Briefing for Northern MPs and MLAs on the Consumer White Paper – A Better Deal for Consumers

The Consumer Council broadly welcomes the proposals outlined in the Consumer White Paper which aim to strengthen, simplify and modernise consumer protection to benefit all consumers, particularly the vulnerable and those overburdened with debt.

We highlight below key proposals in the White Paper, paying attention to issues of most relevance for consumers, the Assembly, the Consumer Council and other stakeholders representing consumer interests. In Appendix 1 we have set some key impacts made by the Consumer Council in these areas.

To help analyse potential impacts we have aligned the proposals with the nine established consumer principles: Access, Choice, Information, Redress, Safety, Fairness, Representation, Quality and Value for Money. (For a definition of each of these principles, please see Appendix 2).

1. Financial Capability

Related principles: Access, Choice, Information, Safety

Protecting vulnerable consumers

The Consumer Council welcomes the emphasis throughout the paper on the particular needs and protection issues relating to vulnerable consumers and Government’s plans to support vulnerable households by providing access to measures including energy efficiency advice, debt counselling, income maximisation and financial assistance. However, it will be vital that these are effectively promoted and made available to all eligible households.

Given our remit, we will also seek to influence the proposed review of how energy and water suppliers protect vulnerable consumers from problem debt and disconnection.

Uncertain economic times require the need for investing in financial capability to help people manage their finances better, make informed choices about their money, stay out of unmanageable debt and avoid debt write-off scams which have become more prevalent1.

The Consumer Council receives part-funding from the Financial Services Authority to lead the Northern Ireland Financial Capability Partnership which brings together government, banks, building societies, credit unions,

1 The OFT has warned of a significant increase in the numbers of adverts from debt and claims management companies that misleadingly state they can take over liability for debts or write-off debts by purchasing consumers’ credit agreements http://www.oft.gov.uk/news/press/2009/72-09

1 education and community groups to ensure that we all help consumers to manage their money and make it work best for them.

Consumer Council commitment and next steps:

• Work closely with utility providers to ensure that appropriate measures are put in place to protect vulnerable consumers • Continue to lead the Northern Ireland Financial Capability Partnership so that all consumers have access to information and support aimed at raising their ability to understand money matters and develop sound financial habits for the future.

Financial inclusion as a devolved matter

The White Paper outlines plans for an additional £18.75 million for the Financial Inclusion Growth Fund. This fund supports community-based lenders such as credit unions and community development finance institutions to provide affordable loans for a wide range of people on low incomes who cannot access mainstream credit. It is our understanding that Northern Ireland will receive its portion of this and other funding provided by HM Government for financial inclusion as part of the block grant. As the Northern Ireland Executive does not currently have a financial inclusion strategy there is a question over how this money will be allocated to financial inclusion in Northern Ireland, and whether or not the NI Executive should consider developing an action plan to ensure effective use of funds during this difficult economic period.

The White Paper also highlights the link between financial distress and mental health problems and the Department for Health is providing £1.5 million to set up a dedicated NHS helpline to offer support to people experiencing stress and anxiety related to their economic situation. Although this helpline has been launched in England NI consumers will not have access to this service.

Consumer Council commitment and next steps:

• Investigate and report back to local representatives regarding the allocation of funding to progress financial inclusion and provision of care for NI consumers suffering finance-related stress and anxiety • Encourage MLAs and MPs to call for NI portion of £18.75 million of Financial Inclusion Growth Fund.

Protection of Advance Payments for Goods and Services

The Consumer Council strongly welcomes Government proposals to reassess the regulatory framework for prepayments.

The Consumer Council has long advocated the need to protect consumers’ deposits and advance payments and will respond in full to the forthcoming

2 consultation on this issue. In particular, we will stress the need to re-examine protection of all pre-payments including supermarkets and retailers’ savings schemes and the gift voucher market. These remain unregulated and have the potential to hit vulnerable consumers the hardest, particularly lone parents.

The Consumer Council recently held a consumer panel with women living on a low income which showed that they were mostly unaware of the risks associated with losing their money with pre-payments like deposits, savings clubs and gift vouchers (see Appendix 3).

Consumer Council commitment and next steps:

• Remain committed to supporting the NI Assembly in addressing the needs of lone parents and other vulnerable consumers under the Government’s Lifetime Opportunities strategy2.

2. Consumer Advocate

Related principles: Redress, Fairness, Representation

One of the most significant proposals set out in the White Paper is the creation of a Consumer Advocate based within Consumer Focus, Great Britain.

The Consumer Advocate will have a wide and demanding remit, including the co-ordination of education and information campaigns, representing consumers in collective action cases and ensuring fairness in consumer credit agreements.

