Baroness Neville-Rolfe
Main Page: Baroness Neville-Rolfe (Conservative - Life peer)Consumer Rights Bill
Baroness Neville-Rolfe Excerpts(9 years, 6 months ago)
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Lord Stevenson of Balmacara (Lab)
The amendment stands in my name and that of my noble friend Lady Hayter of Kentish Town. I declare my interest as retiring chair of the charity StepChange. Your Lordships’ House will be well aware of the considerable influence that it has had in curbing the explosion of high-cost credit that has so disadvantaged consumers in recent years. However, there is more to do.
The purpose of the amendment is to level the playing field on logbook loans by requiring the lender to obtain a court order before repossessing goods being repossessed by this archaic system, which uses legislation first introduced in 1878. A logbook loan is a bill of sale securing a loan on an asset, often a vehicle, and it gets its name from the fact that the lender retains the vehicle’s logbook or vehicle registration certificate, the V54, until the loan and any outstanding interest are repaid. Logbook loans are another form of very high-interest credit, and share with payday loans the use of unfair terms and conditions. They tend to be used by people who have bad credit ratings but need cash quickly. If you check them out on the internet you will find that an application for a logbook loan can be completed in as little as 15 minutes.
Recent research shows that logbook loans secured by a bill of sale are generally for amounts ranging from £500 to £2,000; the average is about £1,000. They are typically repaid over a six to 18-month period. The APR varies, but tends to range between 200% and 500%. These are not cheap loans.
It is the use of a bill of sale that causes the most difficulty. The legislation governing such loans, which dates from Victorian times, means that, uniquely in the high cost credit market, the lender can repossess the debtor’s asset—the vehicle—without a court order. We need to change this, to level the playing field. Bills of sale are already illegal in Scotland. Should we not take a leaf out of its book?
The history of this is interesting. After reviewing the position in December 2009, the previous Government proposed to ban the use of bills of sale for consumer lending, but, after the election, the coalition Government decided not to go ahead but to rely on a voluntary code of practice. Recent research by Citizens Advice shows that there is likely to be a 60% increase in bills for sale registered from 2011 to 2014. We believe that it is now time to stamp out this arcane practice. The Victorians had much to commend them but this legislation is not their finest monument.
When we raised this issue in Committee, the Government response was twofold. First, the Minister confirmed that the Law Commission has agreed to a request from Treasury Ministers to look at how best to reform bills of sale. This is indeed somewhat ironic, given that we had a debate only yesterday on Schedule 20 to the Deregulation Bill, when the Government were rather limply trying to defend their decision not to ask the Law Commission to review acres of what they call “legislation no longer of practical use”. However, this process will take time and unless the noble Baroness has some more information to share with us, it seems highly likely that this issue will not get into the next Law Commission Bill, which is unfortunately not due until 2016. The Government also pointed out that the FCA is in charge of this sector of consumer credit and mentioned that it had defined logbook loans as “higher risk activities”. That is certainly not wrong but when, oh when, will they get around to doing something about it?
As we found with payday lenders, it does no harm to give the regulator a bit of a push when you think that it may not get to the right place quickly enough. Consumer detriment is happening now and it ought to be stopped, so our amendment follows the approach that the House took to capping payday lending, as a sort of regulatory push. As well as welcoming the promised robust action by the FCA, we think it is appropriate to hasten it on its way. If loan book lenders have to use the courts to repossess goods, it will level the playing field with the other consumer credit operators and make it more likely that many will exit the market. That would be “job done”. I do not believe that the actions being proposed by the Government are sufficient to outlaw this scourge in good enough time. Our amendment will strengthen protections for consumers using logbook loans. I beg to move.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)
My Lords, before turning to Amendment 1 in detail, I would like to take a step back and set out why the Government do not believe that this Bill should be the vehicle for addressing issues in consumer credit and financial services more generally.
First, as noble Lords will be aware, the Government have introduced a major package of reforms to strengthen regulation of financial services markets. In the Financial Services Act 2012, we replaced the flawed system of financial regulation that we had inherited. We created the Prudential Regulation Authority to take the lead in ensuring that our banks and our insurers are safely and soundly run. We also set up the Financial Conduct Authority—FCA—as a consumer protection and market conduct regulator.
