Redress, politics and proposals

Now that the government and the opposition parties have set out their policies on financial reform, we know what each would do with the financial regulatory system. But so far as the ombudsman service is concerned, the news seems to be 'no change' – with no one proposing to tamper with our role.

The Conservatives say that the ombudsman service plays an important role in consumer protection, as it provides a means of resolving consumer disputes. They see the ombudsman working closely with their proposed Consumer Protection Agency – which would take over the consumer functions of the Financial Services Authority (FSA) and the consumer-credit responsibilities of the Office of Fair Trading (OFT). The Lib-Dems have made it clear they have no interest in institutional reform – so presumably that means no change for us.

But it’s the government’s proposals for ‘collective redress’ that present the most interest for those of us concerned with complaints and redress in areas where there has been widespread consumer detriment in recent years.

The government's proposals say:

Where many consumers are affected in a similar way, there should be routes to collective redress that can deal with claims more efficiently, reduce the time that claimants may have to wait, and reduce the volume of individual cases dealt with by the courts or the Financial Ombudsman Service.

This would mean enhanced powers for the FSA and a right of collective action in the courts. These proposals echo thoughts I outlined in our most recent annual review.

So I’m looking forward to a busy and interesting final few months as chief ombudsman – watching some of these proposals take shape before I step down at the end of October.

Walter Merricks
chief ombudsman

(OFT) Trading standards action saves consumers £347 million a year - new figures

Action by local authority Trading Standards Services (TSS) to protect the public from unfair trading practices saves UK consumers at least £347 million a year, the OFT revealed today.

In a new study OFT found that, on average, for every £1 that TSS spend on this work, they deliver direct consumer savings of at least £6.

The overall figure of £347million includes:

* an estimated saving of at least £228m a year delivered by TSS through tackling unfair trading practices. This includes actions against traders providing goods and services without reasonable care and skill, misleading claims and omissions, aggressive and coercive selling or unfair contract terms.

* an estimated saving of at least £119million a year delivered by TSS advice and assistance to consumers.

The groundbreaking research is the first time the financial impact of this work, carried out by nearly 200 TSS across the UK, has been evaluated. The OFT is also encouraging individual TSS to use the same methodologies to estimate consumer savings they deliver locally.

OFT Chairman Philip Collins said:

'The current economic climate means that work by local authority Trading Standards Services to promote and maintain fair trading in their communities and across the UK is more important than ever.

These findings demonstrate the very substantial contribution that Trading Standards Services make to the economic prosperity of the UK by protecting consumers and preventing them losing hundreds of millions of pounds each year.'

Consumer Minister Gareth Thomas said:

'The impressive work of Trading Standards Services translates into nearly £350million of savings each year for consumers. Trading Standards is working hard to stop rogue traders ripping people off whilst ensuring that businesses can still compete effectively.'

Councillor Geoffrey Theobald OBE, the Local Authorities Coordinators of Regulatory Services (LACORS) Chairman said:

'This report from the OFT shows how valuable council trading standards services are to local people and they really do save them and businesses a lot of money. It shows that in levelling the playing field for all, council trading standards officers are keeping an extra £347 million in people's pockets and confirms they are doing everything possible to protect consumers and ensure that businesses can compete fairly.'

OFT warns debt management businesses over cold calling

The OFT has told six debt management businesses and four cold-calling companies to stop using unsolicited and misleading calls to advertise their services or face formal enforcement action.

The action has been taken after the OFT and the Information Commissioner's Office received complaints from consumers that they had been cold-called either without prior consent or despite registering with the Telephone Preference Service (TPS). The OFT also found that most of the information given to consumers was potentially misleading or inaccurate, or missed out vital facts about the purpose of the call and the identity of the caller, for example:

* some calls misled consumers into believing that they were one of the 'few chosen individuals' contacted as part of a government scheme to help wipe out consumer debt;

* some recipients were transferred to a commercial debt management business on the pretext of talking to a not-for-profit debt adviser; and

* once referred to a different business, consumers were often not told that there was a fee payable for both the initial advice and the debt solutions offered.

The businesses warned today may also have broken the law by pestering individuals who had not given their consent to be called and/or who had registered to the TPS.

Nigel Cates, Deputy Director of Consumer Credit, said:

'Taking advantage of people who are suffering distress through debt problems is completely unacceptable and this practice of illegal or misleading cold-calling for debt management services must cease immediately. The current economic climate means that it is vitally important vulnerable consumers are protected. We will not hesitate to take action against any business that uses misleading calls to advertise debt management services.'