The Consumer Council will keep a watching brief with regard to any new powers granted to the Consumer Advocate and will review how, if at all, these will impact on current arrangements in Northern Ireland. We would also want to explore mechanisms that the Consumer Council can use to help facilitate potential class action cases where these impact on NI consumers, perhaps as an extension of our super-complaint status3.

In the interests of providing redress and solutions for local issues, we are committed to maintaining our reputation as a champion for Northern Ireland consumers, which has seen a 119 per cent increase in awareness by those who have heard of us and know something about what we do4.

2 This strategy acknowledges that lone parents have higher risks of poverty. 3 The Consumer Council was granted super-complaint status in November 2005 and is one of only eight organisations in the UK to have the power to submit a complaint where evidence exists that particular markets are not working for consumers. 4 Well, what do consumers know now? A Consumer Council Progress Report on Consumer Proficiency 2003 – 2007. May 2008.

3 Consumer Council commitment and next steps:

• Keep local representatives up to date on developments concerning the creation of a Consumer Advocate • Establish strong ties with the GB Consumer Advocate to share our considerable experience in developing consumer education and skills initiatives and resources over the past 20 years.

3. Consumer education and skills

Related principles: Information, Choice, Redress, Representation

Consumer education and skills

The Consumer Council is recognised at a UK and European level as a trailblazer in terms of our work aimed at raising consumers’ awareness of their rights, responsibilities and importantly, developing the skills and confidence needed to exercise these effectively in today’s complex market, seek redress and to cope with the deepening recession.

Latest consumer proficiency research5 found there had been a 54 per cent increase in Northern Ireland consumers who considered themselves to be informed about their rights and the number feeling confident about expressing their rights had also doubled since 2003. Knowing your rights can save consumers an estimated £1806 a year and it has been calculated that the increase in consumer proficiency levels over the past four years represents total benefits to the Northern Ireland economy of £52 million7.

We are pleased to see that three Consumer Council education resources are given as examples of best practice in the White Paper. However, we must express concern at the heavy emphasis within the White Paper on the provision of information and advice and reiterate the need to accompany this with resources and initiatives that empower consumers with the appropriate skills and confidence needed to interpret the information and put it into action.

Consumer Council commitment and next steps:

• Continue local efforts to raise consumer proficiency and share our experience and resources with stakeholders, including the Consumer Advocate to benefit consumers throughout the UK.

5 Well, what do consumers know now? A Consumer Council Progress Report on Consumer Proficiency 2003 – 2007. May 2008. 6 Consumer Detriment Report, Office of Fair Trading, 2000 7 This figure is calculated using an index of consumers who were not proficient in 2003 compared to 2007.

4 Responsible consumer behaviour

With rights come responsibilities and our corporate theme ‘Enabling Consumers to Make Responsible Choices’ fits with Government proposals to encourage responsible consumer behaviour.

Consumer Council commitment and next steps:

• Continue to deliver key messages and information to consumers encouraging them to make responsible choices and reduce their use of energy, paper, plastic bags, avoid food waste and to use water wisely.

Conclusion

The above represents a résumé of the Consumer White paper but we would be happy to brief representatives further if this would be useful.

Please contact Rhonda Allen, Senior Support Officer to Chief Executive and Chairman 028 9067 4817 or [email protected]

5 Appendix 1 – Consumer Council Impacts

Financial Capability

ƒ Our public meetings across NI in autumn 2008 enabled 1,660 people to share with us how the rising cost of living was affecting them. As a result, politicians and the media were able to use our findings, and the weekly monitoring information on pricing of essentials such as food, fuel, home heating oil and mortgage repayments to assist with research and policy work.

ƒ Over 30,000 consumers learnt more about how to manage their money and make it go further through Money Week, a week long programme of events in Coleraine led by the Consumer Council through the Financial Capability Partnership in association with Coleraine Borough Council. Money Week also gained the support of both Junior Ministers Gerry Kelly MP, MLA and Jeffery Donaldson MP, MLA who provided a recorded message for the launch, praising the Money Week initiative.

ƒ The NI Financial Capability Partnership, set up and chaired by the Consumer Council, has brought together 28 key stakeholders from government, financial institutions, voluntary and community groups. The joint strategic vision and priority actions developed by this Partnership is a significant move forward in creating more financially capable people in Northern Ireland.

Consumer Advocate

ƒ In the aftermath of the Farepak collapse, we gave NI Farepak savers a voice by developing an action plan for the Assembly, the Department of Trade and Industry, banks, building societies and credit unions, community organisations and Farepak savers themselves.

ƒ The Competition Commission upheld the super-complaint about unfair bank charges by NI’s main four banks made by the Consumer Council and Which? As a result, proposals to improve the £2.1 billion personal current account market in Northern Ireland have been subject to public consultation by the Competition Commission.

