Clause 202 - Domestic infringements

Enterprise Bill – in a Public Bill Committee am 8:15 pm ar 23 Ebrill 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne 8:15, 23 Ebrill 2002

I beg to move amendment No. 46, in page 145, line 32, after '(2)', insert—

'or is an unfair commercial practice'.

Photo of Derek Conway Derek Conway Ceidwadwyr, Old Bexley and Sidcup

With this it will be convenient to take amendment No. 47, in page 146, line 19, at end add—

'(8) For the purposes of this section an ''unfair commercial practice'' is an act, omission or course of conduct, whether or not it involves a contravention of any enactment or rule of law, which contrary to the requirement of good faith, is deceptive or unfair and which causes detriment to the economic interests of one or more consumers.

(9) In determining whether an act, omission or course of conduct amounts to an unfair commercial practice, the court shall take into account—

(a) the nature of the goods or services in question;

(b) the circumstances of the consumer or consumers in question, including their ability to understand the character, nature and language of any prospective or actual obligation;

(c) the terms of any contract related to the act, omission or course of conduct;

and the court may have regard to whether it involved or involves any of the following—

(d) any misleading or deceptive statement made by the person in question;

(e) any undue influence or pressure exerted by that person on a consumer;

(f) any exploitation by that person of a consumer not reasonably able to protect his own interests because of physical or mental infirmity;

(g) any failure by that person to disclose any information which a reasonable consumer would expect to receive in the circumstances;

(h) any failure by that person to comply with a consumer code of practice (as defined in section 8(4) of this Act) which he claims to follow.

(10) Without prejudice to the generality of subsection (9) above, the following are indicative and non-exhaustive examples of acts, omissions or conduct which may be regarded as unfair commercial practices—

(a) refusing to leave a consumer's home until a contract has been signed;

(b) putting pressure on a consumer to sign a contract by stating that the same goods, service or price will not be available later when this is not the case;

(c) exaggerating the dangers to which a consumer may be subject to persuade him to buy an insurance policy or other protection product;

(d) pressurising a consumer to sign a contract without a reasonable opportunity to study its contents;

(e) without good reason accompanying a consumer from his home to obtain money for a purchase;

(f) selling goods or services which are clearly unsuitable, having regard to the consumer's apparent disability or infirmity;

(g) awarding a prize which promises a free offer or reduction in price for goods or services which are not in fact available;

(h) promising a prize or award or where the cost of claiming it exceeds the value of the prize or award or where the value of the prize or award cannot be used without further unrevealed expense by the consumer;

(i) unreasonably delaying consideration of a complaint by a consumer under the terms of the contract or requiring the consumer to meet onerous conditions before the complaint is considered;

(j) unreasonably delaying consideration of a claim under an insurance policy or other protection product;

(k) failure to keep a consumer reasonably informed about matters related to a contract which affects him;

(l) obstructing a consumer who attempts to terminate a contract.'.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

The hon. Member for Twickenham rightly said that, for many, this is one of the most important parts of the Bill. For that reason, I make no apology for developing my arguments at some length. If I can develop our arguments in sufficient detail, the need for a clause stand part debate might be obviated, which would be desirable only because of the time constraints under which we find ourselves.

Our amendments are by no means perfect. They are a reasonable attempt to tackle a problem. I am indebted to the National Consumer Council for its input and drafting, and to that extent these are probing amendments. I accept immediately the problems of definition involved. The proposals are a fairly significant departure in English law, although not one that other countries have found particularly difficult. We have at least tried to plug a gap in legislation in good faith and with the limited resources available to us and the consumer organisations. At the first hint of the Under-Secretary accepting the principle, I would with alacrity relinquish the task of drafting to the Wykehamists and the double firsts from the civil service who whisper in her ear on a regular basis.

We give a broad welcome, as do the consumer groups, to the extension of stop now orders and the attempt to make the remedies available for obvious and serious breaches of consumer protection more relevant and immediate. Having said that, it is not all good news. We think that the Government have missed a historic opportunity to give real help to consumers. It is a sad fact, as we have discussed before in this Committee and on Second Reading, that we revisit consumer law only about every 30 years or so,

so it seems a shame to waste the opportunity when it comes around.

The Government have set their face against a new duty not to trade unfairly, even though it is supported by all the major consumer organisations. As I will go on to describe, that new duty would offer to the most vulnerable, such as the sick and the elderly, a broad measure of protection from a whole new range of scams. Because the Government have turned down the chance to close some major loopholes in consumer protection legislation, the result of the new provisions will be that the tricksters will stay one step ahead of the enforcement authorities. In short, the Government have let consumers down.

Only the other day, the ''Stop Shark Practices'' campaign was launched in Portcullis House by several leading bodies, in particular the National Consumer Council. The NCC chairman, Deirdre Hutton, and representatives from the Consumers Association, the National Association of Citizens Advice Bureaux and the Trading Standards Institute were present. They were trying, in a nice, friendly way to keep up the pressure on the Government. The hope is that, while there is the opportunity, the Government will grasp the nettle, whether through our amendments or in some other way. Such opportunities do not come up very often in the legislative programme.

The aim is to introduce a general duty not to trade unfairly. We have set out in proposed subsection (10) a non-exhaustive list of the types of activities that may be regarded as unfair. To those lawyers or non-lawyers to whom the word ''unfair'' sounds a bit vague, I would point out that the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contract Regulations 1999 already establish the concept of unfairness.

The NCC makes a particular issue of oppressive doorstep selling. The organisation told the story of an elderly lady who was visited, without invitation or appointment, by doorstep salesmen. They sold her a bed for £3,000—with various gadgets—which was entirely inappropriate to her medical condition and far too complex for her to use. They stayed in her home for five hours, until she signed the contract. I do not think that many elderly, frail ladies would be able to resist signing, if only to get rid of such ghastly people.

The amendments would provide some way of taking action against businesses that systematically adopt an unfair commercial activity against the collective interests of consumers. The enforcement body, whether or not it is the trading standards department or the OFT, could obtain an undertaking from such a business to stop the practice voluntarily. If the business did not do so, the enforcement body could bring civil proceedings for a stop now or enforcement order under the provisions in the clause.

Amendment No. 47 is drafted in negative terms. In an ideal world, the consumer bodies would have produced a general duty to trade fairly, and it sounds a touch Irish to impose a duty not to trade unfairly. However, as a matter of drafting, that is the right approach. Examples are drawn from the Unfair Terms in Consumer Contract Regulations 1994, which came

into force in July 1995. The regulations updated in 1999 include a non-exhaustive list of indicative terms that may be regarded as unfair.

A recent example of the OFT taking action was its investigation of fitness clubs. It stepped in and took action under the regulations to prevent those clubs from treating their members unfairly. Clubs were trying to exclude liability for death or personal injury. There was a lack of clarity about membership periods and cancellation charges, among other things, and a question over allowing clubs to make unrestricted changes to facilities.

