Enterprise Bill

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Mr. Purchase: We have heard of some very sad cases, and behind each of them is the human story of someone who has suffered great distress. Will the hon. Gentleman tell us how the general duty suggested in his amendment would protect the victims in such cases? It has been my sad experience that, whatever law we have, there are exceedingly vulnerable people—sometimes not up to the mark in understanding what is happening to them—who suffer. Almost every example that he has given has involved a person in that sad condition.

Mr. Waterson: The hon. Gentleman makes two points. One is that many people have remedies available to them, but they do not find out about them or are not in a position to use them—they do not want to go to court or cannot afford it, or they simply do not know where to find the right advice when they are in difficulties. However, I am concerned about those who are covered by the main point that the hon. Gentleman quite rightly made: those who are not protected by any current legislation or regulation.

The point of a general duty—I do not claim to have got it right, and neither does the NCC—is to ensure that it moves with developments. The timeshare issue is a perfect example. The same people and organisations—the same tricksters—will just move on. They make their money out of classic timeshares while they can. Eventually, a campaign emerges, MPs agitate and legislation is passed to tackle the issue, but the tricksters are already one or two steps ahead. They have already taken on board the new legislation and are doing something very similar but cleverly ensuring that it is not caught by the law.

However, I am more than conscious of the safeguards that we would have to build into a general duty to ensure that the decent business or the fair trader is not caught. If somebody were to buy goods or services without any pressure or misrepresentation from the seller, but decided that they wanted their money back and somehow found a way of turning the clock back, that would not be right at all.

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I was making the point that doorstep and distance-selling are particular problems for the elderly and the housebound. NACAB says:

    ''CAB clients experience a range of distance and doorstep sales where current legislation fails to offer protection, either because the sale is excluded from the Distance Sales Regulations or because the client initiated the home visit.''

That is an important point. All too often, people selling incredibly expensive and inappropriate equipment can get away with it because the client initiated the visit and contacted them in response to an advertisement in, say, Saga magazine. NACAB goes on to say:

    ''CAB clients from the eastern region found that they had no cancellation rights when they were sold a package holiday, following an unsolicited phone call. They paid £553 deposit and, having given their credit card details, feared the remaining balance . . . would also be taken.''

On pressure sales in general, NACAB supplies the following example:

    ''A 90-year old client with Huntingdon's disease was sold an adjustable bed, which she feared would not suit her at the time of the home purchase. On delivery her fears were proved correct but by then the cooling off period had passed. The company would not refund the £300 deposit but offered to lower the bed, replace the mattress, and fit rails, clearly indicating the unsuitability of the original product.''

There is also the question of rogue traders. We all know about jobbing builders who charge elderly people thousands of pounds to do badly a rather simple job. Some people are charged enormous sums for emergency plumbing jobs. The Under-Secretary also touched on the issue of homeworking. It seems that that is already covered by the Bill or previous legislation, and I welcome that.

I should like to raise one other issue: extended warranties. I undertook to do so during consideration of the Bill when I appeared on ''Watchdog'', so it is the very least that I can do. When we buy a piece of electrical equipment, aside from the sheer complexity of making it work, we often have to deal with being pushed quite hard by the salesman to buy a one, two or three-year extended warranty at some extra cost. I gather that in the cut-throat world of electrical retailing, a large chunk of the profitability comes from the sale of those warranties.

There was a large electrical retailer called Tempo, which went bust and into administration. Thousands of customers who had purchased external warranties called cover-plans discovered that they were, in effect, worthless. It all rather depends on how they paid for their equipment, but thousands of customers found that they had no rights to call on the warranty because the funding had not been ring-fenced. There is no requirement to insure that fund so that the money is available regardless of whether the company continues, and there is no legal obligation to ring-fence the funds by putting them in a separate trust or escrow account. Legitimate companies, such as Dixons, do that. They follow the code of practice of the British Retail Consortium and put the moneys on one side to ensure that they are protected and do not disappear into a black hole if the company goes into administration.

