Consumer Protection

Whilst the Department for Business, Innovation and Skills (BIS) is the ministry with prime responsibility for consumer policy issues with specific political responsibility for it falling under Liberal Democrat control, a significant number of the consumer protection pledges in the Coalition Agreement cut across other Departments, most notably the Department of Energy and Climate Change (DECC), HM Treasury, the Department of Health (DH) and the Department of Work and Pensions (DWP). 

Three ministers have so far held the consumer affairs brief: its longest incumbent, Ed Davey, was catapulted into Cabinet; Norman Lamb, left on promotion for DH; and, now the highly-rated Jo Swinson occupies the post.  High-fliers all, they have arguably benefited from the fact that despite being a junior ministerial brief it enjoys a disproportionately high media profile, perhaps given the applicability of their work to all sections of the public. Despite having a Liberal Democrat Secretary of State at the helm of BIS, it is just as true in consumer policy as elsewhere that the freedom of manoeuvre in terms of implementing the party’s policies is significantly circumscribed as a result of their political partnership with the Conservatives.

In order to achieve positive consumer protection outcomes, particularly for the most vulnerable, the Coalition put its faith in markets to: provide greater choice; promote competition; increase transparency; and, incentivise responsible corporate behaviour, rather than as it is put in the Mid-Term Review document “…resorting to yet more laws and regulations.”  With a few notable and important exceptions, the deregulatory reflex therefore remains alive and  well more than halfway through this administration, although the suspicion must be that one partner in the Coalition is more sceptical of the supposedly unerring ability of the market alone  to deliver positive consumer protection outcomes than the other.

”Consumer Protection” Pledges 1 and 3 of the Coalition Agreement focus on reducing detriment in the financial services field explicitly.  Two real-world examples from the consumer credit policy field are instructive, however, reflecting as they do that deregulatory reflex. It took sustained cross-party backbench pressure in both Houses with Labour’s Stella Creasy leading the charge, supported by a high-profile media campaign, for Treasury Ministers to bring forward, at the eleventh hour, an amendment to the Financial Services Bill that will eventually allow the Financial Conduct Authority (FCA) to control payday lending more effectively than the Office of Fair Trading (OFT), ill-equipped for the role, has.  Away from the limelight, the Liberal Democrats adopted into federal policy the introduction of a statutory debt management plan back in 2011, given the evident consumer detriment in that market, but the party’s ambitions have been stymied with a much-diluted voluntary protocol introduced instead – a much more conservative (and Conservative) solution.  It will be interesting to see whether this policy initiative reappears in the party’s manifesto ahead of the General Election, particularly if eventual regulation of the market by the FCA fails to drive out the poor practice that is still to be found amongst many operators.

At the time of writing, the Coalition has implemented 22% of its original pledges, abandoning one of them.  It will be interesting to see what further progress is made on the remaining four pledges before the Coalition partners enter what seems likely to be a fairly lengthy period of purdah ahead of May 2015, particularly in challenging areas like enhancing customer service in the private sector (Pledge 4) where its ability to control outcomes is fairly limited and, somewhat ironically, an area where market forces should provide the solution.


Progress against the Coalition Agreement

Pledge: Give regulators new powers to define and ban excessive interest rates on credit and store cards and introduce seven day cooling-off periods on the latter.

Status: In progress - Package developed with industry to address store card concerns, including: a ban on direct commission to sales staff; the introduction of a new good-practice training scheme; and, the implementation of a seven-day ban on retail incentives following the customer taking out a card.  The Financial Services Act 2012 (“the 2012 Act”) provides for the new Financial Conduct Authority (FCA) that came into being on 1 April 2013 to cap the cost and duration of credit if the evidence suggests it is warranted.  The FCA has yet to make use of these powers, given it has also yet to take over responsibility for consumer credit regulation from the Office of Fair Trading (OFT), which is scheduled for April 2014.

Pledge: Oblige credit card companies to provide better information to customers in a uniform electronic format the better to facilitate product comparability.

Status: Done – Annual statement for customers developed with industry, showing usage as well as any fees and other costs that may have been incurred, which is also available in electronic form.  More broadly, the Government wants to make progress on its midata programme with businesses providing their customers with personal transaction and consumption data in an electronic, machine-readable format.  Whilst the Government would like businesses themselves to empower consumers by giving them access to the data they collect and hold, it is willing to legislate in this area if necessary.

Pledge: Introduce stronger consumer protections, particularly in the financial services field.

