Topic: Consumer protection
Who: Department for Business Innovation and Skills
When: 5 November 2013
Law stated as at: 7 January 2013
The Department for Business Innovation and Skills (BIS) has published “Civil enforcement remedies – consultation on extending the range of remedies available to public enforcers of consumer law”. This consultation forms part of the Government’s proposed wider reforms to consumer law in the UK which is intended to simply and clarify the law for the benefit of both businesses and consumers.
Current position for consumers:
Currently where goods or services are not up to standard, or a trader has otherwise broken the law, enforcers, such as the OFT and Local Authority Trading Standards Services (Trading Standards), will usually at first seek to work informally with the trader to secure remedial actions to amend its behaviour.
Examples include agreeing to improve record-keeping and collecting (and acting on) customer feedback. If this approach is unsuccessful, enforcers might pursue a criminal prosecution against the trader, or seek injunctive relief against infringement of consumer protection law.
While criminal prosecutions are beneficial to consumers in that they prevent the spread of illegal trading, they do not provide direct remedies to consumers affected by the breach.
In cases where a criminal prosecution is an inappropriate response to a breach, for example, for inadvertent or minor breaches of consumer protection law, injunctive relief may be more appropriate. Injunctive relief, in the form of an Enforcement Order, can order that a trader stop conduct which infringes consumer protection law and/or order that the infringing trader publish the Enforcement Order and a corrective statement in order to eliminate the continued effect of the infringement.
However, neither criminal prosecutions nor Enforcement Orders provide remedies to individual consumers and in her foreword to the consultation, Jo Swinson MP, Parliamentary Under-Secretary of State for Employment Relations and Consumer Affairs, acknowledges this and states the Government’s conclusion that “[t]he enforcement regime should look not just to deterrence but also to providing restorative justice for consumers, especially vulnerable consumers”. The consultation sets out a number of proposals which the Government considers might achieve such restorative justice.
According to the consultation, the remedies proposed should be aimed at achieving one or more of the following outcomes:
• increased business compliance with the law;
• improved redress for consumers affected by the breach; and
• more confident consumers who are empowered to exercise greater consumer choice.
It is highlighted, however, that remedies of this type may only be appropriate where there is no wider public interest in criminal prosecution.
Implementation of the proposals in the consultation would require primary legislation and the Government have suggested this could be achieved by including the proposals in the Consumer Bill of Rights.
The consultation opened on 5 November and closed on 31 December 2012.
In the Regulatory Enforcement and Sanctions Act 2008 (RES Act) the previous Government introduced a number of civil sanctions that could be used by enforcers in relation to certain offences. These sanctions include Fixed Monetary Penalties, the imposition of discretionary requirements, stop notices and enforcement undertakings. The consultation states however that the current Government has concerns about using the sanctions in the RES Act for breaches in consumer protection law because as they currently stand they do not provide remedies for individual consumers.
As an alternative, the consultation suggests the amendment of Part 8 of the Enterprise Act 2002. At the moment Part 8 can be used to stop a business behaving in a particular way, but it cannot be used to require specific remedial action to be taken so that individual consumers are provided with appropriate relief. It is proposed that Part 8 be widened to allow remedies to be attached to Enforcement Orders and undertakings. The remedies attached would be agreed between the trader and the enforcer with any disputes over remedies proceeding to court.
Any breach of an undertaking or an Enforcement Order could be dealt with by further action, as it is at the moment. This might include an unlimited fine and/or imprisonment for up to two years for breach of an Enforcement Order or breach of an undertaking given to the court constituting contempt of court. In relation to a voluntary undertaking given to an enforcer, the breach would be drawn to the attention of the court which may issue an enforcement order.
Increase business compliance with the law
Encouraging business compliance is an important objective of the proposals, and possible remedies suggested to secure compliance include requiring a business to sign up to a Primary Authority scheme and to undertake internal sport checks.
It is proposed that exact remedies will be decided on a case-by-case basis, through co-operation between the business and the enforcer. Where the business and enforcer are unable to reach agreement and the business is unwilling to give undertakings, the enforcer would be able to apply to the court for an Enforcement Order.
Improved redress for consumers affected by the breach
The Government proposes that businesses put in place schemes aimed at providing redress to consumers collectively following a breach of consumer law which causes consumers significant losses. While such schemes would usually be time-limited, an open-ended scheme might be considered where it would benefit a business’ reputation.
The examples of redress schemes provided in the consultation are as follows:
1. where a trader has access to a list of all customers, it could write to all customers explaining their right to a specific sum of money if they send back a tear off slip within a set amount of time. Those who respond should be reimbursed with 30 days.
Enforcers would then check that the trader had sent out the letter and had answered all claims within 30 days;
2. where a trader has no list of customers but there is likely to be take-up if advertised, the trader could place adverts in national, regional or specialist press. As per product recalls, if consumers could show they were affected by the issue, they would receive a sum of money. Consumers complaining to the Citizens Advice consumer helpline could be informed of the availability of redress. As above, the enforcers would check that the trader had properly followed the process.
It is proposed that the trader would agree the scheme with
the enforcer. Failure to comply with the terms of the scheme would be a matter for consideration by a court choosing to apply an enforcement order and a factor to be taken into account if an Enforcement Order is not followed.
More confident consumers who are empowered to exercise greater consumer choice
The Government is concerned that there is a gap in consumer information regarding companies which have broken the law or failed to offer a good service. This lack of information results in little incentive for traders to improve as consumers continue to use their business. It is therefore proposed that remedies could require traders to, for example:
• sign up to an established customer review/feedback site;
• provide greater customer information, including linking up with ‘midata’, an online platform making personal data available and easy to access;
• allow consumers to terminate on-going contracts without penalty; and
• inform existing customers of the breach and any remedial action taken.
It is envisaged that the trader would come to an agreement with the enforcer as to which of these remedies (or combination of remedies) would be appropriate, but if agreement cannot be reached, the matter would proceed to court.
Why this matters:
If the proposals in the consultation are carried forward, consumers will clearly be in a better position to secure redress if something goes wrong and may be more confident in their choices, being better informed of previous breaches in the law by traders. Traders may consequently have to raise their standards, considering the possible costs and reputational damage which might be caused by a combination of the proposed remedies.
As noted above, this consultation forms part of the Government’s wider efforts to reform consumer protection law. The suggestion that the proposals might be included in the Consumer Bill of Rights means there could be even more changes for businesses to digest and adjust to over the next few years.