesday Jenny Willott: The amendment states: how important ensuring that people know their rights “Prior to the exchange of the good or agreeing the contract...the will be, which is why we have already established the trader will...provide the consumer with relevant details”. implementation group mentioned earlier. One thing the In many cases—[Interruption.] Actually, for a lot of group is considering is whether the provision of any people, if something goes wrong with the good that mandatory information at the point of sale would make they have purchased, the time when they need the a valuable contribution to that objective, or whether information is after they have bought it. If someone’s consumers are more likely to absorb the information kettle breaks down four months after purchase, they about their rights when a problem has arisen and they will probably not be able to find the receipt to find the need specific advice. That is being looked at by members information on the back. That does not mean that we of the implementation group, which includes, as the do not provide the information there as well, but we hon. Lady said, the CAB and Which?. MoneySavingExpert, must make sure that people have access to the information business organisations, officials from the Department they need at the point when they actually need it. The and a broad range of other people are involved. They amendment is specifically about the point of sale. I am are looking at what the most effective point would be at not saying that that is not an important part of it, but which to access that information, and so on. there is still a discussion going on about the best way to deliver that, and until there is a consensus about the 4.45 pm most appropriate way to do it, I do not think it should be in the Bill. The implementation group is looking to ensure that consumers are well informed. It is looking at what the messages should be and the best way to get them across. Sheila Gilmore: I hear what the Minister is saying, It will be advising on the channels and the timing, and but the amendment does not preclude other things. looking at when people are most likely to absorb that There are many imaginative ways nowadays to do this, information. For example, businesses will need to know but the amendment does not say that that is the only well in advance of the changes so that they can comply way. It simply says that it should be there. It is important. 157 Public Bill CommitteeHOUSE OF COMMONS Consumer Rights Bill 158

[Sheila Gilmore] obtain further instructions about how to use the goods or about an ongoing issue, but did not want to exercise As I said before, it is something that has been asked for their statutory rights, the amendment would prevent for many years. I cannot see the objection to putting it them from doing so. It would prevent the consumer and in the Bill, and then the details will come after. trader from maintaining an effective dialogue, which could be preferable if the aim is to ensure that both parties are able to resolve any difficulties as early and as Jenny Willott: I appreciate what the hon. Lady says. easily as possible, rather than just relying on statutory She has mentioned it a couple of times at various stages, rights. so I appreciate that she feels strongly about it. That might be an important route for that information to be I hope that the hon. Member for Walthamstow is shared with people. However, because the implementation satisfied that most of the information she is asking for group is working on that at the moment and there is no in the amendment will already be required under the consensus on it, it would not be helpful to put it in the law and that the remainder is unnecessary. Bill. It is important to ensure that we provide flexibility to look at the most effective ways to get the messages Stella Creasy: This has been an interesting afternoon across. for all of us in understanding how the Government address consumer rights. I am conscious of time, but I want to go through amendment 6. The Government Sheila Gilmore: I am still puzzled. One of the main seem to accept the principle that we need to give people organisations involved in the implementation has made more information, but are holding back on putting that it clear that it thinks that it should be in the Bill. If there in the Bill because they would rather give it to people is disagreement in the implementation group, is it about when they have been ripped off instead of at the point the detail rather than the principle? of sale, which is where they might want it. I do not understand the Minister’s case. It is surprising Jenny Willott: As the hon. Lady said, she has spoken that she has not attended a group meeting. Surely she to one of the members of the implementation group, should do so to understand the issue. The way things who is keen to do that. Several people are involved with are going, we will all get to the point where buying a the implementation group. I have not attended a meeting, kettle is a fraught experience. I would want to know, so I do not know the exact level of agreement or before I bought it, what my rights were. If it broke disagreement, but I know that they are working to try to within 30 days, my rights would be different from those ensure that the information sharing, strategy, channels, if it broke after four months. I am sure that when we timing and so on are as effective as possible. I am keen come to other parts of