ƒ The Consumer Council dealt with 5,372 consumers’ complaints and enquiries in 2008 - 2009. This was an increase of 17 per cent on 2007- 08 and confirms that more consumers are aware of their rights and gained the confidence to exercise them when things go wrong.

6 Consumer education and skills

ƒ Over 150,000 Shoppers’ Rights Cards have been distributed throughout Northern Ireland since their launch in 2003. These are a plastic credit card sized resource which explains consumers’ rights under the Sale of Goods Act 1979 and gives a reminder of shoppers’ responsibilities. The card also provides the Consumerline telephone number and website address for expert advice with queries and complaints.

ƒ Every youth worker in Northern Ireland received a free copy of the Buy Rights – Have Your Say DVD and support pack, produced in partnership with the Curriculum Development Unit of the Youth Service. The 12 minute and support materials aim to increase young people’s consumer knowledge, confidence and communication skills; enabling them to deal positively with everyday consumer problems and situations. This resource is also widely used by teachers and the uniformed youth sector i.e. Scouts, Girls’ Brigade and Boys’ Brigade.

ƒ 26,785 children in Northern Ireland aged between 11-14 years will be able to use Ecoworld - an interactive 3-D web-based resource developed by the Consumer Council and Council for Curriculum Examinations and Assessment for Key Stage 3 Education for Sustainable Development module. Visit www.ecoworld.org.uk

7 Appendix 2 – Consumer Principles

The following principles were established in the early 1970’s and provide a valuable framework for evaluating goods or services (public and private sector) or indeed policies and strategies and see to what extent they pay heed to consumers’ interests.

The Consumer Principles

When buying goods or services, consumers have a right to expect:

Access Can people actually access the goods and services they need? Are there barriers – eg physical, socio-economic or perceived?

Choice Do people have choices about where and how they shop for goods and services? Can their choices affect markets to make them work better?

Information Consumers need clear, reliable and accessible information about goods and services to help them make buying decisions, to understand their rights and to know what to do if something goes wrong.

Redress When things go wrong, is there a system in place to help consumers get some redress? Is there an effective complaints procedure and good after sales care?

Safety Consumers should not suffer loss or harm as a result of a product or service they have received. Are systems in place to identify risk and ensure that standards are as high as they should be?

Fairness All consumers deserve to be treated with equity and respect and to receive the highest standards of service delivery and customer care.

Representation Consumers need to be consulted and to have their views represented in shaping the development and delivery of services.

8 Quality Consumers are entitled to the highest standards of quality in terms of the goods they buy or the level of service they receive.

Value for Money Consumers should not pay more for goods and services than their quality, availability or conveyance justify.

9 Appendix 3 – Consumer Panel

Consumer panel to discuss deposits and savings protection with Women’s Information Group 23 June 2009

1 Aim of consumer panel 1.1 The Consumer Council ran a consumer panel8 to discuss deposits and savings protection with 12 women on 23 June 2009. Panel members were recruited by the Women’s Information Group (WIG)9.

1.2 The Consumer Council ran the panel to: • Find out how panel members felt about paying for goods upfront and how aware they were of their rights if a business went bust. For example, the Consumer Council wanted to gauge panel members’ experiences of ordering a sofa or furniture, paying the money upfront and then waiting for delivery;

• Find out how panel members felt about using savings stamps in Christmas supermarket savings schemes; and

• Get ideas from panel members to give to the Government on how people’s money should be protected when they pay in advance for goods or services, especially in the current economic downturn.

1.3 Consumer panel participants were voluntary or community group staff who worked with low income communities and/or lived on a tight budget themselves.

2. Losing Money • One panel member lost the price of a washing machine and the insurance breakdown cover when a business went bust.

• One panel member bought an iPod for £200 and insurance cover from Zavvi10 before it went into administration. She was unsure if their insurance would cover them if the goods became faulty.

8 Consumer panels are run to give a snap shot of opinion and allow consumers to tell their stories and share their experiences. Panels are not statistically representative of the population. 9 WIG is an umbrella organisation which brings together women’s groups throughout Greater and the surrounding towns. WIG believes that information is the key ingredient for any individual or group in the process of gaining confidence, of getting things done or simply being heard. It is a source of power and especially for women who are so often isolated in their homes where information is much harder to acquire. 10 Consumerline (Trading Standards Service in Northern Ireland) received six calls from consumers who couldn’t redeem their vouchers when the company went into administration in November 2008. Additionally, the BBC website contains consumer bloggs from people who couldn’t redeem their gift vouchers when Zavvi went into administration.