To ensure that the FCA has a clear and comprehensive remit covering all consumer financial services matters, we transferred the responsibility for regulating consumer credit from the OFT to the FCA. This means that the FCA’s statutory objectives, such as consumer protection, apply to the regulation of consumer credit. It also means that the FCA’s comprehensive and flexible rule-making powers can be used to help protect consumers from bad practices in the consumer credit market for the first time. For example, the payday lending rules introduced by the FCA have meant that the volume of payday loans has shrunk by 35% since the FCA took over regulatory responsibility in April 2014, demonstrating the strength of the regulatory regime. The Government therefore consider that the Consumer Rights Bill is not the place for making amendments to the law on consumer credit.
I turn to the detail of the amendment. Across government, we share concern about the risk to consumers from logbook loans, which were well described by the noble Lord, Lord Stevenson. The Government believe that people should be able to borrow and should have the tools to make an informed decision about which credit products are right for them but that consumers should be confident that they will be treated fairly when things go wrong. As I have said, responsibility for consumer credit regulation, which includes logbook lenders and the associated arrangements, transferred from the Office of Fair Trading to the Financial Conduct Authority on 1 April. Consumers are far better protected under the stronger, well resourced FCA regime.
Like payday loans, the FCA defines logbook loans as “higher risk activities”, as has been said, so lenders face closer supervision. Logbook lenders are subject to a range of binding FCA rules, including requirements to provide precontractual explanation to borrowers of their rights before any agreement is signed. The Government have ensured that the FCA has a wide enforcement toolkit to take action where its rules are breached. There is no limit on the fines it can levy and, crucially, it can force firms to provide redress to consumers.
“(19) Subsection (20) qualifies the application in relation to England and Wales and Northern Ireland of the rights mentioned in subsections (1) to (3) where—
(a) the contract is a severable contract, (b) in relation to the final right to reject, the contract is a contract for the hire of goods, a hire-purchase agreement or a contract for transfer of goods, and(c) section 26(3) does not apply.(20) The consumer is entitled, depending on the terms of the contract and the circumstances of the case—
(a) to reject the goods to which a severable obligation relates and treat that obligation as at an end (so that the entitlement to a refund relates only to what the consumer paid or transferred in relation to that obligation), or(b) to exercise any of the rights mentioned in subsections (1) to (3) in respect of the whole contract.”
“(7A) Whether or not the consumer has a duty to return the rejected goods, the trader must bear any reasonable costs of returning them, other than any costs incurred by the consumer in returning those goods in person to the place where the consumer took physical possession of them.”
Viscount Younger of Leckie (Con)
My Lords, my noble friend Lord Clement-Jones makes an interesting point about extending the law to allow multiple repairs beyond repair one but within a defined period of time. It is still not entirely clear what this time period would be. I noted that he said that it would be a determinate end-point of repair.
It is a laudable proposition but for the fact that it could put undue cost burdens on small businesses. I give the example of a local business selling a complex piece of machinery. It comes in for repair once and then on a couple of other occasions before it dawns on the trader that the repair is as a result of the customer perhaps not using it properly or misusing it. However, up until this point, it is the trader who by law, under my noble friend’s amendment, would bear all the costs of the transport and the re-repair.
Therefore, although the trader could make the sale contractual to pre-empt or prevent this, I believe that it is more proportionate and less prescriptive to retain the one-repair proposal as laid down in the Bill.
Baroness Neville-Rolfe
My Lords, following the discussion my noble friend Lord Clement-Jones described in Grand Committee, I recently met representatives of the motor industry to discuss their concerns about the issue of one repair and we had a constructive discussion that included other amendments. I am very pleased also to hear from the noble Viscount, Lord Simon, about his discussions with the motor industry and, of course, to see my esteemed predecessor, my noble friend Lord Younger, making a very good point about the costs on traders.