the Bill, we will see that that is a to leave it to them to decide the best way of doing that. problem. What the hon. Lady wants may be part of the final On amendment 8, I do not understand what the approach, but I do not think it is helpful to have that in Minister is suggesting. We are asking for details to be the Bill. provided before sale so that the seller can be confident. Amendment 8 seeks to ensure that consumers have I want to draw attention to ticket touting. If someone accurate contact information about the trader so that if advertises tickets for something, it is not possible to something goes wrong with the goods they can easily know whether they genuinely have tickets until the pursue the remedies due to them. I completely agree money has been paid, by which time, if the site is a false that it is good for consumers to know who to contact one or is a botnet, it is too late. What the Minister is and how, and when things go wrong, they should not be saying is not clear. There may be fraud, but there will be sent around the houses, or from one telephone number no one from whom to get money back. That is the to another because that can be extremely expensive and difference. I do not know whether the Minister has frustrating, and people give up. None of us wants that. bought tickets online and been defrauded in that way, As I have said before, the new consumer contract but right now, because there are no direct contact regulations that come into force in June will make it details for that person, it is not possible to exercise one’s clear that traders must give certain information clearly rights, or to know before the sale that those details are and comprehensively. That information is, first, their available. identity—and, in answer to a point made by the hon. For the rugby world cup, for example, we know that Member for Walthamstow, the identity of any trader on people are selling tickets, having been given them, but whose behalf they are acting—and, secondly, contact that they are not meant to be for resale, so there is a very details of both traders, including address and any phone real chance that anyone who bought such a ticket would or e-mail. That may also include an address for complaints still not be able to get into the grounds. Providing and queries. That is in the regulations and will come contact information at this point in time would crack into force in June. down on that problem, because it will require openness As a result of those regulations, the first and last about who is selling the tickets. It closes a loophole that parts of the amendment, (2A) and (2C), are not needed people are exploiting. From what the Minister is saying, because they will be covered by the law when the I do not understand not only whether that information regulations come into force. The other part, (2B), states will be available, but how and at what point in the that the consumers may use those details to contact the transaction, which is what makes all the difference in trader in two specific situations: to confirm that the dealing with such problems. If she can set that out, it trader has the legal right to supply the goods, or to would be incredibly helpful. identify the trader with a view to exercising consumer rights. I am worried that that is a bit limiting. For Jenny Willott: The hon. Lady can read Hansard.I example, if a consumer wanted to contact the trader to just said exactly that. 159 Public Bill Committee13 FEBRUARY 2014 Consumer Rights Bill 160

Stella Creasy: I am sorry that the Minister is so The amendment is relevant to the second half of the dismissive of a request for information about a serious discussion we had this morning on log book loans. It and important issue. She told us about the implementation tries to deal with the second half of the challenge that of the regulations, but she has not said whether the we all identified, which is that individuals might information will be provided before or post-sale. If she unknowingly buy a vehicle with a charge against it. Not looked at and read the amendment, rather than being knowing, necessarily, that a charge applies to the vehicle, dismissive of it, she might understand that the question they could discover that bailiffs are at the door seeking of information before sale is important. That is all we to recover the good and, because a bill of sale agreement are asking for. If she had a bit more respect for the has been applied, they would then have their cars taken parliamentary process of scrutiny, she would understand away. that that is a reasonable question. One in four cars in this country is sold in this way. It is a real concern that the issue of information on Jenny Willott: I will repeat my previous comments: whether a debt is outstanding on a vehicle has not been the regulations require the contact details of the trader identified. We therefore think it is right to amend the to be given before the contract is made. I have already Bill to offer consumers protection from that sort of said that about three times, on various different charge. Amendment 9 would ensure that consumers interventions. The Consumer Contracts Regulations who buy a second-hand car are given that information clearly require such information before the contract is prior to the sale. Someone could choose to continue to made. buy a car knowing that there is a debt outstanding on it, perhaps because it is a particular specialist car. I have dreams of one day trying