We shall address the Government's amendment in more detail later. With some prompting from us, they have produced a draft exhaustive list of legislation and common-law duties to be covered by stop now orders, on which there will be further consultation. The NCC makes the point, with which we agree, that an exhaustive list will be prone to loopholes that could be exploited. It thinks that the Bill's wording merely needs illustration and that a non-exhaustive list would be more appropriate. We agree with that. The NCC refers to the fact that only certain sections of key consumer legislation are listed. For example, only sections of the Sale of Goods Act 1979—a large piece of legislation—that deal with implied terms are listed. The Under-Secretary may be able to shed some light on that matter. The NCC goes on to say that the Government measures do not go as far as it would like. Amendments No. 47 would provide an indicative list of unfair practices, which would cover unfair, innovative practices not currently caught by specific legislation.

Subsection (10) of amendment No. 47 sets out concrete examples of problems occurring at the moment. One danger of consumer protection legislation has always been that a practice or abuse is dealt with somewhat ponderously and laboriously, only to discover that the con artists have moved on and found a new activity from which they can make money from gullible and vulnerable consumers.

During the half-term break some weeks ago, I went to the Canary Islands with my family. As we strolled down a street, we were accosted by an English person who offered us something that said, in large letters, ''This is not timeshare''. Timeshare is a thing of the past, and con artists are now into something called holiday clubs. Those are a major abuse, and some of the briefings that we have received discuss them in detail. People used to make a fortune from timeshare, although one leading exponent has just been ordered to pay £36 million in compensation for his activities over a number of years—

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

That may be right.

In case hon. Members are worrying, I should say that my lady wife and I did not join a holiday club in the Canary Islands. We noticed, however, that the organisation involved was substantial and that it was run entirely by English people. That part of the world has a long tradition of such things, which first

appeared under the timeshare brand name and then under that of holiday clubs.

Proposed subsection (10) identifies a range of issues that are of interest not only to consumer organisations and trading standards departments, but to Members of Parliament, and I am sure that those present have come across at least a sprinkling of references to them in their mailbags and surgeries. One such issue is the refusal

''to leave a consumer's home until a contract has been signed''.

I mentioned the elderly lady who had people in her home for five hours. The amendment also refers to

''putting pressure on a consumer to sign a contract by stating that the same goods . . . will not be available later when this is not the case . . . exaggerating the dangers to which a consumer may be subject to persuade him to buy an insurance policy . . . pressuring a consumer to sign a contract without a reasonable opportunity to study the contents''.

It goes on to mention

''accompanying a consumer from his home to obtain money for a purchase'',

which presumably means frog-marching the hapless consumer to a cash machine to draw out money to pay for an item.

The amendment then refers to

''selling goods or services which are clearly unsuitable''.

I shall not to go into it in great detail, but Age Concern has sent all members of the Committee a very good report. I looked at the draft some weeks ago, partly because I am co-Chairman of the all-party group on ageing and older people. The report provides worrying evidence of the methods used to sell products such as special chairs and beds to elderly or disabled people, yet much of the high-pressure salesmanship involved avoids existing regulations. People who thought that they were replying to an advert for embrocation for their backs have ended up buying a massive and very expensive armchair. Some have been asked to pay enormous sums and to put down large deposits. Others have been blackmailed into buying a stair-lift by being given a worrying picture of what life would be like if they could not get up the stairs. Some of the items involved are incredibly expensive, such as a rise and recliner chair that cost £4,350. So the report goes on; I commend it to the Under-Secretary and to members of the Committee.

Another scam involves

''awarding a prize which promises a free offer or reduction in price for goods or services''.

Interestingly, we were told on the street in the Canary Islands that we had won a prize. It never materialised, but it was supposed to be enough to get us into the premises just around the corner. The amendment refers to a whole series of other scams, including—last, but not least:

''obstructing a consumer who attempts to terminate a contract.''

Back in 1973, when part III of the Fair Trading Bill was debated in Parliament, Sir Geoffrey Howe, as he is now, said that its purpose was to create a climate in which the overwhelming majority of traders who dealt fairly with the public could continue to flourish without interference, and in which the minority who

maintained an unhelpful attitude to justified complaints by consumers would see sense and, in the end, the necessity of mending their ways and improving their standards. I think that it would be fair to say that all members of the Committee believe that part III of the 1973 Act has simply not lived up to the ambitions that people had for it. The provision was supposed to have been targeted at traders who followed a consistent course of conduct that was unfair and detrimental to consumers. None of us regrets the passing of part III. We merely want it to be replaced with something more effective and immediate.

I am pleased to say that a variety of other bodies supports the amendments. I have a letter from the Institute of Plumbing, in which it expressed support for the NCC's proposals. It states:

''The addition of a 'general duty not to trade unfairly' will help protect the public from unscrupulous and sometimes dangerous traders in our industry and elsewhere.''

The Law Society—curiously so; I would have expected it to have reservations, but the opposite is the case—has a particular reason for supporting the amendments. It states that

''legal services are usually a 'once off' ''—

let us hope that remains the case—

''and—frequently—a 'distress' purchase and so most consumers do not have a ready framework against which they can judge and compare price and service.''

The Law Society then speaks about the so-called ''claims farmers'' or self-styled tribunal advisers who resort to pressurised selling techniques that involve repeated cold-calling by telephone and repeated unsolicited visits to consumers' homes. It states:

''Part of the selling process can involve pressurising the consumer to overstate their claim with the consumer being given an unrealistic picture of the compensation that might be available. The consumer is persuaded to enter a complex agreement''—

one that he simply does not understand—

''concerning the purchase of insurance and/or the fees and expenses that will have to be paid''.

The Law Society is therefore firmly supportive of those two amendments.

It is fair to say also that there are some less enthusiastic voices. The CBI is concerned about the extension of stop now orders. It says

''They have been used extensively by the OFT since their introduction in June 2001 but they have operated with a total lack of clarity and certainty of process.''

It went on to discuss the delay in producing guidance, but we were fortunate to received guidance on stop now orders on the day of Second Reading. It then said that it would be ''looking for necessary safeguards''.

The joint briefing from the Local Government Association and the Local Authorities Co-ordinating Body on Regulation Standards is generally supportive, but it echoes a point that we made on Second Reading and have made more than once in Committee. It states:

''these proposals will inevitably increase authorities' workloads. After consulting our member authorities, we believe that additional

resources will be required for trading standards departments in the region of £10–£15 million.''

I want to press the Under-Secretary on some of the scams and abuses that the consumer organisations say will not be affected by this part of the Bill, not even as amended by the Government's amendments, which we shall discuss in more detail in another debate. It seems fairly clear, to use the words of NACAB, that

''the scope for action will comprise existing legislation''.

In other words—I shall not be churlish about it—powers are quite laudably being extended to a range of activities that are the subject of existing legislation, whether primary or secondary. That will make a difference to many consumers, but NACAB goes on to say:

''For the CAB Service the acid test of whether the Enterprise Bill will bring improvements for consumers is whether it will mean an end to practices like the following'',

and it lists a number of activities of rogues and tricksters which they believe will not be affected by this part of the Bill. Again, I expect the Under-Secretary to deal with those issues.

NACAB further illustrates the point with the story of some CAB clients in the London area who were pressured into buying a holiday scheme:

''They attended a presentation, having been told they had won a holiday, at which they were sold Canal-Time on a houseboat. When they tried to withdraw, they were told that they must pay £595 in administration costs or the company would sue for the full cost of the deal—£9,445. They did not get cancellation rights under timeshare legislation because boats are not included under current timeshare legislation.''