I understand—although I am not a huge fan of motor cars—that motor vehicles are very complex goods and there can be a tendency for faults to reappear after repair. However, a limit of one mandatory repair or replacement sets an important and appropriate balance. The Bill provides key simplifications, as we all know, which we expect to benefit both consumers and traders, including the motor industry. The Bill sets a 30-day period for consumers to exercise the short-term right to reject, whereas in the past, claims have been made in relation to motor vehicles some months after the car was bought. The amendments we have laid on deduction for use, which my noble friend Lord Clement-Jones referred to, recognise the particular nature of motor vehicles, being complex and subject to rapid depreciation. He also noted in Grand Committee that the issue of one repair is pertinent to the final right to reject. I am grateful to my noble friend for going away and amending his amendment.
To the extent that the Bill’s provisions regarding one repair may impact on the motor industry, I think that being able to apply a deduction for use in the first six months mitigates against that and is an important and complementary protection. I am not blind to the needs of the industry, but the revised amendments go too far. They would undermine both the consumer protection and the clarity that the Bill provides. The limit of one mandatory repair or replacement before a consumer is entitled to some money back follows consultation by both the Law Commission and BIS, both of which identified that approach as being the preferred option. The Law Commission recommended that there should be greater clarity as to when a consumer can move from repair or replacement to access some money back. The Bill’s one repair or replacement provision gives that clarity and I am concerned that it should not be undermined. Importantly, the Bill does not prevent the consumer from agreeing to further repairs. I think consumers—certainly a consumer like myself—tend to act reasonably with a motor trader, especially if they are treated reasonably in return. As long as the trader keeps them well informed I think most people would be willing to accept further repairs. If, however, the relationship breaks down, the consumer should, and will under the Bill, have the right to exit the contract if the trader has tried and failed to fix the fault.
I also feel that a time limit set by the power included in the amendment would fail to provide the necessary safeguard to protect the consumer fully. There is a real risk that such a time limit would become the default, leaving consumers stuck waiting. Without the certainty of being able to ask for money back after one failed repair, consumers would have to show that a repair process had caused them significant inconvenience or taken more than a reasonable time. While these are important protections within the Bill, we do not think they are sufficient alone for goods. This was the very issue on which the Law Commission recommended that there should be further clarity. The evidence submitted to the Law Commission’s consultation showed that it is unclear when the point of significant inconvenience is reached, allowing considerable scope for dispute.
All of these concerns are compounded by the fact that these amendments are so broad in scope. We believe that as drafted they could apply to all goods, even a table that needed more than one repair. Essentially, the amendment seems to cover both complex faults in simple goods and simple faults in complex goods. It would be unclear whether or not the consumer had to make the goods available to the trader more than once. It would also be all too easy for an unscrupulous trader to argue for repeated repairs—even on simple non-complex goods if they claimed that the nature of the fault justified it.
My noble friend mentioned guidance and perhaps, without commitment, I can come back to him on that issue.
Lord Clement-Jones
Perhaps I can interrupt my noble friend to see what her reaction is before I respond. Does she accept that there is a conflict between what Ministers have been saying about the one repair concept and what is in the guidance? If so, clearly she could go further in undertaking that the guidance should be revised.
Baroness Neville-Rolfe
My advice is that there is no conflict, but as my noble friend has raised the issue, I shall certainly take a look and write to him. The amendments cut across the simple, clear provision set out in the Bill, so I ask my noble friend to withdraw his amendment.
Lord Clement-Jones
I detect in a mild kind of a way that that is a no—a fairly firm no. The motor industry will be very disappointed by that response, and I thank the noble Viscount, Lord Simon, for his support. I am somewhat surprised by the noble Viscount, Lord Younger, because this amendment is heavily supported by dealers and manufacturers. It is designed for their benefit; it is certainly not designed to add to their woes, which I believe Clause 23 has the capacity to do. It will bear unduly harshly on dealers, in particular, but I recognise a stone wall when I see one. I very much hope that my noble friend will undertake to review the guidance on page 39 and the conflict between what on the face of it seems to be a completely contrary statement to what is in the guidance. Perhaps we can make progress in that respect. In the mean time I beg leave to withdraw the amendment.
Baroness Neville-Rolfe
My Lords, I thank the noble Baroness, Lady Hayter, for her kind words and acceptance of my amendment. I thank her for not wishing to press her amendment.