Status: In progress - The Government will introduce a Consumer Bill of Rights in order to give individuals clearer protections in law and future-proofing them in order to keep pace with technological advances.  BIS consulted in 2012 on the transposition into domestic law of the Consumer Rights Directive, with the Government response to that process expected to be published in Spring 2013.  It is expected that the Directive, intended to streamline European law in this field, will be incorporated into a wider Consumer Bill of Rights, which might be expected to make an appearance in the 2014 Queen’s Speech. The Government has committed to publishing a draft version in the course of the 2013/14 session. With respect to financial services specifically: as of March 2012, consumers have been able to receive an alert from their bank when their account balance is low or before an unarranged-overdraft charge is incurred; since March 2013, consumers have been also made aware of the ‘grace period’ within which charges will not be levied, if sufficient funds are deposited to cover the debit, with no charges applying to small unarranged overdrafts any longer; working with the payday lending industry, the sector’s codes of practice have been revised to try and enhance transparency to help vulnerable consumers; and, the 2012 Act has provided the OFT, ahead of the FCA taking over responsibility for consumer credit regulation from it, with new powers to suspend licences immediately, where there is an urgent need to do so for consumer protection reasons.  The Government established the Money Advice Service in April 2011 to promote understanding of the financial system and also intends to strengthen the protections for consumers from rogue bailiffs, whilst  ensuring that debts can still be collected fairly. The MoJ launched a consultation document to that end in mid-February 2013, with a closing date of 14 May.

Pledge: Enhancing customer service, in both the public and private sectors.

Status: In progress – With respect to the public sector, the Government has published Choice Frameworks, covering core services which set out people’s rights in relevant fields, whilst also highlighting the availability of simple and effective forms of redress where they are unhappy with the range on offer or their quality.  With respect to the NHS, for example, DH published its Choice Framework for the Service covering the 2013/2014 period at the end of 2012.  It is not clear what specific plans the Coalition has in respect of enhancing customer service in the private sector.

Pledge: The creation of an Ombudsman within the OFT that can “proactively” enforce the Grocery Supply Code of Practice so as to curb supermarket buying power within this chain, which risks acting to the long-term detriment of consumers.

Status: In progress - The Groceries Code Adjudicator Act received Royal Assent on 25 April 2013.  This legislation establishes  a body capable of enforcing the Code and able to draw on wide-ranging powers to effect remedies where retailers are found to be in breach of its provisions.

Pledge: More accurate food labelling to instil greater confidence in the origin of what consumers buy and its environmental impact.

Status: Not achieved – Whilst the Government has worked with the food sector to develop Principles on Country of Origin Information, which amount to theoretical best practice in this area, as well as worked within the European Council to shape the eventual form of Regulation No 1169/2011 “on the provision of food information to consumers” (which covers the labelling of geographic provenance), identification in early 2013 of infiltration into the supply chain of horsemeat has rather undermined any increased confidence that might have existed as a result of earlier Government action in this field.  It is on the basis that consumer confidence in the food supply chain has fallen, rather than risen, that a not achieved has been awarded in respect of Pledge 6.

Pledge: Increase the control of households over their energy costs by ensuring that bills furnish information on how to switch to the cheapest tariff offered by their supplier as well as provide comparisons with equivalent dwellings.

Status: Done – Building on Ofgem’s Retail Market Review, the Government secured agreement from gas and electricity companies that they would notify their customers of the cheapest tariffs available, whilst the Energy Bill will enshrine in law the changes necessary to require that suppliers ensure all households can access the lowest available rate to meet their needs.  The Bill, which started in the Commons, has benefited from a carry-over motion and will therefore be revisited this Parliamentary session, with the Report Stage scheduled for 3 June and the third reading to follow the next day.  The Government has also helped to develop proposals aimed at facilitating the collective switching of consumers to different suppliers, thereby strengthening their bargaining power.  In addition, the Government is set to consider extending the rural fuel discount beyond remote island communities to their equivalent settlements back on the mainland.

Pledge: Give Post Office account holders the chance to benefit from direct debit discounts and ensure that social tariffs, aimed at those customers in fuel poverty, are offered, giving them access to the best prices available.

Status: Not achieved – Abandoned, with prohibitive costs and the adoption of Universal Credit, which will change the way benefits are paid, cited as the reason.  The DWP is, however, working with the Post Office to explore how it might support delivery of those social tariffs.

Pledge: Extending protection and support for ‘off-grid’ energy consumers.

Status: In progress - The Coalition introduced a one-off grant scheme: the Renewable Heat Premium Payment (RHPP).  The RHPP is aimed at off-setting the relatively high up-front costs of installing renewable-heating equipment.  Such equipment can provide cost-effective alternatives to the burning of fossil fuels in off-grid homes. Nevertheless, the Government acknowledges that there is more to be done to support “off-grid” energy consumers. The Government is expected to announce the final details of the domestic renewable heat incentive scheme and of expansions to the non-domestic incentive this summer, to “provide grants towards the cost of installing renewable heat technologies in domestic properties off the gas grid, and for solar installations on or off the grid”.