to drive a Rolls-Royce. However, Stella Creasy: I am pleased that the Minister has if I see a Rolls-Royce and there is a charge outstanding finally said that the information is required before the on it, surely I should know that prior to sale, so I am contract is made. Had she said so earlier, I would not aware that it may incur an additional debt. For example, have asked the question. I may wish to pay off the charge so I can secure the log We will come back to whether that deals with the book myself. issue around ticket touting, because the Minister also seems to think that providing the information would be 5pm somehow restrictive on traders. We need a little more clarity. The question of ticket touting is key for us, Because the Government have failed to act on bill of because it is a great example of consumer detriment. sale legislation and have shown today that they have The Minister has not identified what would happen if absolutely no interest in the rights of consumers in that the information were false. Is that an issue in the trading arena, there is clearly a problem for both the person laws? Will the regulations deal with the secondary ticketing originally taking out a loan and securing it against a sites and the ways in which they are selling tickets? I will car, and the person who might unknowingly buy a car not press amendment 8, but we reserve the right to with that attached to it. As we tried to set out this come back to the issue on Report. morning when the Minister seemed not to understand the ways in which bill of sale provisions work, it is We will also come back to the point of sale information, because it says that you can repossess a good without because it makes no sense to Opposition Members to having to go to court that the problem arises. Someone wait until people have been ripped off before giving might have bought a car but would not actually have them information about how to exercise their rights. full ownership under a bill of sale agreement. This [Interruption.] I see nodding and agreement from amendment tries to close that loophole from the perspective Committee members. I am pretty sure that there will be of the person who might buy a property, rather than support widely in the House for that as well. necessarily the person who would have taken out the I beg to ask leave to withdraw the amendment. loan. Amendment, by leave, withdrawn. We do not think it is unfair to ask that a person who Clause 11 ordered to stand part of the Bill. has bought a property should know its full history by Clauses 12 to 16 ordered to stand part of the Bill. default. Therefore, if someone trades such a good, they have a responsibility to let the person know the details of the property that they are purchasing. With that in Clause 17 mind, we have tabled this amendment, to try to get to the bottom of how we protect consumers who might TRADER TO HAVE RIGHT TO SUPPLY THE GOODS ETC have unknowingly bought a car with such a charge. I am certainly aware in my constituency of people who have had cars repossessed that they did not know had Stella Creasy: I beg to move amendment 9, in such charges against them, and were devastated to lose clause 17, page 8, line 20, at end insert— such property. ‘(1A) Prior to sale the trader must disclose any— (a) outstanding claims to the goods, or Andy McDonald: Will the Bill not leave open the (b) legal charges against the goods, possibility of people thinking they are acquiring a which is the subject of the contract and which may— vehicle that is their entire property? Not only that, the (i) affect the consumer’s future enjoyment or use of the money they spent in acquiring the goods is money goods, or down the drain. They may also have spent additional (ii) cause financial detriment to the consumer.’. funds on that vehicle to repair or enhance it in some It seems that the good will of the Committee is being way. It just compounds the problem if we do not arrest tested yet again by the behaviour of the Government. this development now. 161 Public Bill CommitteeHOUSE OF COMMONS Consumer Rights Bill 162

Stella Creasy: It is absolutely devastating for individuals it taken away for a charge that someone did not know to have bought a car in good faith—they may have of. It goes against natural justice. The only thing we can saved up substantially to buy a car second-hand, only to do now is table an amendment like this to try to deal have it taken away. Due to the Government’s behaviour with these sorts of problems. I hope that hon. Members this morning in failing to deal with bill of sale agreements, will recognise that this is about fairness on all sides of it means that this can continue. The only redress that the equation—something that the Minister seemed to the Minister seems to think they might have is under be in short supply of today. I hope that other hon. unfair contract terms. That is too late when the car is Members will recognise that there is value in accepting gone. those proposals and will act accordingly. We could have made progress this morning to bring Ordered, That the debate be now adjourned. these bill of sale agreements under modern consumer (Mr Gyimah). protection laws, so that there is a right to challenge before the good is taken away. That right has been denied. I 5.3 pm know that Government Members are not unsympathetic Adjourned till Tuesday 25 February at five minutes to to the idea that it is deeply unfair to buy a car and have Nine o’clock.