Baroness Hayter of Kentish Town
I thank the Minister for clarifying that she will be supporting Amendment 11 in my name, to which she has added her name, and moving her own Amendments 10 and 12, as we get to them. We will move our Amendment 11 in its place. I know that the Minister has put her name to it, but I think she will probably be moving Amendments 10 and 12 in their place. For the moment, I beg leave to withdraw Amendment 9.
“(a) the goods consist of a motor vehicle, or(b) the goods are of a description specified by order made by the Secretary of State by statutory instrument.”
“(13) In subsection (10)(a) “motor vehicle”—
(a) in relation to Great Britain, has the same meaning as in the Road Traffic Act 1988 (see sections 185 to 194 of that Act);(b) in relation to Northern Ireland, has the same meaning as in the Road Traffic (Northern Ireland) Order 1995 (SI 1995/2994 (NI 18)) (see Parts I and V of that Order).(14) But a vehicle is not a motor vehicle for the purposes of subsection (10)(a) if it is constructed or adapted—
(a) for the use of a person suffering from some physical defect or disability, and(b) so that it may only be used by one such person at any one time.(15) An order under subsection (10)(b)—
(a) may be made only if the Secretary of State is satisfied that it is appropriate to do so because of significant detriment caused to traders as a result of the application of subsection (10) in relation to goods of the description specified by the order; (b) may contain transitional or transitory provision or savings.(16) No order may be made under subsection (10)(b) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.”
Lord Stevenson of Balmacara
My Lords, I echo the words of those noble Lords who have said that this has been a very good debate: it has indeed been good and it is right that it should have been, because it raised difficult issues with which the Government have been grappling. The predominant weight of the arguments that we have heard today—because they were not universally on one side—was for change, so I hope that that will weigh heavily with the Government when they come to consider what they are going to do.
I had a full speech here, full of witty aphorisms and wonderful evidence, but you always find that in debates of this nature, somebody stands up and says, “Do you know, just about everything that could be said about this thing has been said, but not by everybody,” and then they repeat them. I am not going to do that. The issue on which I want to reflect is what on earth the Government are going to do with this. When you have had your case as put in Grand Committee completely destroyed by the forensic words of the noble Lord, Lord Moynihan; when you have had your best arguments bashed to boundary by the noble Baroness, Lady Heyhoe Flint; when you have reduced the noble Lord, Lord Clement-Jones—and it is an astonishing thing—to speak for less than three minutes in a debate; when your former Secretary of State is lining up to give you good advice about how you should deal with this, then you are in a spot of trouble.
You know you are in trouble when you have to rely on people on the other side who are basically scaremongering. I respect the noble Lords who have spoken in support of the Government on this matter, but I think they went way over the top, while we on this side were utter models of restraint. We insisted on only two things: that the equity that should exist for anybody who wishes to buy tickets is not abolishing, changing or adjusting any market; I thought that the noble Lord, Lord Grade, made that point very well, and it was previously made by the noble Lord, Lord Holmes, who picked up the point made by the noble Baroness, Lady Heyhoe Flint. Instead, it is about making those markets that exist work fairly, removing the fraud where it is possible, and making sure that people can see and get access to the events they want. When you have consumers, event organisers, participants and the police—for goodness’ sake—on your side, what on earth are you doing, and who are you listening to when you stand against them?
Baroness Neville-Rolfe
My Lords, many of us love British sport and our creative industries. This love unites most of us in the House and certainly those in the Chamber today. As the noble Lord, Lord Stevenson, said, it has been a very good debate. We have had a star cast, including ladies of sport—the noble Baronesses, Lady Grey-Thompson and Lady Heyhoe Flint—and the noble Lord, Lord Holmes, so we have had real experts.
Noble Lords will know that I take a great deal of personal interest in this issue. In fact, I should almost declare an interest as a mother of three cricketers. I have met the England and Wales Cricket Board, the organisers of Wimbledon and the Rugby Football Union. I have also met Which? and I am aware of the interest of UK Music, which I meet on other things. I have actively engaged with Mike Weatherley MP and his All-Party Parliamentary Group on Ticket Abuse. I have been working with these bodies to try to get to the core of this issue: what we can best do to help and protect the fans? It is the fans who really matter in this equation.