Mick Gorrill, Assistant Information Commissioner at the ICO, said:

'Under the Privacy and Electronic Communications Regulations (PECR), organisations should not make automated marketing calls without the prior consent of the subscriber. The ICO has received a large number of complaints about automated marketing calls promoting debt management schemes. We have worked closely with the OFT on this issue and welcome the action taken.'

Additional Information

1. The OFT is not able to name the 10 businesses warned about unsolicited cold calling because of disclosure provisions under Part 9 of the Enterprise Act 2002.

2. This action stemmed from evidence received from complainants and submitted to both the OFT and the Information Commissioner's Office (ICO) that these companies were engaging in practices, contrary to the Privacy and Electronic Communications (EC Directive) regulations 2003 (PECR) and the OFT's debt management guidance.

3. The OFT has worked in partnership with the ICO on this issue. It supplemented OFT complaint information by providing vital evidence regarding a number of licensed companies.

4. The OFT published Debt Management Guidance for licensees in December 2001, updated in September 2008. This outlines minimum standards expected of licence holders providing debt management services. It states that advertisements and other promotional material must not mislead, either expressly or by implication or omission. Marketing includes texts and faxes as well as telephone, and the use of such mediums for marketing purposes will also need to comply with the Guidance. Whilst the use of cold calling by telephone as a means of marketing is not prohibited by the Guidance it is implicit that such business practices must be transparent and must not mislead consumers either expressly, by implication or omission.

5. Whilst the use of cold calling by telephone as a means of marketing is not prohibited by law there is legislation in place which regulates how it should be done. This provides that a trader must not transmit, or instigate the transmission of, communications comprising recorded matter for direct marketing purposes by means of an automated calling system unless prior consent is provided. It also says that a trader must not use or instigate the use of, a public electronic communications service for the purposes of making unsolicited calls for direct marketing purposes where the subscriber has notified the trader that they do not wish to receive such unsolicited calls, or where the number of the line in question has been registered with the Telephone Preference Service (TPS).

6. Consumers who are concerned about automated cold calls should contact the ICO in the first instance. For further information, see http://www.ico.gov.uk.

7. Consumers wishing to avoid receiving unsolicited and unwanted calls may wish to contact the TPS. The TPS is a free service administered by the ICO. It allows consumers to register to opt out of receiving unsolicited sales and marketing telephone calls to their home or mobile telephone numbers. Further details can be found at http://www.tpsonline.org.uk/tps

8. For advice on dealing with debt, see Directgov at http://www.direct.gov.uk/en/campaigns/RealHelpNow/index.htm or visit your local Citizens Advice bureau.

(Consumer Direct) Avoid the rogue doorstep traders this summer warns Consumer Direct

As the sun comes out, so do the rogue traders, warns Consumer Direct today.

The warning comes on National Rogue Trader Day, a multi-agency campaign designed to warn people of the dangers of rogue trading and doorstep crime.

Between April and September last year, Consumer Direct, the OFT's advice service, received 2,384 complaints about cold callers offering home maintenance services, 15 per cent higher than during the autumn and winter months. The top complaints were about contractors offering tarmacing and paving services (25 per cent), roofing repairs (20 per cent) and insulation work (11 per cent).

Typically, rogue traders may knock on the door offering to tarmac the drive or repair loose roof tiles in return for a small fee. In some cases, the work is unnecessary and victims may find that any work done is substandard and the price far higher than anticipated. Others who pay cash up front can find themselves out of pocket when work is left unfinished.
Putting right sub-standard work can also be costly. Research by Lloyds TSB Insurance published earlier this month found that the cost for correcting botched home improvement work averaged £460.

Michele Shambrook, Operations Manager for Consumer Direct said: 'As the weather improves, we usually see an increase in complaints about uninvited doorstep traders. Although door-to-door canvassing is not illegal, we would always encourage people to think very carefully before agreeing to have any work done straightaway and avoid handing over cash up front.'

New consumer protection regulations which came into force in October 2008 require all doorstep traders to provide consumers with a seven day cooling-off period in writing, provided the price is more than £35.
Consumers who request work to start before the cooling off period ends still have the right to cancel, but may be liable to pay reasonable costs for any work done.