Pyramid money-gifting schemes are also mentioned; some hon. Members will have come across those. The example given is of a retired man from the north-east. He

''invested his savings on the promise that the returns were guaranteed. He lost everything and is now receiving money advice from the CAB for non-priority debts of over £333,000.''

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

I am grateful to the hon. Gentleman for having tabled the amendments. Now that we have moved on from the CBI-influenced amendments that we considered earlier, we can be sure that we shall deal with a lot of interesting information from the National Consumer Council and the citizens advice bureaux—there are some seven examples in the NACAB briefing. Another area is junk mail—an incredible rip-off practised on the poor and vulnerable—which ties in with many of the other methods that have been described.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I am grateful to the hon. Gentleman—he makes a telling point—if a trifle worried whether some of my amendments will pass muster as far as he is concerned. I have lurched to the left in no uncertain fashion.

Credit repair scams, which we shall probably discuss when considering the part of the Bill dealing with insolvency, are also referred to by NACAB. It reports:

''Clients of a CAB in South London contacted a local credit repair company who promised to repair their credit rating in two weeks for a fee of £400. The clients received no help at all from the

company. When eventually the clients visited the offices of the company, they found that the company was no longer in existence.''

I have already touched on the really big problem, that of timeshares and holiday clubs. Of principal concern are sales of timeshares that do not involve a specified building, and those involving periods of less than three years, thereby removing themselves from the scope of current legislation. As I understand it, and as NACAB and others read the legislation, the Bill will not deal with that. NACAB goes on to say:

''Many companies try to avoid the legislation and evade the cooling off period by designing a product so it is not a time-share in the legal sense.''

NACAB's briefing gives several examples of clients being taken for a ride by timeshares that call themselves holiday clubs.

Doorstep and distance-selling is a problem not just for the average consumer but, as I have tried to describe by reference to the Age Concern report, for the elderly and housebound.

Photo of Ken Purchase Ken Purchase Labour/Co-operative, Wolverhampton North East

We have heard of some very sad cases, and behind each of them is the human story of someone who has suffered great distress. Will the hon. Gentleman tell us how the general duty suggested in his amendment would protect the victims in such cases? It has been my sad experience that, whatever law we have, there are exceedingly vulnerable people—sometimes not up to the mark in understanding what is happening to them—who suffer. Almost every example that he has given has involved a person in that sad condition.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

The hon. Gentleman makes two points. One is that many people have remedies available to them, but they do not find out about them or are not in a position to use them—they do not want to go to court or cannot afford it, or they simply do not know where to find the right advice when they are in difficulties. However, I am concerned about those who are covered by the main point that the hon. Gentleman quite rightly made: those who are not protected by any current legislation or regulation.

The point of a general duty—I do not claim to have got it right, and neither does the NCC—is to ensure that it moves with developments. The timeshare issue is a perfect example. The same people and organisations—the same tricksters—will just move on. They make their money out of classic timeshares while they can. Eventually, a campaign emerges, MPs agitate and legislation is passed to tackle the issue, but the tricksters are already one or two steps ahead. They have already taken on board the new legislation and are doing something very similar but cleverly ensuring that it is not caught by the law.

However, I am more than conscious of the safeguards that we would have to build into a general duty to ensure that the decent business or the fair trader is not caught. If somebody were to buy goods or services without any pressure or misrepresentation from the seller, but decided that they wanted their money back and somehow found a way of turning the clock back, that would not be right at all.

I was making the point that doorstep and distance-selling are particular problems for the elderly and the housebound. NACAB says:

''CAB clients experience a range of distance and doorstep sales where current legislation fails to offer protection, either because the sale is excluded from the Distance Sales Regulations or because the client initiated the home visit.''

That is an important point. All too often, people selling incredibly expensive and inappropriate equipment can get away with it because the client initiated the visit and contacted them in response to an advertisement in, say, Saga magazine. NACAB goes on to say:

''CAB clients from the eastern region found that they had no cancellation rights when they were sold a package holiday, following an unsolicited phone call. They paid £553 deposit and, having given their credit card details, feared the remaining balance . . . would also be taken.''

On pressure sales in general, NACAB supplies the following example:

''A 90-year old client with Huntingdon's disease was sold an adjustable bed, which she feared would not suit her at the time of the home purchase. On delivery her fears were proved correct but by then the cooling off period had passed. The company would not refund the £300 deposit but offered to lower the bed, replace the mattress, and fit rails, clearly indicating the unsuitability of the original product.''

There is also the question of rogue traders. We all know about jobbing builders who charge elderly people thousands of pounds to do badly a rather simple job. Some people are charged enormous sums for emergency plumbing jobs. The Under-Secretary also touched on the issue of homeworking. It seems that that is already covered by the Bill or previous legislation, and I welcome that.

I should like to raise one other issue: extended warranties. I undertook to do so during consideration of the Bill when I appeared on ''Watchdog'', so it is the very least that I can do. When we buy a piece of electrical equipment, aside from the sheer complexity of making it work, we often have to deal with being pushed quite hard by the salesman to buy a one, two or three-year extended warranty at some extra cost. I gather that in the cut-throat world of electrical retailing, a large chunk of the profitability comes from the sale of those warranties.

There was a large electrical retailer called Tempo, which went bust and into administration. Thousands of customers who had purchased external warranties called cover-plans discovered that they were, in effect, worthless. It all rather depends on how they paid for their equipment, but thousands of customers found that they had no rights to call on the warranty because the funding had not been ring-fenced. There is no requirement to insure that fund so that the money is available regardless of whether the company continues, and there is no legal obligation to ring-fence the funds by putting them in a separate trust or escrow account. Legitimate companies, such as Dixons, do that. They follow the code of practice of the British Retail Consortium and put the moneys on one side to ensure that they are protected and do not disappear into a black hole if the company goes into administration.

Some 100,000 customers of Tempo, who had paid good money for such protection, have been left without any recourse. Many of the company's other customers were taken over by Dixons and entered into its cover-plan, and that is commendable, but that is yet another example of a major loophole in the current law, which is not addressed by clause 202 or by the Government amendments that we will debate shortly.

We have an opportunity—perhaps just once in a parliamentary lifetime—to get this right. I am not saying that our amendments are exactly right, but the principle is important. If we can bring together all the best consumer organisations—the NCC, the Consumers Association, NACAB, the Trading Standards Institute and others—in a unanimous campaign to persuade parliamentarians that we should go that bit further to try to tackle exactly the sort of issues raised by the hon. Member for Wolverhampton, North-East, we should at least see whether there is a way of meeting their expectations while having some regard for the understandable concerns and reservations of business organisations such as the CBI.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry) 8:45, 23 Ebrill 2002

I put my name to amendment No. 47. The hon. Member for Eastbourne put his lengthy case extremely well and covered many of the points that I would want to make. I shall start by going back to basics. Why are we so concerned with consumer protection and the need to spell out in such detail how consumer protection provisions should work? The purpose underlying much of the legislation is to provide more competition. There are many contexts in which it is necessary but not sufficient to protect consumers. Consumers encounter problems in the market because of asymmetric information—as economists call it—excessive complexity, and lack of balance in bargaining power, which make the relationship unsatisfactory. There is a failure in the market, and a responsible Government must intervene. We are concerned with how that should be done.