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Some 100,000 customers of Tempo, who had paid good money for such protection, have been left without any recourse. Many of the company's other customers were taken over by Dixons and entered into its cover-plan, and that is commendable, but that is yet another example of a major loophole in the current law, which is not addressed by clause 202 or by the Government amendments that we will debate shortly.

We have an opportunity—perhaps just once in a parliamentary lifetime—to get this right. I am not saying that our amendments are exactly right, but the principle is important. If we can bring together all the best consumer organisations—the NCC, the Consumers Association, NACAB, the Trading Standards Institute and others—in a unanimous campaign to persuade parliamentarians that we should go that bit further to try to tackle exactly the sort of issues raised by the hon. Member for Wolverhampton, North-East, we should at least see whether there is a way of meeting their expectations while having some regard for the understandable concerns and reservations of business organisations such as the CBI.

Dr. Cable: I put my name to amendment No. 47. The hon. Member for Eastbourne put his lengthy case extremely well and covered many of the points that I would want to make. I shall start by going back to basics. Why are we so concerned with consumer protection and the need to spell out in such detail how consumer protection provisions should work? The purpose underlying much of the legislation is to provide more competition. There are many contexts in which it is necessary but not sufficient to protect consumers. Consumers encounter problems in the market because of asymmetric information—as economists call it—excessive complexity, and lack of balance in bargaining power, which make the relationship unsatisfactory. There is a failure in the market, and a responsible Government must intervene. We are concerned with how that should be done.

We are concerned about the concept of mis-selling, which does not necessarily involve criminally fraudulent actions. Of course, there are purists who say that there is no such thing as mis-selling, only mis-buying, because the fault lies with the consumer—caveat emptor. However, I know that the hon. Member for Eastbourne and most Labour Members share my view that there are many examples of mis-selling.

Mr. Mark Field: I would not want entirely to disagree with the last proposition relating to mis-selling and mis-buying. It strikes me that a significant number of consumers seem to have hard-luck stories with which we might have some sympathy, but there is also a brigade of people who want something for nothing and are out to get the free prize. There is some difficulty in framing any law in such a way that it protects the interests of every last hapless consumer.

Dr. Cable: That is right, and the reason why the amendment is couched in such elaborate and detailed terms is precisely to capture genuine cases of

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mis-selling. The hon. Member for Eastbourne fairly recognised the difficulties of trying to legislate in this area. A good example of the extent of mis-selling, rather than mis-buying, which was taken up initially by the Under-Secretary's predecessor as Economic Secretary, the right hon. Member for Leicester, West (Ms Hewitt), was the mass mis-selling of pension policies, when many of nurses and miners were diddled out of their pension entitlements as a result of aggressive—

Mr. Purchase: Fraud.

Dr. Cable: Legally, it was not fraud. It involved practices that we are trying to capture in legislation, and compensation had to be sought, but the problem is that it was not fraud. We are therefore trying to frame the Bill in such a way that it catches mis-selling.

Mr. Djanogly: I certainly agree that it is sometimes a question not of fraud, but of the methods involved. A constituent wrote to me, saying that the terms and conditions were written in the tiniest letters possible on the back of a document that they had received, and that they therefore had to pay extra for something that they thought would cost a certain price. Technically, that was not illegal, but it was certainly sharp practice.

Dr. Cable: The phrase that the hon. Gentleman finished on—sharp practice—best describes the problem that we are trying to tackle. The hon. Member for Eastbourne made it clear that we are trying to define activities that are not currently illegal, but which involve attempts to use sharp practice to get around the law. That is a difficult concept to grasp, but we are trying to do so as far as we humanly can. Those who drafted the clause were quite heroic in attempting to put together language that captured all the contingencies that we could plausibly imagine.

There are clearly two ways to capture what we have in mind. One would be to establish a brief general legal duty, but the Under-Secretary told us on Second Reading that that was not possible. Life would be much easier if it were, but if she sticks to the position that it is not, we shall be forced to spell everything out in a highly prescriptive way. I agree with the hon. Member for Eastbourne that our proposals are exploratory, and I am sure that there are all kinds of technical failings with the list and that clever people from all parties in the other place will have a go at it and produce something better. Essentially, however, we are putting down a marker.