Consumer Direct has the following tips for people considering home maintenance or improvement projects:
* Ask friends and neighbours for recommendations or look for traders who belong to trade associations approved by the government-endorsed Trustmark scheme (http://www.trustmark.org.uk).
* Alternatively, ask your local authority about assured trader schemes managed by Trading Standards Services. Details of those authorities who are members of the Local Authority Assured Trader Scheme Network are available on the OFT website at: http://www.oft.gov.uk/oft_at_work/consumer_initiatives/trader/members
* Shop around and ask for at least three written quotes (rather than estimates) before choosing a trader.
* Agree a written contract covering the work, the price, the payment arrangements and the start and finish dates.
* Never pay the total amount in cash up front, try to avoid paying large deposits and in all cases, you should try and keep back enough money to keep pressure on the trader to get on with the job and to finish it properly. Before you make any final payment make sure you are satisfied the work has been carried out properly and meets the terms of the contract.
* Ask for VAT invoices, get a signed receipt for every payment you make and keep all the paperwork for your records.
* If you pay by credit card or the work is being financed by a credit agreement arranged by the trader, you may have extra protection as the lender is jointly liable with the trader for any breach of contract (if the work costs between £100 and £30,000).
* Be fair about completion: pay promptly if everything contracted for has been completed satisfactorily.

Ron Gainsford, chief executive of the Trading Standards Institute (TSI), said: 'National Rogue Trader Day is a brilliant example of Trading Standards, the Police, Consumer Direct and a wide range of other agencies working together to tackle rogue traders who are preying on local communities all over the country.

'This concerted, high-profile national action is a great way to raise awareness of how people can protect themselves from doorstep conmen and what they need to do if they think rogue traders are operating in their area.'

Information on consumer rights and advice on dealing with traders is available by calling Consumer Direct on 08454 04 05 06 or by visiting the website at http://www.consumerdirect.gov.uk.

(OFT) Why people fall victim to scams - OFT research

The psychological reasons consumers may fall victim to mass marketed scams are revealed today in groundbreaking OFT research

The research, undertaken by The University of Exeter on behalf of the OFT, provides a valuable insight into why consumers fall victim to scams, as well as the psychological techniques used by scammers to con the UK public out of an estimated £3.5 billion every year.

Some of the key findings about victims of scams are that:

* up to 20% of the UK population could be particularly vulnerable to scams, with previous victims of a scam consistently more likely to show interest in responding again,

* a good background knowledge of the subject of a scam offer, such as experience of investments, may actually increase the risk of becoming a victim through 'over-confidence',

* victims are not in general poor-decision makers, for example they may have successful business or professional careers, but tend to be unduly open to persuasion by others and less able to control their emotions,

* victims often keep their decision to respond to a scam offer private and avoid speaking about it with family or friends.

The research also found that many scams use a range of highly persuasive techniques. A common tactic is to seek to exploit basic human emotions such as excitement or fear to provoke a spontaneous 'gut reaction' to the scam offer. Such scams also abuse people's trust of authority by making a scam look like a legitimate offer from a reputable business or official institution.

The research findings will help to inform the joint OFT and Serious Organised Crime Agency's National Strategy for tackling mass marketed fraud, in particular in developing more effective consumer awareness campaigns to help consumers recognise and resist scams.

Mike Haley OFT Director of Consumer Protection said:
'This research provides valuable insight into the sophisticated, heartless and calculating psychological techniques used by scammers to exploit consumers. Scams often have a devastating emotional as well as financial impact on victims. This research will help us to develop more effective methods to counter the scammers.'

Gareth Thomas, Consumer Minister, said:
'These findings show it is not just the vulnerable but the financially savvy too who are at real risk of falling victim to scammers.
Trading Standards Scambuster teams are working hard to highlight the dangers of scams across the country. They have already saved consumers more than £3 million and seized £2 million in criminal assets.'

The report can be downloaded at http://www.oft.gov.uk

OFT warns debt sector about tracing tactics requirements imposed on debt collection company

The OFT is warning the debt collection and tracing sector that using neighbours to pass on messages to trace subjects is an unacceptable practice and should be ceased immediately.

It is concerned that some businesses are breaching the spirit of the OFT debt collection guidance by using this trace method, which has the potential to reveal to neighbours that individuals are being pursued for payment of debts.

The OFT is calling on businesses in the sector to take positive steps to address these concerns. If businesses continue to use these tactics, the OFT will look to take swift enforcement action.

The OFT has imposed requirements on one 'trace and collect' company, Link Financial Limited (Link), to confirm that it will no longer engage in this practice.

Following an application by Link to renew its existing consumer credit licence, the OFT, working alongside Lambeth Trading Standards, reviewed Link's business practices and raised concerns about the use of this trace method.

Link agreed to stop using the practice and, as allowed under the Consumer Credit Act 1974, made specific proposals which addressed the OFT's concerns. As a result, the OFT has imposed requirements which state that Link must not in future use neighbours to pass on messages to trace subjects.

