Briefing for Northern Ireland 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 Northern Ireland 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’ Christmas 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