We are concerned about the concept of mis-selling, which does not necessarily involve criminally fraudulent actions. Of course, there are purists who say that there is no such thing as mis-selling, only mis-buying, because the fault lies with the consumer—caveat emptor. However, I know that the hon. Member for Eastbourne and most Labour Members share my view that there are many examples of mis-selling.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

I would not want entirely to disagree with the last proposition relating to mis-selling and mis-buying. It strikes me that a significant number of consumers seem to have hard-luck stories with which we might have some sympathy, but there is also a brigade of people who want something for nothing and are out to get the free prize. There is some difficulty in framing any law in such a way that it protects the interests of every last hapless consumer.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

That is right, and the reason why the amendment is couched in such elaborate and detailed terms is precisely to capture genuine cases of

mis-selling. The hon. Member for Eastbourne fairly recognised the difficulties of trying to legislate in this area. A good example of the extent of mis-selling, rather than mis-buying, which was taken up initially by the Under-Secretary's predecessor as Economic Secretary, the right hon. Member for Leicester, West (Ms Hewitt), was the mass mis-selling of pension policies, when many of nurses and miners were diddled out of their pension entitlements as a result of aggressive—

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

Legally, it was not fraud. It involved practices that we are trying to capture in legislation, and compensation had to be sought, but the problem is that it was not fraud. We are therefore trying to frame the Bill in such a way that it catches mis-selling.

Photo of Jonathan Djanogly Jonathan Djanogly Ceidwadwyr, Huntingdon

I certainly agree that it is sometimes a question not of fraud, but of the methods involved. A constituent wrote to me, saying that the terms and conditions were written in the tiniest letters possible on the back of a document that they had received, and that they therefore had to pay extra for something that they thought would cost a certain price. Technically, that was not illegal, but it was certainly sharp practice.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

The phrase that the hon. Gentleman finished on—sharp practice—best describes the problem that we are trying to tackle. The hon. Member for Eastbourne made it clear that we are trying to define activities that are not currently illegal, but which involve attempts to use sharp practice to get around the law. That is a difficult concept to grasp, but we are trying to do so as far as we humanly can. Those who drafted the clause were quite heroic in attempting to put together language that captured all the contingencies that we could plausibly imagine.

There are clearly two ways to capture what we have in mind. One would be to establish a brief general legal duty, but the Under-Secretary told us on Second Reading that that was not possible. Life would be much easier if it were, but if she sticks to the position that it is not, we shall be forced to spell everything out in a highly prescriptive way. I agree with the hon. Member for Eastbourne that our proposals are exploratory, and I am sure that there are all kinds of technical failings with the list and that clever people from all parties in the other place will have a go at it and produce something better. Essentially, however, we are putting down a marker.

I am sure that the Under-Secretary will not accept our proposals in their present form, but I challenge her to confront some of the specific activities that the CAB and others have raised with us. Although they are not currently illegal, they clearly involve serious sharp practice, and I ask her to tell us how they will be dealt with under stop now or other provisions.

I shall rattle through a couple of examples, while trying to avoid duplicating those that the hon. Member for Eastbourne detailed. Pyramid selling is common practice in eastern Europe, but I assumed that it had largely been banished from sophisticated western countries such as ours and that most people had understood the problems. However, the women's pyramid-selling scheme reminded us that the problems

are still very much alive and with us. Under amendment No. 47, people who wilfully promote a pyramid-selling scheme could be caught by proposed subsections (9)(d) or (10)(k). If the Under-Secretary thinks that that approach is defective, how would she deal with such schemes? Does she envisage that powers under the Bill or under any other legislation would catch them?

Fraudulent prizes are another example of the problems that we are discussing, and I have come across them a great deal in my constituency, as I am sure other hon. Members have. Typically, people receive junk mail offering a free Porsche or a free Ferrari, and they need only ring in to claim it. When they do so, however, they are kept on the telephone for 10 minutes or cannot get through because tens of thousands of other people are ringing in. Behind the scheme, however, is a company that has leased a line through the Dutch telecom system and which charges £10 a minute. It will receive far more in revenue than it would cost to dispose of the Porsche—if there ever was one. Such schemes are clearly an attempt to deceive, but, as far as I know, they are not illegal under the Bill. They could, however, be captured under proposed subsection (9)(h) or the following provision.

As for high-pressure selling, the activities of ''Encyclopaedia Britannica'' salesmen were legendary when I was a kid. We have probably moved on from there—perhaps they have cleaned up their act, or not as many people buy encyclopaedias. However, we can cite many examples of the adoption of similar types of approach by, for example, those who tried to take advantage of the first wave of television cabling. There are numerous examples from my constituency of salesmen shoving their feet in the door, refusing to go away and insisting on several hours of negotiation with tired and often vulnerable customers. There are other examples of people promoting competing suppliers of electricity and gas.

A lot of high-pressure salesmanship goes way beyond ethical practice, and there should be some protection from it. Our amendments take that into account, and parts of subsections (9) and (10) are specifically directed towards that.

The Institute of Plumbing has been mentioned in relation to breaches of the codes of practice of trades groups. I have also had several discussions with the Federation of Master Builders, whose credibility has been undermined by its more roguish members. I am sure that members of the Committee have had experience with builders who have installed a defective damp-proof course, for example. When the customer tries to call in what looks like a guarantee, the builder is far too busy to come and do the repairs, or does not recognise the guarantee.

Those builders may have the Federation of Master Builders badge stamped on the letterhead of their notepaper, but they are clearly breaching the demanding standards set by their professional body. Other clauses of the Bill will give those codes of practice much more credibility, but we need a measure, under the stop now provisions, that specifically allows

the authorities to pursue those who deliberately and wilfully breach their intentions.

I cite one more example, from the financial services industry. About a year ago, I encountered a case of a man in his mid–70s who was sold a financial product that had value only through its terminal bonus in 20 years' time. Due to the complexity of the paperwork and the technical jargon employed by the salesman, he was persuaded to buy it. Some of our proposed subsections would prevent that kind of practice and enable trading standards officers to intervene.

There are many examples; I repeat them because I am challenging the Under-Secretary to say to us, ''We recognise that malpractice and mis-selling, but we have other solutions to the problem.'' If she can give us some other solutions, we shall go away content. However, if she simply says, ''It is all too difficult because these practices are not illegal and we cannot do much about them'', that would not be good enough and we would have to search for other remedies.

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire 9:00, 23 Ebrill 2002

This is a good probing amendment. If it were more than that and we were voting on it, there would be a problem, because I do not know whether the measures it contains would work. How would courts and trading officers interpret ''misleading and deceptive statement'' and ''undue influence or pressure''? The amendment should persuade the Under-Secretary, however, to discuss the ideas that it introduces. I hope that she will introduce a measure that tackles the practices more precisely.

We may have difficulties in deciding on a form of words that will work in these areas. The problem derives from the sophistication of the scams and the manipulation that takes place in an advanced and modern world. During our break, I popped into the Library and borrowed a copy of ''The Global Third Way Debate'' edited by Anthony Giddens. His introduction makes three points that are relevant to our considerations. He says that the world has changed due to globalisation, what he calls ''the knowledge economy'' and the growth of individualism in society.