I am sure that the Under-Secretary will not accept our proposals in their present form, but I challenge her to confront some of the specific activities that the CAB and others have raised with us. Although they are not currently illegal, they clearly involve serious sharp practice, and I ask her to tell us how they will be dealt with under stop now or other provisions.

I shall rattle through a couple of examples, while trying to avoid duplicating those that the hon. Member for Eastbourne detailed. Pyramid selling is common practice in eastern Europe, but I assumed that it had largely been banished from sophisticated western countries such as ours and that most people had understood the problems. However, the women's pyramid-selling scheme reminded us that the problems

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are still very much alive and with us. Under amendment No. 47, people who wilfully promote a pyramid-selling scheme could be caught by proposed subsections (9)(d) or (10)(k). If the Under-Secretary thinks that that approach is defective, how would she deal with such schemes? Does she envisage that powers under the Bill or under any other legislation would catch them?

Fraudulent prizes are another example of the problems that we are discussing, and I have come across them a great deal in my constituency, as I am sure other hon. Members have. Typically, people receive junk mail offering a free Porsche or a free Ferrari, and they need only ring in to claim it. When they do so, however, they are kept on the telephone for 10 minutes or cannot get through because tens of thousands of other people are ringing in. Behind the scheme, however, is a company that has leased a line through the Dutch telecom system and which charges £10 a minute. It will receive far more in revenue than it would cost to dispose of the Porsche—if there ever was one. Such schemes are clearly an attempt to deceive, but, as far as I know, they are not illegal under the Bill. They could, however, be captured under proposed subsection (9)(h) or the following provision.

As for high-pressure selling, the activities of ''Encyclopaedia Britannica'' salesmen were legendary when I was a kid. We have probably moved on from there—perhaps they have cleaned up their act, or not as many people buy encyclopaedias. However, we can cite many examples of the adoption of similar types of approach by, for example, those who tried to take advantage of the first wave of television cabling. There are numerous examples from my constituency of salesmen shoving their feet in the door, refusing to go away and insisting on several hours of negotiation with tired and often vulnerable customers. There are other examples of people promoting competing suppliers of electricity and gas.

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A lot of high-pressure salesmanship goes way beyond ethical practice, and there should be some protection from it. Our amendments take that into account, and parts of subsections (9) and (10) are specifically directed towards that.

The Institute of Plumbing has been mentioned in relation to breaches of the codes of practice of trades groups. I have also had several discussions with the Federation of Master Builders, whose credibility has been undermined by its more roguish members. I am sure that members of the Committee have had experience with builders who have installed a defective damp-proof course, for example. When the customer tries to call in what looks like a guarantee, the builder is far too busy to come and do the repairs, or does not recognise the guarantee.

Those builders may have the Federation of Master Builders badge stamped on the letterhead of their notepaper, but they are clearly breaching the demanding standards set by their professional body. Other clauses of the Bill will give those codes of practice much more credibility, but we need a measure, under the stop now provisions, that specifically allows

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the authorities to pursue those who deliberately and wilfully breach their intentions.

I cite one more example, from the financial services industry. About a year ago, I encountered a case of a man in his mid–70s who was sold a financial product that had value only through its terminal bonus in 20 years' time. Due to the complexity of the paperwork and the technical jargon employed by the salesman, he was persuaded to buy it. Some of our proposed subsections would prevent that kind of practice and enable trading standards officers to intervene.

There are many examples; I repeat them because I am challenging the Under-Secretary to say to us, ''We recognise that malpractice and mis-selling, but we have other solutions to the problem.'' If she can give us some other solutions, we shall go away content. However, if she simply says, ''It is all too difficult because these practices are not illegal and we cannot do much about them'', that would not be good enough and we would have to search for other remedies.

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