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Consumer White Paper - A Better deal for Consumers

Kevin Brennan MP,  Minister for Further Education, Skills, Apprenticeships and Consumer Affairs (jointly with DCSF)
BIS Conference Centre, London,  02 July 2009

Introduction

Thank you Larry. Good morning everyone.

The publication today of our new Consumer White Paper - A Better deal for Consumers comes at a critical time for the UK.

Consumers are very much at the heart of our economy, driving the competitive markets which bring prosperity to us all.

But the downturn has hit consumers and business - putting a real strain on family finances, leaving many firms feeling the squeeze as customers become increasingly conscious of every pound and penny they spend.

The Government has already done much to help, targeting action to keep money in the pockets of the hardest hit and protecting them from falling into debt.

But we need to do more - now and for the future.

The White Paper

A Better Deal for Consumers sets out the real help we will provide now for those in financial difficulty, and in the longer term how we will boost confidence and help consumers take greater responsibility for themselves.

This is in line with the Prime Minister’s plan for Building Britain’s Future that provides a radical vision for a fairer, stronger and more prosperous society for all.

The White Paper sets out how we will protect consumers from firms who trade unfairly, and ensure that enforcement against the minority of rogue traders is effective and proportionate.

I want to stress that in these extremely challenging economic times, we still need to minimise the burdens of regulation on business. The policies set out here are designed to crackdown on the unscrupulous, but they will enable the honest business to thrive on a level, competitive playing field.

Consumer Credit

First let me start by setting out our plans around consumer credit.

We need to guard against reckless lending and borrowing, and ensure that businesses play fair by consumers.

We need to supplement the real help we’re already providing with long-term measures to enable people to keep their finances on a solid footing.

The White Paper measures include a review of the regulation of credit cards and store cards.

This will examine:

• If restrictions should be placed on card providers’ ability to raise interest rates on existing debts
  
  
• If minimum monthly repayments should be raised to ensure that people who only make the minimum payment will be in a position to pay off their debts over a reasonable period
  
  
• If the practice of increasing borrowers’ credit limits without their prior consent should be banned
  
  
• And in what order debts built up on a credit card should be paid off

We will also legislate to ban the sending of unsolicited credit card cheques to customers.

And we are announcing that the FSA will set up an online credit card comparison tool as part of its Money-made-clear site.

There will also be new requirements on lenders to ensure they check consumers’ creditworthiness before they offer them a loan. This will be complemented by a new requirement to explain financial products to consumers before they buy - including the consequences of failure to repay.

This will be implemented through the Consumer Credit Directive, which will come into force in June next year.

We will curb excessive fees and charges – all arrears and default fees and charges on credit accounts should be transparent, cost reflective and reasonable.

The issue is currently the subject of a test case brought by the OFT and seven banks and building societies in relation to fees and charges for overdrafts.

Once the House of Lords has made its decision on the test case, the Government will work with interested parties to move the market to a more efficient, equitable, and transparent system as quickly as possible.

There will also be an OFT review into High Cost Credit, looking at markets such as doorstep lending and ‘pay-day’ loans where the typical APR is 50 per cent or higher.

We will also look to ban the way bills of sale are used to support consumer loans such as 'log book' lending – a big cause of complaints from consumers.

We will do more to help those in debt help themselves.  The Money Advice Trust will launch a self-help debt advice toolkit this autumn to help people get a better deal for themselves when negotiating with creditors. I’m pleased to announce that the Government is providing funding for this important initiative.

And the new Debtor’s Guide will be published shortly by the Insolvency Service for consumers and businesses. This will help those in difficulty with debt to understand their options and where to go for help.

Consumer Protection

I now want to talk about measures we will be taking to improve consumer protection outside the area of credit and debt.

That is why today I am announcing the creation of a new role – the Consumer Advocate.

My ministerial colleagues and I have been impressed by the experience of other European countries who have appointed a consumer champion with the power and authority to act on behalf of consumers.

Our new Consumer Advocate will be a high profile consumer champion, tasked initially with the responsibility of promoting consumer education and information.

Also in this area, we will be working closely with Consumer Focus and the OFT to launch a new consumer rights campaign in the Autumn.

And we propose to give the Advocate new powers to spearhead fair compensation for groups of consumers. As a public figure, he or she will have to carry out these tasks in a manner which is fair to business.

I want to see more individual consumers benefiting from enforcement activity – not the mass compensation culture that we see emerging elsewhere but the reasonable expectation that consumers who buy things in good faith shouldn’t be out of pocket when things go wrong.

That is why we want to look at how we can use new powers in the Regulatory Enforcement and Sanctions Act to ensure consumers get fairly compensated.

And in circumstances where traders fail to respond to reasonable requests to reimburse consumers, the Consumer Advocate would have the power to take action through the courts to require compensation for a group of consumers. This should never be used lightly but we need a mechanism to ensure access to justice is a reality for consumers.

Finally, another important role for the Advocate will be to help recover money for consumers who have been scammed by rogues overseas.

The White Paper sets out our plans for a Consumer Bill of Rights.

This Bill will strengthen, modernise and simplify UK consumer sales law – making statutory rights less confusing for consumers and retailers alike whilst ensuring that consumers continue to enjoy a high level of protection.

It will look at developing rules on new 'digital' products, ensuring the principles of consumer protection apply.

It will also implement the forthcoming EU Consumer Rights Directive. Among other things, this will bring in a 14-day 'cooling off' period for off-premises and distance sales.

Rogue Traders

The Bill will also contain legislation to ban persistent rogue traders from continuing to trade with consumers.

A few unscrupulous traders treat fines as a business overhead or simply ignore them. In these cases a banning order will be more effective than existing options, such as county court judgements.

Fighting Fund

Trading Standards officers provide a valuable service to communities by tackling rogue traders. The Government proposes a new fighting fund to enable TSOs to pursue them through the courts.

The fighting fund will be targeted at Trading Standards investigations which cover national issues or are beyond the scope of local authorities’ boundaries.

Internet Enforcement

A new enforcement team will be established to protect consumers from e-crime. Government will ensure enforcers from the OFT, Trading Standards and the police share information to investigate and take action to protect consumers.

A single point for consumers to report on-line scams and problems such as non-delivery of goods will aim to boost confidence in buying goods and services over the internet.

Conclusion

I’ve set out a brief summary of the proposals – which taken together further provides practical, real help now and in the future for consumers.

They will ensure that we learn the lessons from the recession, and prepare for the upturn.

So that we have consumers who are free from unsustainable levels of debt and are confident in the marketplace.

Today’s White Paper is good for business, fair for consumers and key to helping us achieve long-term prosperity and social justice.

It shows how the Government is determined to build for Britain’s future, by putting Britain firmly on the path to recovery and seizing future opportunities for economic growth.

Thank you.