I referred to the phenomenon of junk mail, which attempts to persuade people that they will win something if they will only send some money in, after which they get next to nothing back. That is a massive globalised scam activity. When someone's name is known from his having filled in a form on one occasion, it is fed into a massive network of material that comes from all over the world. The Royal Mail, or whatever it calls itself nowadays, is involved in that activity as a provider of cheap postal facility arrangements; indeed, it has a publication that encourages people to chance their arm in the attempt to win things. We are all involved in that society on a wide basis.

We are also part of the knowledge economy. Such phenomena as the internet and the training given to people in advanced skills present a massive problem, because the techniques used to dupe people become cleverer. Many people are uninvolved and therefore vulnerable to progress. I have difficulties even beginning to understand the instruction books for

mobile phones, for example. That is the sort of society in which we live, and it is easy to influence and control people in such circumstances through the small print of the forms that they fill in.

As for individualism, old communities have broken up and people are now highly mobile. They lack links and connections and are dependent on their own wit and understanding to interlink with groups of people who feel the same as they do, who no longer live just around the corner. That isolation means that there is none of the community backing that people used to have, so they have to be able to scan the small print. Legislation needs to take into account what Giddens is saying; that the world has changed dramatically and people are subject to even stronger manipulative influences from those trying to make a fast buck.

Photo of David Borrow David Borrow Llafur, South Ribble

Does my hon. Friend share my concern that many scams and much high-pressure salesmanship will be difficult to define? If 99 people out of 100 were not susceptible, one could make a strong argument that a reasonable person would not be taken in by such salesmanship. Therefore, one is drafting legislation to save that one person in 100 who may be vulnerable to manipulation and techniques. I would suggest that that is not the usual way in which legislation is drafted, as a common assumption is that legislation is based on how a reasonable person would react to something. In this case, we are discussing a situation in which 99 people out of 100 would not be manipulated in the way that we have described. [Interruption.]

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

My pager might have been vibrating, but it did not make that noise.

My hon. Friend makes an important point, but the ratio of those susceptible to scams is probably more than one in 100. A whole group in society is excluded from the sort of knowledge to which I have referred. However, it is generally accepted that people should have understanding and knowledge and be able to work out the details and the implications of the system, and that those without that knowledge are not catered for, or are simply rather foolish.

However, we are talking about a big sub-group, and we should try to ensure that the legislation takes care of their problems and assists them in handling those situations.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

In response to the intervention that he took from the hon. Member for South Ribble (Mr. Borrow), the hon. Gentleman seemed to be confusing two quite different legal principles. If consumer protection legislation is to mean anything, it must protect the vulnerable and the elderly; the one or more people in every 100 who are caught by scams, and not the smart, sophisticated city lawyer—I mean no disrespect to my hon. Friend the Member for Huntingdon—who is well able to take care of himself.

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

I took my hon. Friend's point to be about the nature of the legislation that we are about to pass. We might think that legislation is for the reasonable person and that they should act in accordance with its provisions, and therefore that all

those other cases were pushed away to the horizon of our understanding. It is important that we concentrate on that problem.

Photo of Ken Purchase Ken Purchase Labour/Co-operative, Wolverhampton North East

I return to Giddens and his third way. Is he not a man who had an understanding of the nature of individualism, and recognised that it was part of the culture of capitalism—in other words, that human greed drives most people—which is why people are susceptible to so many scams? Does the Committee agree that a change of culture to a more socialistic understanding of enterprise would improve the consumer position of so many people, and that many of those laws would not be required?

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

I was not trying to sell Giddens, nor was I involved in my own form of junk mail or a junk presentation of positions; I was merely using a reasonable analysis to say that some changes in society, such as globalisation, the knowledge economy and individualism, are important and that we should respond to their characteristics. To me, the programme for socialism is somewhat different from what it used to be, and we have had to adjust ourselves to it.

Photo of Derek Conway Derek Conway Ceidwadwyr, Old Bexley and Sidcup

Order. We started with the amendment. Let us not wander too far down the theoretical route.

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

I am afraid that my hon. Friend the Member for Wolverhampton, North-East led me in that direction, but he shared some important thoughts with us.

I want to say a bit about the junk mail game. In the last Parliament, I had a meeting with a Minister at the DTI, and I took a large black plastic bag packed full of letters—400 of them—that had been received by one constituent. On one occasion, she had filled in some of the forms and immediately become a subject of a scam. Those letters were only a small part of the mail with which she was inundated.

A regular column in The Daily Mirror seeks to trace such mail and tackle the problem. The usual scam is that readers are told that they have won some money and that if they send material or resources back, a prize will be theirs. The pieces are worded in such a way that if one reads it carefully, one can see that that has not happened. Something is often offered in return for a reply; a lucky charm perhaps, or something of a similarly worthless nature.

Photo of Jonathan Djanogly Jonathan Djanogly Ceidwadwyr, Huntingdon

Would the hon. Gentleman add to his list junk e-mail, which is becoming increasingly annoying? I received a letter from a constituent only last week complaining about pornographic junk e-mail that his eight-year-old daughter had received the previous day.

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

Junk e-mail is certainly a problem, especially if received by those for whom it was not intended. Many of those who use e-mail are part of what is known as the knowledge economy, but many of those who receive junk mail are not in that category. Paragraph (h) of amendment No. 47 contains a provision relating to prizes and awards, which tries to deal with that problem.

There is not only junk mail that tells people that they have won money when they have not. There is also junk mail that tells people that they have had a lot of bad luck recently, and they are offered assistance by someone who gives some sort of psychiatric help to break their run of bad luck. It is obviously financially worth while for people to run such scams because sufficient numbers of people respond.

Other scams guarantee that people will win money on the lottery. They provide people with a perm of numbers, which requires them to pay a fortune to enter. There are similar to scams to do with filling in football pools, often from Keynsham in Somerset. There are many problems that need to be tackled and the Bill gives us an opportunity to do that. They are difficult problems but it is not the first time that they have been raised with the DTI.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster 9:15, 23 Ebrill 2002

I shall keep my remarks brief because I know that the Under-Secretary is champing at the bit to respond to the debate.

Many of the examples cited by my hon. Friend the Member for Eastbourne are entirely valid and reflect some of the sharpest practice. However, it must be said in response to the thoughtful contribution of the hon. Member for North-East Derbyshire (Mr. Barnes) that some people in society are motivated by greed, and no legislation can protect them; nor should it protect people who are gullible or greedy and think that they can get something for nothing. I am one of the 3 per cent. of the population who has never done the national lottery.

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

Sometimes people are under so much pressure that the national lottery, or something similar, is the only way out of their depressed state. Therefore, they will spend money on some mechanism that claims to be able to help them win. We should stop the scam and direct our attention towards the people who run those schemes; then we would not receive so much nonsense through the post.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

It strikes me that some scams will be very difficult to legislate against, not least because as soon as legislation is introduced, the scam artists move on to the next thing.

My hon. Friend the Member for Eastbourne made a valuable contribution. Clearly, there are some gaps in the current legislation, but I have some sympathy with the situation in which the Under-Secretary finds herself. I am a little concerned about the lack of definition of ''trading unfairly''. Effective enforcement is key to any such legislation. Much trading standards is in the hands of local authorities, many of which are caught for cash and unable to enforce many of their regulations, be they in relation to trading standards or planning, to the full satisfaction of their residents. I would be concerned about putting too much regulation into statute and then finding that we could not enforce it. I hope that the Under-Secretary will give some thought to our amendments, because they make some useful suggestions. Following the examples given by my hon. Friend, I hope that we can go at least some way to closing the loopholes that exist under the current law.