Nigel Cates, OFT Deputy Director for Consumer Credit, said:
'Using neighbours to pass on messages to trace subjects is an unacceptable practice that contravenes our debt collection guidance. It has the potential, whether unintentional or not, to lead to the disclosure of private financial affairs and to cause distress and embarrassment, and we have made this clear in discussions with the Credit Services Association.

'We are pleased that Link has acted responsibly and taken positive steps to change its policies and procedures.

'If other businesses continue to engage in similar practices we will not hesitate to use our licensing and enforcement powers.'

(OFT) OFT launches market study into the sale of second-hand cars

The OFT has today launched a short market study into the sale of second-hand cars.

The study follows concerns about the large number of consumer complaints relating to the sector. Last year, more than 68,000 consumers complained to Consumer Direct about issues with second-hand car sales. Concerns around defective vehicles, services and potentially misleading selling are consistently among the top complaints to the government-funded advice service.

The second-hand car market is large, with sales of approximately £35 billion in 2008, and the level of harm appears substantial: the financial cost of car clocking alone is estimated to be £100 million per annum.

The purpose of the study is to understand the causes of such high levels of consumer complaints and to consider whether existing consumer protection legislation is sufficient and effective in this sector.

The study will focus on sales by dealers rather than private sales between individuals, but the findings will aim to provide clarity across the wider second-hand car market. The OFT hopes to work closely with the second-hand car industry, local authority Trading Standards Services, consumer bodies and other interested parties.

John Fingleton, OFT Chief Executive, said:

'Buying a second-hand car is a major and potentially difficult purchase, given the fact that many consumers lack the necessary experience or knowledge to make an informed buying decision. We aim, particularly given the current financial climate, to look at the entire process for consumers when buying a second-hand car and whether existing regulation delivers sufficient robustness, confidence and clarity for both the customer and car dealer.'

The OFT expects to complete the work by the end of the year. The OFT will be contacting key parties directly; other interested parties can submit written views by 5 June to second-handcars@oft.gsi.gov.uk.

(OFT) Three arrests in suspected pyramid scheme investigation

The OFT continued its criminal investigation into a suspected unlawful pyramid scheme operating in the South West of England and South Wales by carrying out further raids in the Bristol area today.

OFT officers executed entry warrants at home addresses in Bristol and East Harptree accompanied by police, who arrested three women alleged to be involved in the establishment, operation and promotion of the suspected pyramid scheme. The OFT also served notices at a number of other addresses requiring individuals and businesses to produce documents relevant to the investigation.

The OFT is working closely with Avon and Somerset Police and South West England Scambusters and these raids are connected to arrests carried out in January and earlier this month.

The scheme appears to be aimed at women, with each participant promising to enlist two more members. The OFT estimates that up to £18 million may have passed through the scheme since May 2008 with thousands of consumers paying up to £3000 each to join.

The OFT is asking anyone with information regarding any suspected pyramid scheme to contact Consumer Direct on 08454 04 05 06 or at http://www.consumerdirect.gov.uk.

The Consumer Protection from Unfair Trading Regulations 2008 (CPRs) prohibits the establishment, operation or promotion of any scheme where money is made primarily from recruiting other people rather than from the sale of goods and services. Breach of the prohibition is an offence punishable by up to two years imprisonment and/or an unlimited fine. The OFT's investigation is still ongoing and as such no assumption should be made that any person has committed an offence.

(OFT) Manchester United to revise season ticket terms

Manchester United has agreed with the OFT to revise its season ticket terms and conditions to make them clearer and fairer for fans.

Following a complaint from the Manchester United Supporters Trust in November, the OFT identified a number of potentially unfair terms with the club's season tickets under the Unfair Terms in Consumer Contract Regulations (UTCCRs). The club has responded positively and agreed to amend its terms to ensure that:

* every season ticket holder is now guaranteed a seat at every home league and cup game,

* the club provides clearer information about when a season ticket holder is likely to be moved from their seat for a cup match,

* if fans' season tickets are terminated for failure of credit card payments for cup games they will receive a pro-rata refund of the money they have already paid to the club,

* duplicate season tickets are issued where the original has been lost or stolen, and

* a clearer appeal process is in place to deal with disputes over cancellation of season tickets because of non-payment for cup matches. The club has also agreed to provide clear and upfront information to supporters before they buy their tickets, enabling them to calculate the maximum total cost for a holder over a season based on the club reaching the final stage in all competitions, as well as an indication of the number of home cup games in the previous campaign.

Though Manchester United did not agree that the previous terms and conditions were unfair the club has provided assurances that these changes will be implemented in time for supporters considering the purchase of season tickets for 2009/2010.