I congratulate the noble Lords, Lord Moynihan and Lord Clement-Jones, and the noble Baroness, Lady Heyhoe Flint, on their extensive work on this issue and the expertise they always bring to our debates. Most fans buy tickets direct from the venue or the organiser, often well in advance of the event. To pick up a point made by the noble Baroness, Lady Heyhoe Flint, debenture holders and sponsors often get ticket allocations well in advance, which is why there are sometimes tickets on sale well ahead of events. A lot can change between a ticket being bought and the event itself—people fall ill or make other plans—and these fans then resell their tickets to other fans. This is the market we are discussing today, for which there has been great support. I agree with the All-Party Parliamentary Group on Ticket Abuse when it says that,
“the existence of a secondary market is justified by the need of consumers to pass on tickets bought for events that they can no longer use”.
Let me be clear: we believe fans should be protected in this market.
If the House will bear with me, I will respond to the debate and will then set out some new plans to take things forward. The noble Lord, Lord Moynihan, talked about fraud. Fraud is a criminal offence under the Fraud Act 2006. It covers activity by all sellers, including consumers and traders. Many of the actions referred to are fraud: selling tickets you do not have and have not purchased is fraud; traders impersonating consumers to sell tickets are committing criminal offences; and, arguably, selling tickets knowingly in contradiction of their terms and conditions without informing the consumer of this may be fraud.
Repeating in the Bill that fraud is a crime would not make it any more illegal. What matters to fans, and many of your Lordships, is enforcement of the law that we have. There is fraud in the ticket market: we do not dispute the numbers quoted from the National Fraud Authority on this. In the specific case of ticket fraud, it reports £1.5 billion of losses. That is not a number to be ignored and we are not going to ignore it. As my noble friend Lord Grade said, there is a serious problem.
The Government have a huge focus on cutting economic crime, and we have created a powerful Economic Crime Command within the National Crime Agency to drive this forward. We have also strengthened the reporting and intelligence arrangements for fraud. ActionFraud is now the single national reporting centre for fraud and financially motivated cybercrime. Since 1 April this year, responsibility for ActionFraud rests with the City of London Police, bringing it closer to the National Fraud Intelligence Bureau. This allows links to be made between disparate crimes that would otherwise not be connected and it has led to a significant increase in the reporting of fraud. The Government are also investing £860 million through the National Cyber Security Programme, which includes work on online fraud.
Baroness Neville-Rolfe
I thank my noble friend Lord Deben. I think I have made a number of commitments. I have set them out in the legislative framework that exists. I will certainly look at how the points that I have made today are implemented. It would be wrong for me to make a commitment to amend the Bill because I am not sure that amending the Bill is what is needed today. What I think is needed is the way forward that I have described. It has been a good debate. The Government have listened and I ask for the amendment to be withdrawn.
Lord Harris of Haringey
My Lords, about a year ago, in my capacity as chair of the National Trading Standards Board, I had a meeting with what I think was then called the Electrical Safety Council, now rebranded as Electrical Safety First. We were not discussing this issue but it was raised as one of the concerns that the then Electrical Safety Council had about the way in which the recall system worked.
My noble friend highlighted a number of concerning issues. These include, for example, the length of time that often seems to elapse between manufacturers becoming aware of a product failure or an incident, even one leading to an inquest, before they take action to recall products. Their recall efforts are often minimalist in trying to make sure that the message reaches consumers.
I hope that the Government are not simply going to tell us that self-regulation works best and that the systems in place are adequate. The examples that have been cited and the fact that this remains a continuing concern show clearly that action needs to be taken along the lines of my noble friend’s amendment.
Baroness Neville-Rolfe
My Lords, protecting consumers from serious injury and property damage caused by unsafe appliances is a crucial government responsibility. I can assure your Lordships that the Government are listening carefully to the concerns expressed in this House during the passage of this Bill and are absolutely committed to improving the systems of product recall, as I will explain. I am grateful to the noble Baroness, Lady Hayter, for sharing some recent experiences.