Miss Johnson: I have a great deal of sympathy for the motives behind the amendments, but it is important to obtain proper evidence of the extent and the nature of unfair commercial practices that are not already unlawful before rushing to legislate. I shall deal with how they may already be unlawful in a moment.

It is very important that new legislation is founded on a robust evidence base to ensure that it targets the right issues and does not create undue burdens on business. Although we have heard from the Opposition on several occasions today about the importance of not creating such burdens—I agree entirely, in principle—it is interesting that on this matter that point has not been made at all.

I will deal with a number of the specific points that have been made about scams, problems and sharp practices, because it is helpful to go through as many as possible. I cannot promise to deal with every issue that has been raised in what has been an extensive and full debate, but, as I said, I have a great deal of sympathy for the motives behind the amendment.

Many of the unfair practices that have been mentioned, including the sharp practices and the mis-selling covered by the hon. Member for Twickenham, will be covered by existing legislation and will either be Community or domestic infringements under this part. The draft lists I have made available to members of the Committee include, for example, the inclusion of unfair terms in consumer contracts, the sale of goods that are not fit for their purpose, misleading advertising and the giving of misleading price indications. I shall return later to the relevance of that to some of the examples that have been given. It is essential that existing legislation is enforced properly before we introduce new law. That is the purpose of this part of the Bill.

Significant extensions of the law are involved and I hope that hon. Members are taking them into account in their thinking as they consider problems with which many of us are familiar, perhaps because we have experienced them directly. It is not only little old women who experience such problems, but little old men and some who are not old at all. Even some in the City have been caught; I am sure that some smart City lawyer was caught by the wine scam. Some consumers are more vulnerable than others, but all of us are potentially vulnerable to such practices.

Photo of Jonathan Djanogly Jonathan Djanogly Ceidwadwyr, Huntingdon

We have continually spoken about vulnerable people, but I have not heard anyone say how ingenious the people who run these scams can be.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I am afraid that criminality and ingenuity often go hand in hand. Such ingenuity could be used for better purposes, which is how we would like it to be.

Amending the Bill as proposed by the amendments would have a significant impact on the current consumer protection regime and the full implications need to be properly considered. For example, it is difficult to define an ''unfair commercial practice''. ''Unfair'' can mean different things to different people, notwithstanding the point about unfair terms made by the hon. Member for Twickenham. Unless terms are

properly defined, the result will be vague legislation, which will take years of interpretation by the courts before a clear meaning emerges.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I assume that the Under-Secretary accepts that since 1977 there has been the Unfair Contract Terms Act, which defines the meaning of ''unfair''. A body of law has grown up around the meaning of the word ''unfair'', which could be translated into a provision in the Bill.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

It would be a matter for the courts to decide whether it was appropriate to transfer existing decisions in that way. Either way, the amendment would make it difficult for consumers to be certain of their rights, for businesses to be sure that they were complying with the law and for enforcement bodies to apply it. Much of what is proposed is as broad as the Fair Trading Act 1973. That Act was broad and brave, but it did not work for a variety of reasons that I know the hon. Member for Eastbourne will accept.

Photo of Charles Hendry Charles Hendry Opposition Whip (Commons)

Before the Under-Secretary moves on, can she say under what circumstances it might be fair to refuse to leave a consumer's home until a contract has been signed?

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I have said that I shall address individual cases in a moment, and will consider what redress, if any, might be available under existing legislation. Our consultations on the European Commission's proposals in that area have clearly demonstrated that business is concerned about the introduction of a general duty, defined in broad terms, which might result in ''fairness'' and ''unfairness'' being defined differently in different courts.

That brings me to Europe, which has been absent from our debate. As many hon. Members are aware, the Commission has published a Green Paper on the EU consumer protection regime. It proposes an option for tackling unfair practices. In that context, we are encouraging the European Commission to build up an evidence base about the extent of any problem and to focus on ensuring that existing legislation is properly enforced. If we have difficulties defining ''fair'' and ''unfair'' in a UK-only context, it will be even harder to do so in a European context, in which countries with diverse regimes might have to be considered.

The hon. Member for Eastbourne asked about the terms concerning the sale of goods covered in our list of community infringements. They are in the community list because of the scope of the sale of goods directive. All other breaches of contract are in the list of domestic infringements.

When someone receives an unsolicited visit, such as the elderly lady mentioned by the hon. Member for Eastbourne in the context of doorstep selling, the distance selling regulations provide for a seven-day cooling-off period. I accept that if one invites the salesperson in, one is not covered in that way. However, it is a criminal offence for the salesperson not to inform the consumer of his cancellation rights. The hon. Gentleman's example is covered in the Bill, under community infringements.

Mr. Waterson: The entire point that I was making to the Under-Secretary was that salespeople are getting around the problem by going to consumers homes after they have responded to an advertisement. That immediately takes the transactions outside of the provisions.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

Indeed. I have accepted the point in that case. We can construct any number of cases that will not be covered. I fear that whatever we do, there will always be scams, thanks to the ingenuity that hon. Members have mentioned and the degree of effort that goes into them.

I remind hon. Members that a consumer who asks a salesperson to call has the opportunity to check what is available elsewhere and to arrange for a friend or relative to be present. When an individual invites someone into his home, rather than experiences the unsolicited call that is covered in the Bill, it can be difficult to tell whether that can be defined as unfair. I shall go through some of the cases that have been put to us. Existing legislation provides some protection.

In the first instance, the Sale of Goods Act 1979 provides individual rights of redress. The Consumer Credit Act 1974 allows the consumer to pursue the credit card company for redress as well as the supplier. In other cases, the Sale of Goods Act 1979, the regulations covering doorstep sales included in the Consumer Protection (Cancellation of Contracts Concluded away from Business Premises) (Amendment) Regulations 1998 and the Unsolicited Goods and Services Act 1971 might provide the relevant protection. In many of the cases that have been cited, the Misrepresentation Act 1967 could provide additional rights of redress.

A point that we need to bear in mind, which has been made by a number of hon. Members, it is often a question not of no provision being made, but of enforcing the provision and/or the consumers' knowledge of the provisions and how to go about getting them enforced. We all know that many consumers do not have the wherewithal to take action. That would be same whatever legal provision was in place; it will still be difficult for some consumers to know what to do to obtain justice.

Another problem is extended warranties given by companies that have since gone bust. In such cases there will be no one to take the goods back, but that would not be changed by a general duty to trade fairly—or, if we so choose, a duty not to trade unfairly. As for the small print example given by the hon. Member for Huntingdon, regulations covering unfair terms require the terms to be plain and intelligible. If they are written in print so small that is difficult to read, they will breach the regulations, which is a Community infringement, so they are likely to be covered. We are also considering advertising and print size in relation to other issues.