10 3. Paying by debit and credit card • Seven attendees out of 12 preferred to use a credit card while four out of 12 preferred to use a debit card to pay for a bigger purchase, eg a TV, washing machine or a sofa.

• Just one panel member out of 12 said she used a credit card to pay for an item over £100 because of protection under Section 75 of the Consumer Credit Act.

• Some panel members said they used credit cards to get a financial incentive for using the card (based on the amount of purchases made) and to take advantage of free credit (paying their bills within the agreed period with the credit card provider so as not to incur any costs).

• Women who paid by either debit or credit card associated the concept of prepayment protection with having proof of purchase on their bank statements and receipts. They appeared be unaware of protection under Section 75 of the Consumer Credit Act for an item costing £100 or more. For example, when asked if they used debit or credit cards to pay for goods up front on the Internet and in shops, women said they used debit cards (as opposed to credit cards) as they could keep track of how much money they had to spend and could refer to their bank statements.

• One woman used a local bank’s card (this card is similar to a debit card, but card holders can only spend what is in their accounts).

• One woman did not know the difference between a debit and credit card, believing a debit card to be the best way of protecting pre- payments.

4. Finance Agreements • One woman previously used a finance agreement to pay for goods. She did not encounter any problems and paid the money off before the end of term, to take advantage of the free credit facility.

• Seven women thought that finance agreements with bigger companies would be more reliable and safer than with smaller companies. They made their purchasing decisions based on the terms of the agreement, insurance and after sales.

5. Internet shopping • Four of the women did not know how to use Internet shopping.

• One woman said she would not shop on the Internet again because of a poor experience. She bought a bed and requested next day delivery. She did not pay by credit card because it would have cost extra and she was on a tight budget. She paid by debit card instead.

11 She waited a few days for delivery and when the item didn’t arrive she cancelled. She was shocked at how quickly the money was taken from their account and it took months of complaining to the business to get the money back into her account.

6. Pre-payment cards • One woman used a travel company’s pre-payment card to ‘load’ money on to pay for their holiday as this helped them to keep within budget. When asked what would happen their money if the firm went bust she did not know.

7. Ideas on ways to protect prepayments Panel members were asked for their ideas to give to Government on ways to protect prepayments if a business went bust. They made the following suggestions: • They all agreed pre-payment protection was something the Government should sort out. They suggested that all companies should pay a pre-payment insurance to the Government. Some panel members felt that if a company paid insurance they may be left with nothing (as well as their customers) if the insurance company went bust; and

• Businesses who supply similar goods should have a partnership or an arrangement between them, so that if one business went bust they could step in and give consumers the goods they pre-paid for.

8. Paying for goods at Christmas • At Christmas, many use cash to pay for purchases while some save with the credit union.

• No one was interested in using saving schemes such as Park for Christmas because of the Farepak collapse.

9. Stamps Savings schemes • Three panel members used Tesco stamp saving schemes. They begin saving in September and complete at least two cards (to the value of £100) in the run up to Christmas.

• Two of Tesco’s stamp savers also saved in Iceland’s stamp saving schemes and one woman saved all year round and not just at Christmas.

• Panel members who used stamp savings schemes used them to have a sense of ease knowing the Christmas food was paid for and were able to budget for other essentials. They said they liked to save with Iceland because they thought the bonus was generous.

• Panel members said that stamp saving schemes were a good way to budget. They said it suited people from their community who lived on

12 a low income or run one parent households and they wouldn’t have large amounts of money to put in the bank.

• Panel members who used the cards appeared not to be deterred by the prospect of losing their money if they lost their stamp savings card. One panel member said she kept her card at home safely, bought the stamps and attached them to the card when she got home.

• One panel member wrongly believed that Iceland would reimburse her if she lost her savings card. She said that Iceland did keep customers names and addresses as there was a space on the card for customers’ details. She also believed that as a regular shopper at Iceland, they would know her shopping habits and reimburse her for any losses.

• One woman lost her supermarket stamps and was put off from using this type of scheme to save again.

• Other panel members said they ‘wouldn’t touch’ stamp savings schemes and suggested to other members that their money would be better in a bank account.

• None of the panel members saved money with major supermarkets (through a bank account) and they were not aware that this service existed.

10. Ideas for improvement of Stamps Savings schemes • Panel members who used the saving schemes believe there is room for improvement to make them more secure to ensure consumers could get their money back if the cards were lost or stolen.

• They said the system and plastic card type that Boots used in their Advantage card might be a good way of keeping customers details and a record of how much they save.

11. Conclusions Panel members commented that they wanted a training session from the Consumer Council on their rights regarding pre-payments. They said that participating in the panel would make them more wary of paying for goods upfront in the future. The Consumer Council has arranged a consumer rights session with the group in autumn.

13