I am grateful for the work done by the noble Lord, Lord Harris, and the trading standards teams across the country which put considerable effort into enforcing an effective product safety regime. In 2012, they inspected more than 100,000 products, which led to more than 2,000 product lines being withdrawn from the market and more than 750 voluntary actions by manufacturers and retailers. There are other withdrawals that good retailers take proactively. Product liability law is an added incentive to action. Most manufacturers and retailers are keen to co-operate with this enforcement effort and there are strong sanctions if they do not. Under product safety law, offenders can rightly face fines of up to £20,000 and 12 months in jail.
However, noble Lords are understandably concerned that we should be rigorous in looking for ways to improve the effectiveness of the recall system, the importance of which I know so well from my retail experience. One important aspect of an effective system is making sure that retailers and manufacturers can contact consumers who have bought an unsafe product. Some good work is already going on across the supply chain to address this issue. It is being led by the Association of Manufacturers of Domestic Appliances and supported by BIS and the Trading Standards Institute on a Register my Appliance portal for consumers, which was launched earlier this month—I hope that noble Lords are all listening because, as a citizen, one should register one’s own appliances. This will make it considerably easier for consumers to register contact details so that they can be traced more easily in the event of a product recall. By encouraging consumers to register their products and to maintain their contact details, it will be much easier to contact relevant consumers in the event of a product recall.
In addition, Electrical Safety First, to which the noble Lord, Lord Harris, referred, is working to explore the options for improving traceability and recall effectiveness, in partnership with government and industry members. While this work should increase the traceability of consumers in the event of a product recall, we also need to consider whether we can improve the effectiveness of the current system for registering and publicising products that are subject to recall. Alerting consumers to the risks posed by faulty products can be difficult, especially where goods have changed hands or contact details have altered. It is important that all those who have a part to play in alerting consumers can access the information they need. That is why we are acting today to address the concerns raised by noble Lords by launching an independent review of the product recall system. The review will consider existing information systems, such as the Trading Standards Institute website for informing consumers about product recalls, and how well these work in practice, as well as looking at the cases and data to which the noble Baroness referred. It will also consider how well the EU’s RAPEX rapid alert system for dangerous consumer products covers UK needs and identify any gaps in the coverage that may need to be addressed. Once we have appointed a suitable chair for this review, we will expect it to report back within 12 months.
That review demonstrates that the Government take very seriously the issues raised by noble Lords during the passage of the Bill. Robust product safety legislation is in place based on an EU-wide regime, and this legislation provides consistency for business and consumers across member states, but we must ensure that the whole system works effectively to minimise harm to consumers. That will require all the different players to work better in partnership across the supply chain.
In the light of our decision to conduct an independent review of product recall, I very much hope that the noble Baroness will feel able to withdraw her amendment.
Baroness Hayter of Kentish Town
I genuinely thank the Minister for using this opportunity to announce that today. I also thank my noble friend Lord Harris of Haringey for his support for that. I welcome the review and I hope that it will consider one of the problems with the European system at the moment. It covers only goods that are sold in more than one EU country, not those sold either only in this country or only in this country and non-EU countries. I note the Register My Appliance initiative, but there is a problem with it which I hope the Government’s review will consider. The industry-led solution led by the AMDEA continues to be an opt-out system—you have to opt out if you do not want your details used for marketing purposes. It will make people reluctant to register if they know that they will get more junk mail or e-mails from product manufacturers.
I am advised by the people at Electricity Safety First that the system as set up will be used for marketing unless you opt out, and we know the difficulty with that. I trust that that can be looked at in the review.
Baroness Neville-Rolfe
My Lords, the noble Baroness makes a good point, and I will certainly take it away and suggest that we add that to the review of product recalls.
Lord Clement-Jones
My Lords, I am not sure whether the noble Lord, Lord Stevenson, will thank me for making an even shorter speech than I made in the previous debate. I must say that my breath is somewhat taken away by the sweeping nature of the amendment, which tries to sweep all digital content into the clauses on the sale of goods. The software industry may have some difficulty with some areas of Chapter 3 on digital content, but if what the noble Lord wants happened, it would be horrified. The dialogue between the software industry and the Government may not have produced everything that the software industry wants, but it has recognised that digital content is very different. I forewarned the noble Baroness, Lady King, that I would cite her. Like me, she said:
“I will not speak at length on this amendment or the other amendments … but it seems worth reiterating the peculiar nature of digital content”. [Official Report, 20/10/14; col. GC 183.]