Prize draws would be covered under the misleading advertising provisions. Pyramid selling, such as in the Women Empowering Women case, is quite tricky. We are certainly looking to see what can be done, but hon. Members must be aware that the system is based on

one individual giving a gift to another. No overall promoter is involved. Individuals simply pass the object on, as members of the Committee might do. The question is: who can we take action against? It is not entirely clear that a general duty would help. As for unsuitable products, such as the armchair that was delivered in place of the expected back embrocation, it is implied in the Sale of Goods Act 1979 that goods must be of a satisfactory quality and reasonably fit for their purpose; in that example, it would seem that the goods were not fit for the expected purpose.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne 9:30, 23 Ebrill 2002

I would not like the Under-Secretary to have the impression that the reason why those people did not have a remedy was that they thought that they were buying a can of embrocation but were sent an armchair. The point of my story was that those people originally asked a salesman into their home because they wanted embrocation, but by the time they got rid of him he had sold them an armchair. That is a slightly different problem.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

The question of people outstaying their welcome is obviously tricky. It is not clear whether it is a matter for consumer protection.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I agree with the hon. Gentleman that it is clearly unsatisfactory, and that it is not the right way for anyone to do business. However, this is not simply a matter of consumer protection. If someone who entered my home outstayed their welcome, I would regard that as something beyond the fact that they were trying to sell me something that I did not want. It would be a considerable infringement of all sorts of aspects of my home life.

Prize draws may be dealt with under the misleading advertising regulations. As for junk mail, people can register with the direct mailing preference service to reduce the amount of junk mail that they receive. However, I accept that it is a significant problem, and we are still looking at it.

Photo of Mr Tony McWalter Mr Tony McWalter Labour/Co-operative, Hemel Hempstead

I am listening to my hon. Friend's recital of the reasons why it is difficult to decide when a practice is unfair, but the Bill does not have much to do with the OFT. It seems odd, now that we have reached clause 202, that there should be all sorts of reasons why we cannot identify an unfair commercial practice. I hope that the Minister might be a little more positive. Particularly, I feel that we ought to do something about the selling of deeply unsuitable goods to disabled and handicapped people.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I have expressed considerable sympathy with hon. Members' intentions regarding the amendments. I hope that my hon. Friend does not think that I have been trying to argue about the difficulties. The various issues that people have raised are covered by elements of the Bill or other relevant legislation.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

May I first express my appreciation for the fact that the Under-Secretary is trying to engage with us and answer the points individually? That is very helpful to our discussion. In the context of her basic argument that there is substantial existing legislation that could be used by sophisticated

consumers, will she explain why the examples that we are citing were not, for the most part, brought to us by individual hapless consumers but by sophisticated consumer organisations such as NACAB and the Consumers Association? Those organisations have teams of lawyers who have looked at the legal remedies and found them wholly unsatisfactory. That is why they have prompted us to table amendments to introduce new powers. Has she discussed the matter with those bodies, and has she persuaded them that the legal remedies really do exist?

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

We are, obviously, in regular discussion with those bodies. I am sure that we will continue to talk about this issue for some time, not least because there will soon be a European dimension to the discussion as well.

In terms of the detailed examples, it is very difficult, without using an even more detailed example, to get both sides to discuss the issues connected with enforcing legislation. We need to be clear which legislation would apply and why it would or would not work. I am grateful to the hon. Member for Twickenham, because he gave some examples and specifically said how he thought the general duty not to trade unfairly would address the problems in them. However, in quite a number of the cases that we have been discussing, there is already provision.

A general duty not to trade unfairly would not in itself, any more than any existing legal provision, enable consumers to get redress. People would still have to be aware of it and find ways of making it bite on the person subjecting them to mis-selling or sharp practices. We have to find ways as a society of supporting them in doing that, through information or enforcement mechanisms. However, the issue would remain the same.

The hon. Member for Eastbourne was concerned about holiday clubs. Some of them do fall within the definition of ''timeshare'', even if those running them say that they do not. However, because of the overseas nature of timeshare, it is important that any necessary changes are effected by an amendment to the timeshare directive, which covers places such as the Canaries. It is particularly important to cover such areas.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I may have missed this, in which case I apologise, but has the Under-Secretary dealt with the question of extended warranties?

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I beg the hon. Lady's pardon.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I thought that I had covered that point. If a company has gone bust, there is nobody to take the goods back to. A general duty not to trade unfairly would not help that fact.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I withdraw my apology, because I remember that bit, but I did not think that it dealt with my point about the Tempo case. A simple change in the law is necessary, whereby companies that take money for extended warranties have to keep it separate. Perhaps we could return to that when we deal with the insolvency provisions. Such money

should either be kept in a separate account or protected by an insurance policy.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I am not briefed on the questions underlying the separation of the funding, but I would have thought that there may be issues relating, for example, to financial services regulations and other matters, which might be more relevant than the topic that we are considering, although I appreciate that the problem adversely affects consumers.

In conclusion, I am not saying that there is no future in considering a general duty to trade fairly, but it is difficult to see how that would help, and in some cases there is recourse to existing legislation. I hope that I have reassured hon. Members on a number of fronts in that context. We must be clear about exactly what problems any new legislation would need to address—to know what the evidence is and what the detriment to the consumer is—and to ensure that we do not duplicate existing legislation or make it difficult for legitimate businesses to operate. We want to ensure that consumers are fully protected, which is why we are extending coverage to ensure that a wider range of consumer protection is available, and making greater use of stop now orders.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

Let me repeat that we appreciate the extension of stop now orders, as do consumer bodies. If we had the time to debate the technicalities of how they work, we might be able to suggest how they could be made more effective, but it is unlikely that we will have that opportunity.

The more the Under-Secretary has dealt with the specific issues raised by hon. Members, the more she has made a case for a general duty. Piecemeal legislation introduced after the event keeps the House busy but is often ineffective to deal with new scams, which are often produced by the same old tricksters. I am not ungrateful for the Under-Secretary's efforts in dealing with individual points, but the fact that she has had to deal with those points as we have gone along shows why a general duty of some sort would be so much better.

In short, the Government have not tried hard enough on this issue. I would have liked the Under-Secretary to offer to think about the idea, to talk to people such as Deirdre Hutton of the National Consumer Council, to the Consumers Association and to NACAB, and table an amendment that would be more effective than ours. She has not said that she will, and unless she is prepared to make a further concession, I am minded to invite colleagues to press the matter to a vote.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I will clarify my position, because I am not sure that the hon. Gentleman characterised it accurately. We are sympathetic to the motives behind the amendments, but exactly what problems they are designed to address is not as obvious as the hon. Gentleman suggests. That is why I have gone through many of the cases individually. I accept that he thinks that it would be possible to draft an all-encompassing clause, but I fear that there would be difficulties doing so. There are no simple answers. If there were, I am

sure that previous Governments would have found them. Considerable ingenuity would still be applied to getting round a general duty to trade fairly. Some member states have such provisions, interpreting what is fair or unfair in their own way, but there is no evidence that they are having more success than we are in clamping down on scams. We are extending the infringements that will be covered by existing legislation, so that many unfair practices will be covered. I am open to further discussion about the evidence and the need for further measures, but the way forward is insufficiently clear for me to be able to say that I will table an amendment on Report.

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 8.

