My Lords, I support Amendment 49B. Information and transparency, although not sufficient, are essential ingredients for empowering consumers. Providing good-quality, transparent and clear information to consumers enables them to make good choices and therefore make markets more efficient. This is particularly so, as my noble friend Lady Hayter has pointed out, with services contracts that do not expressly fix a price, where there are many elements to the service provided and where the contract is ongoing over an extended period with ongoing charges being incurred.
The consumer needs the necessary information to enable them to assess whether they are being charged a fair or reasonable price for a particular service, particularly given the issue of ongoing fees and charges. We all know that consumers can suffer from information overload and behavioural bias. Differences of knowledge and understanding between the consumer and trader can be commonplace. This gives rise to particular though not exclusive requirements—that clear information should be provided for all elements of the service contract and over time for ongoing costs and charges and that the prices for all those elements must be reasonable. This amendment would lock in all elements of the service provided into the reasonable price requirement.
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Examples of the problem that this amendment seeks to address can be found regularly in financial service products. The FCA and its predecessor have built a mountain of compliance requirements but we still have a stubborn persistency of problems in this market. FCA rules and compliance requirements have not prevented financial service providers from failing to deliver the price and charges standards across all elements of the contract over time that would be considered reasonable, and certainly not in the area of pensions and investment products. Although the debate on the Pensions Bill that is coming will address quality standards and charge capping in certain areas, it will not cover all retirement income products or retail investment products, which are very vulnerable to the cumulative effects of charges over an extended period. Consumers need to know what they are paying for, especially for a service that is due to serve them for a substantial or significant amount of time into the future, and that those prices will remain reasonable over that period.
The amendment addresses all elements of the service supplied and the ongoing costs or charges for an element of the service. This is a very big consumer protection issue, certainly in financial services. Given the Government’s new freedoms on choice in the access to pension arrangements, which will apply from April 2015, the risk of consumer detriment in the marketplace could become even greater if protection of consumers in terms of reasonable prices for charges when service contracts run over an extended period is particularly important. In view of those changes that are coming, the need for a statutory provision, which sets a reasonable price requirement on all elements of the service contract and all ongoing charges or costs, is exactly what the Government should provide for in this Bill.
The benefits of this amendment are not restricted to financial services. Other types of ongoing service contracts would also be addressed, such as service contracts that cover the provision of voice, data and media services, which is an area for scale numbers of complaints, would also benefit from this amendment. Are all elements of such a service provided by these sectors over the life of a contract set at a reasonable price? Is the plethora of charges made clear, and is each of them reasonable? There are many examples of consumers entering into contracts for a service in the belief that they are paying a particular price only to be stung at the end of or during the contract term because of what they did not see or understand, or because not all elements of that contract were price or committed to be priced in reasonable terms.