Although I do not have the exact reference, I entirely agree with her. The noble Lord, Lord Knight, made similar points about the peculiar nature of digital content. It would be an extremely retrograde step to sweep up the additional content in this. If the noble Lord had come with individual amendments to the clauses to bring digital content in, I might have been more sympathetic, because one then could have seen the exact consequences of the amendments, but the consequences of this amendment could be quite unforeseen and extremely contrary to the interests of the strong and vibrant software industry that we have in this country.
Baroness Neville-Rolfe
My Lords, the Bill brings in clear quality rights for consumers of digital content for the first time. In this digital age, many of us are consumers of digital content on our smartphones, our smart televisions, our computers and, I was hearing this morning, on wearables. The sector is crucial and growing for the UK economy. The Business Population Survey estimated that there were more than 300,000 digital content firms in 2013—e-book publishers, games, software and website developers—with an annual turnover of just over £200 billion. It is vital that we have the right sort of regulation for that important, very innovative sector. That is why we have consulted widely on our approach to digital content.
The digital content chapter provides that when digital content is faulty, the consumer is entitled to a repair or replacement of the digital content. If that cannot be done within a reasonable time, or without significant inconvenience to the consumer, the consumer is entitled to a price reduction, which may mean some money back or, in some cases, 100%. I set out the general picture because we are about to discuss a number of amendments in this area.
This approach takes account of the way that industry works. As my noble friend Lord Clement-Jones, who I am delighted to see here at this debate, said in Grand Committee,
“in practical terms the software industry will always find a workaround or fix to a problem”.—Official Report, 20/10/14; col. GC 211.]
I have been using that quote elsewhere. In other words, when digital content is faulty, the problem is usually remedied quickly through an update.
The proposed amendment would apply to intangible digital content the same rights as apply to goods. So when intangible digital content is faulty, the consumer would also be entitled to a short-term right to reject, a limit to a single repair or replacement, and a final right to reject. Applying the full suite of goods remedies to digital content where it does not form part of goods, as it does in a washing machine, for example, would result in provisions that were not fit for the digital world.
We want provisions that encourage an increase in uptake and allow industry to innovate and flourish. This amendment would be a retrograde step, to the detriment of consumers. As the noble Lord, Lord Knight, who has already been quoted as a real digital expert, reflected in Committee, we must remember that many digital content producers are micro-businesses and start-ups, and we need to maintain an environment in which they can flourish and provide innovative products—while, of course, not letting them off the hook for substandard offerings.
The noble Lord, Lord Stevenson, made a number of good points, but I feel, as does my noble friend Lord Clement-Jones, that the proposals in his amendment could have unforeseen effects. A short-term right to reject intangible digital content and strict limits on the numbers of repairs and replacements would not be practical in the complex world we live in. In the digital environment, a fault in one copy of digital content may be replicated in all copies, or the fault may not be a result of an action by the trader at all. That is why a repair is a more equitable solution in the first instance than a full refund.
There are also issues around the practicality of “returning” intangible digital content. I think the noble Lord, Lord Stevenson, is suggesting that there should be an obligation on the consumer to delete digital content and on the trader to provide a refund. I do not believe it would be equitable or necessary to impose such a burden on consumers, who may not be technically savvy enough to achieve this—or not without assistance from the content supplier. Of course, many forms of digital content are quickly used, so the consumer may already have taken advantage of the digital content as much as they intended—for example, having viewed the film or read some of the e-book—before they reject it. There is a high risk that a short-term right to reject would therefore push manufacturers towards more restrictive data management techniques that would not be in the best interests of the consumer. Or it could cause the industry to be more conservative in its product offerings, reducing our competitiveness. Innovation would be chilled.
Looking to the future, it is also worth considering the moves in Europe towards a digital single market, and remembering that digital content is commonly sold across borders. The short-term right to reject is a domestic law; there is no short-term right to reject in the consumer sales directive from which many of the goods remedies derive. If we went ahead with a short-term right to reject intangible digital content, we could be out of step with Europe, creating problems for our manufacturers who want to sell across borders.