Rhif adran 3 Adults Abused in Childhood — Clause 202 - Domestic infringements

Ie: 5 MPs

Na: 8 MPs

Ie: A-Z fesul cyfenw

Na: A-Z fesul cyfenw

Question accordingly negatived.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry 9:45, 23 Ebrill 2002

I beg to move amendment No. 167, in page 145, line 43, at end insert—

'(e) an act done or omission made by a person supplying or seeking to supply goods or services as a result of which an agreement or security relating to the supply is void or unenforceable to any extent;

(f) an act or omission by which a person supplying or seeking to supply goods or services purports or attempts to exercise a right or remedy relating to the supply in circumstances where the exercise of the right or remedy is restricted or excluded under or by virtue of an enactment;

(g) an act or omission by which a person supplying or seeking to supply goods or services purports or attempts to avoid (to any extent) liability relating to the supply in circumstances where such avoidance is restricted or prevented under an enactment.'.

Photo of Derek Conway Derek Conway Ceidwadwyr, Old Bexley and Sidcup

With this it will be convenient to discuss Government new clause 7—Person supplying goods.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

Clause 202(2) gives the Secretary of State the power to specify by order the legislation and common law obligations, breach of which will constitute an act or omission for the purposes of the definition of a domestic infringement when it consists of anything done or omitted to be done, as set out in subsections (2)(a) to (2)(d).

Subsection (2)(a) provides for criminal offences and (2)(b) for breaches of contract. Subsection (2)(c) provides that in the order-making power are included things done or omitted to be done in breach of a non-contractual duty owed to a person by virtue of an enactment or rule of law enforceable by civil proceedings. Subsection (2)(d) provides that within the definition are acts or omissions for which legislation provides a remedy or sanction enforceable by civil proceedings. However, neither subsections 2(c) nor 2(d) would cover the situation in which an enactment created a sanction of unenforceability, restricted the

exercise of rights in relation to the supply of goods or services or prevented the exclusion of liability in relation to the supply of goods or services.

An example of the first of the situations is the requirement in relation to the form, content and signature of agreements in sections 60 and 61 of the Consumer Credit Act 1974, and the duty to supply copies of the agreement and notice of the right to cancel in sections 62 to 64 of the 1974 Act. In these cases the court can allow the agreement to be enforced except in cases set out in sections 127(3) and (4); for example, improperly executed agreements or security instruments. We therefore want to cover breach of these requirements when the sanction is unenforceability as a domestic infringement. There is potential harm to the collective interests of consumers if lenders fail to meet the requirements deliberately or without taking adequate care to ensure they do not fail. Consumers who are not aware of their rights will not know that the agreement is unenforceable and may consequently pay up. New subsection (2)(e) will cover that situation.

New subsection (2)(f) further extends the definition of a domestic infringement to include any act or omission by which a person purports or attempts to exercise any right relating to his supply of goods or services when legislation forbids him to do so in the relevant circumstances. Subsection (2)(f) will include, for example, the creditor who seeks to enforce a term of a regulated credit agreement when he has failed to comply with the statutory precondition for enforcement, such as the requirement to give the debtor or hirer seven days' notice of his intention to do so. A person who demands or accepts payment of sums when legislation relieves the payee of liability for them would be exercising a right within subsection (2)(f).

New subsection (2)(g) will include within the definition of a domestic infringement an act or omission by which a person supplying or seeking to supply goods or services purports to avoid or attempt to avoid liability relating to the supply when such avoidance is restricted or prevented under an enactment.

New clause 7 is consequential to this amendment. It repeats in substance section 138(4) and 138(5) of the Fair Trading Act 1973. That provides that in relation to the supply of goods under a hire purchase agreement, a credit sale agreement or a conditional sale agreement, the person conducting the antecedent negotiations, as well as the owner or seller, shall be treated as a person supplying or seeking to supply the goods. The effect is that in such agreements the dealer will be treated as the supplier as well as the finance company, which is technically the supplier under the contract with the consumer.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

We join the National Consumer Council in welcoming amendment No. 167. It is an improvement, although it goes nowhere near as far as we would like. I am sure that the following is right, but I shall repeat it so that the Under-Secretary can intervene if she considers that I am wrong; all the important and useful enactments and provisions to which she referred are part of existing law, whether it

be primary or secondary legislation in this country or something that has emanated from Europe. There is no basis upon which the clause, even as amended, can deal with the new problems and scams that we have been discussing.

The National Consumer Council makes the point that the Bill aims to cover situations in which a consumer uses an agent or other intermediary—for example, an insurance agent, travel agent or mortgage broker—to act on his behalf and is entitled to services as part of a separate contract. The NCC has concluded that, as a result of the amendment, it would be possible to deal with problems caused by such intermediaries through enforcement orders, as envisaged in the Bill. However, it sounds a note of caution. It has concerns about whether the Bill covers everything that might go wrong and wants further information as to whether all the common law duties of agents will be covered. For example, would it apply to a situation in which an agent fails to set up an agreement, such as a mortgage broker failing to set up an endowment insurance policy? If the Under-Secretary does not know off the top of her head, perhaps she can write to me.

Although NCC would have preferred amendments Nos. 46 and 47, it supports the aim of this amendment in seeking to stop traders' exploitation of consumers' lack of knowledge of their rights by attempting to exercise non-existent or restricted rights against them. It says that there are many examples of people who, already in severe financial difficulties, are misled, intimidated and exhorted to release their property to bailiffs and other debt collectors without proper processes having been followed. It also points out that it is unclear whether the wording of the amendment would cover a situation in which a debt is enforced by a business that fraudulently or recklessly claims to have supplied goods or services. Apparently that has been a major problem in the United States, where a business supplying internet services fraudulently claimed to have supplied web addresses. The Federal Trade Commission had the power to bar the practice and to publicise the case.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I am happy to write to the hon. Gentleman about those points.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

That is very helpful. The National Consumer Council also makes the point—which came up in a different context—that the Government have helpfully produced a draft exhaustive list of legislation and common law duties to be covered by the stop now orders, and that there is to be further consultation. It repeats the point that an exhaustive list, almost by definition, could leave loopholes that could be exploited. It expresses a clear preference for a non-exhaustive list.

The Under-Secretary might be able to deal with the next example by saying that it comes under community infringements. The only DTI legislation, it appears, is the Food Safety Act 1990, prohibiting the sale of unfit food and controlling quality standards. That is missing from the Bill, claims the NCC, as are other pieces of legislation that would directly benefit consumers. Perhaps that is another example of something that is dealt with in another list, such as the Community infringement list, in which case the

Under-Secretary can tell me and I shall shut up—temporarily—or she can write to me to clarify the matter.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

It is very helpful to have that made clear. Again, the Under-Secretary might want to consider that matter in her consultation on the draft list that she has so helpfully provided. We are not being critical for the sake of it, and we are grateful for what the Minister has tried to do in producing that exhaustive list—

It being five minutes to Ten o'clock, The Chairman proceeded, pursuant to Sessional Order D [28 June

2001]and the Order of the Committee [16 April 2002], to put forthwith the Question already proposed from the Chair.

Amendment agreed to.

The Chairman then proceeded to put forthwith the Questions necessary to dispose of the business to be concluded at that time.

Clause 202, as amended, ordered to stand part of the Bill.

Clauses 203 to 226 ordered to stand part of the Bill.

Further consideration adjourned.—[Mr. Pearson.]

Adjourned accordingly at five minutes to Ten o'clock till Thursday 25 April at half-past Nine o'clock.