Mike Haley, OFT Head of Consumer Protection, said:

'We have worked closely with Manchester United and are pleased that the club has amended its season ticket terms to the considerable benefit of its fans. These changes greatly improve the protection for season ticket holders at all stages of the process, from upfront transparency on potential costs, to a guarantee of a ticket to all home games in all competitions.'

OFT consults on financial services strategy review of unsecured consumer credit market announced

The OFT has launched a consultation on its proposed financial services strategy which sets out its approach to the sector in response to the current economic crisis. The OFT is asking interested parties to comment on its proposal to focus on two inter-related themes:

* The prioritisation, in the short term, of promoting fairness and responsibility between the credit industry and consumers, and

* advocating choice and competition to ensure that public decisions made to deal with the current crisis do not harm competition in the long term to the detriment of consumers.

The strategy also announces that the OFT is to conduct a review of the unsecured credit market. The financial crisis has led to significant changes in this market and the review will focus on the fair treatment of consumers and on ensuring that this key driver of economic growth works effectively.

John Fingleton, Chief Executive, said:

'Much of our work is already aligned with the needs of consumers, business and the economy in the current crisis but this strategy will sharpen our financial services focus over the coming year.

'With our focus on credit, we are addressing the area in which there is a real risk of short-term consumer harm while also ensuring that the sector that emerges from the current crisis is competitive and behaves fairly and responsibly towards consumers. 'Looking further forward, the financial services sector that emerges should be characterised both by effective prudential regulation and open markets. Choice and competition involving existing players and new entrants are vital to delivering growth, prosperity and a good deal for consumers. There is a risk that this could be overlooked in the re-design of financial regulations, with high costs for consumers and the economy.'

The consultation will run until 12 June 2009. A final Financial Services Plan, taking account of consultation responses, will be published in July 2009.

(OFT) OFT to focus investigation into unarranged overdraft charges on three banks

The OFT has announced that it is to streamline its investigation into unarranged overdraft charges by focusing on the terms of three banks in particular. The aim is to progress the case in the shortest and most efficient way possible.

The OFT believes that the terms of the three selected banks provide the best representative selection of all the banks' unarranged overdraft charging terms, and therefore the outcome of this more focused investigation will be relevant to the assessment of other banks' terms.

The investigation will concentrate initially on the charging terms of Lloyds TSB, HSBC and Clydesdale. The OFT has written to all the banks under investigation to outline this decision.

It should not be assumed that the OFT is more or less likely to find the terms of these banks' unfair than those of the other banks. The investigation into the other banks' terms is merely on hold and the OFT has stressed that no banks' terms have been given a clean bill of health.

The OFT expects to reach final conclusions on fairness later this year.

OFT sets out responsive approach for uncertain times

The OFT has today published its Annual Plan, setting out its priorities for the year ahead.

The plan promises a responsive approach in a fast-changing economic climate - with the OFT geared up to anticipate and rapidly address developments that could jeopardise consumer welfare or threaten competitive markets. Consumer credit and the financial services are highlighted as areas likely to require particularly close attention.

The OFT's approach for the next 12 months follows four main themes:

* Maintaining constant standards through high-impact work
In 2008, competition investigations carried out by the OFT resulted in the first ever criminal convictions against individuals for price-fixing offences, and in the consumer field the OFT continues to pursue the court case to test the fairness of unauthorised bank overdraft charges. The OFT will continue to promote competition and protect consumers - businesses and individuals will not able to use the economic circumstances as an excuse to disregard their legal obligations.

* Responding to changing circumstances and events
The OFT is working to address the risks to consumers and businesses that the economic downturn may present. Regulation of consumer credit and financial services is increasingly important, for example, and the types of intervention the OFT uses may also change as a result of the recession. The OFT will be agile in deploying its resources to deal with shifting economic and social priorities.

* Influencing the debate around competition and consumer issues
The OFT will seek to influence debate to ensure strong competition is recognised as a key driver in supporting economic recovery, and that effective consumer protection builds public confidence in markets. The OFT will continue to provide positive input into government policy in this context, and will actively engage with business and trade associations on issues such as self-regulation and compliance.

* Working with partners
The OFT will further develop links with partners such as local authority Trading Standards Services and other government departments, as well as working closely with central government on issues relevant to the economic climate, such as consumer credit and priority sectors for future economic growth.

Philip Collins, OFT Chairman, said:
'These uncertain economic times require the OFT to be active, responsive and flexible in continuing to promote competition and protect consumers.

'The OFT will continue to take strong and decisive action where necessary to intervene in markets which are not working well for consumers, and will work closely with government, business and consumer groups to enhance public confidence in markets.'