I believe that, although there are attractions in providing a short-term right to reject for digital content where it does not form part of goods, this would tip the balance of the Bill too far the wrong way. Indeed, it would be to the detriment of consumers, who would suffer from, at the very least, restricted product offerings and higher prices. I therefore ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
I thank the Minister for her full reply. I would like to come back on one or two of the points that she mentioned. I also thank the noble Lord, Lord Clement-Jones, for coming at me with rather less venom than he threatened me with outside the Chamber beforehand, when he implied that I would be mad even to stand up and make my speech. The bark was rather worse than the bite on this occasion, particularly as I have now discovered that, even though he had the correct item in his hand, he misquoted my noble friend Lady King. My noble friend is incredibly adept on the iPad, and was able to summon up the full quote, and of course it was about a different issue. I shall have words with my noble friend Lord Knight later: he gets quoted too often on these issues and, as I have discovered, he is not always sound on some of the points that we want to put through.
Lord Taylor of Holbeach (Con)
I am sorry to interrupt my noble friend, but the Minister has not replied to her amendment at this stage. I have a feeling that she would like to hear from the Minister before she replies to her.
Baroness Neville-Rolfe
I am grateful to the noble Baroness, Lady Oppenheim-Barnes, for her contribution today and in Grand Committee. I value her long experience and expertise on the subject of consumer rights, including from her time as Minister for Consumer Affairs—I asked at the department and gathered that she was a real livewire—not forgetting her experience at the National Consumer Council and elsewhere.
I am glad that she feels that the Bill process has been good, with pre-legislative scrutiny and stakeholder involvement. I think that is an interesting general lesson to learn. I agree that consumers and businesses should be educated about their rights and responsibilities effectively. We have made this point many times during discussions. I share the noble Viscount’s concerns about the amendment, because it is very wide ranging.
It also goes wider than the Bill. Consumers and traders need to know about the rights and responsibilities under other consumer legislation, too, such as the consumer rights directive. I can confirm that the regulations came into force in June this year. I thank my noble friend Lord Younger and his role in that process.
I agree with my noble friend that this is a very important area. We will not realise the benefits of the Bill unless the new rights are well understood and used. As part of our work preparing for implementation of the Bill, we have worked closely with business groups, consumer groups and enforcers to develop a high-level plain English summary of consumer rights because information is critical. That summary is being prepared to cover the various circumstances that arise from this legislation. It allows traders the flexibility to display the information in the most appropriate way for their business.
I do not believe that the mandatory approach suggested by this amendment is the most effective way of ensuring consumers are informed of their rights. There is a real risk that overloading a consumer with information at the point of sale would lead to them ignoring that information. Surely that defeats the object of simplicity and clarity. For many things—for example, newspapers or bags of apples—what the voluntary approach allows is common sense. There is also a risk of confusing consumers where retailers’ own policies are more generous than consumers’ statutory rights. A major retailer told us that it already offers terms more generous than the statutory requirements. It has built its brand on that and thinks that displaying information on core consumers’ statutory rights would undermine its message that a customer who was dissatisfied for any reason could bring the product back even if it was not defective.
We are therefore already developing wording that works. We have wording that can be adapted to various circumstances whether you are selling goods in a shop or online. We have business groups committed to promoting this with their members. We have consumer groups that are also committed to promoting this. I do not think that this amendment is the right way forward. Instead, a flexible, voluntary approach will work. Business groups support the voluntary approach, including the British Retail Consortium, the Federation of Small Businesses and the British Chambers of Commerce, all of which are critical to information provision to the many businesses involved and to good customer service and good consumer care. I believe in a simple, clear framework of law. That is important to good traders as well as to rogue traders, to pick up a point made earlier.
The information provision is being done as part of the work of the implementation group, which also involves Which?, enforcers, Citizens Advice and others. I agreed in Committee that other relevant consumer rights, such as that in the consumer rights directive, should be part of the information dissemination process. I do not think that this is the right way forward. I have had useful discussions with my noble friend Lady Oppenheim-Barnes and I ask her to withdraw the amendment.