My Lords, Amendments 56FC and 56G are in my name and those of my noble friends Lady Hayter and Lord Stevenson.
Amendment 56FC aligns the definition of “average consumer” with case law from the European Court of Justice. This basically means using a phrase already well established in EU law to identify an average consumer. The phrase in question is,
“taking into account social, cultural and linguistic factors”,
when identifying what is average. The essential point of Amendment 56FC is to give courts flexibility when determining what constitutes average. The amendment supports the view of the Financial Services Consumer Panel, which has judged the Bill to be inadequately flexible.
I realise that the Minister is likely to respond to Amendment 56FC by saying that it is too subjective. It would seem, for example, to protect consumers who might currently be unprotected—those who are not average. An example might be consumers with learning difficulties, mental health problems or medical conditions. The European Court of Justice has not found this approach too difficult and has used the phrase in a succession of cases. Although the ECJ expects traders to consider an average consumer as reasonably well informed and reasonably observant, at the same time it expects traders to take social, cultural and linguistic factors into account. This does not seem to have caused it undue problems.
Amendment 56G requires the CMA to,
“publish an annual assessment of the extent of consumer detriment caused by the use of unfair terms”.
Throughout this debate, we have heard that consumer protection is meaningful only if consumers understand what their rights actually are and those rights are enforced. Amendment 56G would provide insight into those two critical factors. Many stakeholders involved with this legislation are concerned about the enforcement landscape, which is looking very patchy, to say the least. One of the obvious reasons for that is that funding for trading standards has in some places been cut off at the knees. The majority of trading standards enforcement comes via local authorities and we all know what has happened to local authority funding. The amendment requires the CMA to publish an annual assessment of the extent of consumer detriment in relation to what we have just been discussing around unfair terms.
It is helpful to have an idea of what we are talking about in terms of scale. The most recent comprehensive research on this that I am aware of was conducted by the National Audit Office in June 2011, although I would welcome any more recent figures that the Minister no doubt has to hand and can bring to the debate. In June 2011 the NAO estimated that the total cost of detriment to the consumer was £6.6 billion. Of that sum, £4.8 billion could not be tackled locally. Therefore, £4.8 billion of consumer detriment requires a national response and a national enforcement strategy. That national response is funded to the tune of £34 million—or at least that was what was forecast for this year.
Those figures set out a national problem that costs the consumer almost £5 billion, depending which of those figures you are using, and yet our response at a national level amounts to £34 million. That is an example of asymmetry that is clearly detrimental to consumer interests. Of course, you are never going to spend as much on trying to tackle the problem as the scale of the problem itself because clearly that would not make sense but I am sure we can all understand that there is a very big gap there when you look at the scale of the problem.
I am sure that, none the less, the Minister will resist the amendment by saying that the NAO is reviewing the landscape. She may well also point to research commissioned by the University of Birmingham which the Government are supporting and which will look at the structure of trading standards and the extent to which funding cuts may have impacted the service, among other issues. However, the key point here is that the CMA has overall responsibility for unfair terms legislation and therefore the CMA should determine detriment in this area. After all, it holds the knowledge about what is happening in the market. Yes, the NAO has looked at the landscape and said that it is a dog’s breakfast because it is just so complicated. The feeling out there is that the Government have replaced one complicated landscape with another one.
We know that the scale of the problem is huge and that the resources allocated to tackle it are few and far between. It is for precisely that reason that we need all the insight and information we can get from the right source. The debate that we recently had on unfair terms sets out why we need to assess and then tackle the vast scale of consumer detriment caused by unfair terms. I beg to move.
5.15 pm