Enterprise Act 2002 (Part 8 Domestic Infringements) Order 2013

Lord Popat Excerpts

Wednesday 6th February 2013 Grand Committee

Moved By

[Lord Popat]

That the Grand Committee do report to the House that it has considered the Enterprise Act 2002 (Part 8 Domestic Infringements) Order 2013,

Relevant document: 15th Report from the Joint Committee on Statutory Instruments

[Lord Popat]

My Lords, this is a short but not insignificant order that will enable the effective enforcement of the Consumer Protection (Payment Surcharges) Regulations 2012. The regulations implement into UK law Article 19 of the European Union consumer rights directive. They prohibit traders from charging consumers above-cost payment surcharges. The Government have had concerns about the level of card surcharges that exceed the real costs in several sectors of the economy. Such surcharges are typically employed as a form of drip pricing, whereby the consumer does not see the final transaction cost until after completing several forms. That can make it more difficult for consumers to shop around. Under the regulations, surcharges for using a particular form of payment will become cost-reflective.

The provisions of the directive need to be implemented in UK legislation by December 2013 and brought fully into force by June 2014. Given the concerns that have been raised about these practices—notably by Which? and in a report by the Office of Fair Trading—the Government have decided to implement this part of the directive early. The payment surcharges regulations were made and laid before Parliament on 19 December last year under the negative resolution procedure. As with this order, they come into force on 6 April 2013. They are not of course the subject of the Motion today but they are directly related.

Article 2 of the order provides for the enforcement framework in Part 8 of the Enterprise Act 2002 to apply in relation to the regulations. This enables the relevant enforcement bodies to apply to the courts for enforcement orders against traders that have engaged, are engaging or are likely to engage in conduct that breaches the regulations, if that conduct harms the collective interests of consumers in the United Kingdom. Taken together, the regulations and this order will provide an effective enforcement regime in fulfilment of the directive’s requirements that adequate and effective means exist in national law to ensure compliance with the provisions of the directive and that penalties laid down for breaches of the directive are effective, proportionate and dissuasive.

Although the payment surcharges regulations implement an EU directive, Article 2 of the order specifies them as a domestic infringement rather than a community infringement for the purposes of the 2002 Act. This is because the obligations in the regulations take effect from April 2013, whereas the EU directive requires them to take effect only from June 2014. The order does not therefore strictly relate to infringements of EU law in the period up to June 2014. For this reason, and unlike the regulations, the order is subject to approval by both Houses of Parliament. I beg to move.

[Lord Stevenson of Balmacara]

Did the noble Lord, Lord Lucas, wish to speak?

--- Later in debate ---

[Lord Kennedy of Southwark]

My Lords, I thank my noble friend for that. I should have jumped in before him, so I apologise for not getting this right. I wanted to ask one question about the impact assessment and the opt-out for small businesses. I do not believe in extra burdens and regulation for businesses, but it seems odd to me that we seem to be saying that, by allowing business with fewer than 20 people to opt out, they can carry on overcharging customers. It seems odd and unfair that they will still be able to make these charges, but generally I think that this is a great order and I am delighted that it is being brought in.

[Lord Popat]

I thank the noble Lord. He is quite correct that this order will prohibit traders from charging consumers above-cost payments; in other words, the charges will not exceed the real cost of the goods or services bought from the trader. We are implementing this in December 2013, largely due to our own research and that of Which? magazine, which brought this to our attention. The European directive will be enforced in 2014, so it will be good for consumers. The European Commission is looking at the payment separately under the financial services regulations. We will obviously get this information in due course. It is our policy to exempt microbusinesses from the new regulations until 2014. They are small businesses that employ probably fewer than 10 people, but they are crucial for growth and we have to support and encourage them. That is my response to the questions about small businesses.

[Lord Kennedy of Southwark]

May I push the Minister a little further on that? It just seems very odd to me; I want to see small businesses and the economy grow, but if I am running a small business, I do not see why I should overcharge my customers. That does not seem like good practice and we should not allow it because it is not fair. I hope he will explain the point he is making. Why should small businesses be able to overcharge when big businesses cannot?

[Lord Popat]

As I said earlier, microbusinesses are crucial to growth. As a small businessman myself, I want to give value for money to my customers and do not want to make them pay any unnecessary charges, because I want to make sure that I get my repeat business. It is our policy is to exclude microbusinesses. The regulations will apply from June 2014 and not from December 2013.

Motion agreed.