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Accommodation Addresses

11 am

Mr. Paul Truswell (Pudsey) (Lab): It will come as no surprise to any of us that trading standards authorities and other agencies receive many complaints from the victims of mail scams. The conmen involved, who often use accommodation addresses provided by so-called mailing houses, are extremely difficult to trace as they use those addresses for a short period only—[Interruption.]

Mr. Roger Gale (in the Chair): Order. Will those leaving the Chamber do so quietly, please?

Mr. Truswell : I suspect that, like me and most other citizens of this country, the Minister receives his fair share of dubious mail shots, which are a national problem. Rogue businesses buy or rent addresses that sound legitimate or prestigious and use them as part of a scam. They have the mail redirected to them or collect it personally. People who send money to those addresses probably do not realise that they are merely a front—in many cases, a shoe box-sized locker or a pigeon hole in a very small office.

Calculating the numbers of accommodation address providers or the companies using them is difficult, as they rapidly come and go. They exist to some degree in most local authority areas, but there is no way of keeping track of them. Although a minority of accommodation address providers make reasonable inquiries of their customers, far too many are happy to accept cash payments and take mobile phone numbers as the only contact detail.

I appreciate that tackling the abuse of accommodation addresses is not a panacea for dealing with mail scams, many of which originate abroad. However, experience shows that many of the victims are initially identified by fraudsters operating through scams in the UK. Once that happens, they tend to be targeted by all and sundry. A perfect and tragic example in my constituency was that of an older person who had lost a total of £25,000 on mailing scams. He suffers from dementia. Carers alerted west Yorkshire trading standards officers, who found eight plastic carrier bags full of further mail requesting money for dubious lotteries and competitions and various other scams. According to figures I was given recently, the West Yorkshire Trading Standards Service has received more than 200 complaints in the past year, but it is believed that that is the tip of the iceberg.

I should make it clear that the majority of mailing houses that provide accommodation addresses operate within the law. Sadly, however, some less reputable businesses use those facilities to set up dubious home-working scams, operate prize draws and lotteries, offer mail order goods that never arrive and generally rip off the public. We know from many media stories how wide the problem is.

Unfortunately, the people who provide the accommodation addresses all too often operate on a "no questions asked" basis and keep insufficient or no records on those who use the addresses. Thus, those users are virtually anonymous. All too often, the investigating police and trading standards officers, such
 
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as those in my area of west Yorkshire, visit the accommodation addresses only to find that there are no proper details on the individuals who use them.

There is a voluntary code of conduct, but many accommodation address providers do not adhere to it; I shall come to that issue shortly. West Yorkshire trading standards officers have told me how frustrating it is to go to such providers and ask them to stop providing facilities for obvious and palpable scams, only for the operators to shrug their shoulders and say, "Well, we are not breaking any laws."

Enforcement action needs to go hand in hand with the public awareness and education that will help people not to be victims in the first place. Many of us operate under the simple rule that if something looks too good to be true, it probably is.

I could cite many examples to demonstrate the sort of scams that use accommodation addresses; I am sure that, given his position, my hon. Friend the Minister is aware of even more. One example that particularly struck me was the company Select Publications, not because of the size of individual losses but because of the scale of its operation. The company was registered with Companies House, using a mailing address in Westminster as its registered office. When it was finally brought to the courts, the two people running it were found guilty of deception and sentenced to three and a half years' and two years' imprisonment respectively.

As a result of the company's efforts to cover its tracks, the investigation required a huge amount of work by police and trading standards officers. They were not helped by the fact that the accommodation address providers had kept no records that allowed them to trace the individuals; that is one reason why I have cited this example. It took two years to get the defendants to court, and it is thought that they ripped off about 16,000 consumers.

The company used multiple addresses around the UK, including one on the Edgware road, to disguise its location. It advertised in local newspapers, on jobs websites and in Exchange and Mart, offering home-working opportunities stuffing envelopes. It also offered a home-working advice line, an undeclared premium-rate phone line, that cost people about £20 for a 10-minute call. To obtain the jobs stuffing envelopes, the victims, as I shall call them, had to pay a £35 administration fee and often received nothing in return.

Those who got envelopes never received any pay—surprise, surprise—and were subsequently bombarded with mail shots from further businesses, all owned by the principals of the original company, Select, who used different addresses to disguise that fact and start the process all over again.

Another company registered with Companies House used an accommodation address in Islington as its registered office. In the run-up to Christmas, the company placed adverts for cut-price goods, including TVs, Playstations and Gameboys, in three national newspapers, to exploit the festive season and the wish of parents to gratify the demands of their young ones. The company took upwards of £150,000 in debit and credit card receipts before the directors fled their homes, no doubt having ruined the Christmases of many people.

The directors had also registered another company at a separate address after setting up a website that offered the
 
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same goods, but failed to deliver any. The investigation uncovered hundreds of consumers who had paid by debit card; on average, they had lost £200 each. Again, when trading standards officers approached the accommodation address providers, they were given no information about the individuals concerned. That made the investigation difficult.

I could go on and on. Another company carried out removals on behalf of customers and sold the householders' furniture and other valuable items. Again, it used a mailing address as a front so that customers were unable to trace it. An accommodation address was also used as a front for a bogus bank that inveigled two American banks into clearing two cheques for several hundred thousand dollars each. The examples go on and on.

Prestigious accommodation addresses are often used to enhance the image of a company that operates by mail. For example, companies purporting to sell medically related goods may use a Harley street address that turns out to be nothing more than an accommodation address used by hundreds of different businesses. One such company supplied pills for prostate problems, having made a string of unsubstantiated claims about their ability to cure all sorts of ailments. Another trader used a Regent street address to sell fake Viagra pills, which were ineffective and potentially dangerous. Again, that trader was very difficult to trace.

An investment scam using a Bond street address—I am citing scams that have used prestigious addresses—conned investors out of £6 million. The company, which was actually based in Spain, claimed that it would buy art works on behalf of investors and promised high returns each year. The idea was that the money would be used to purchase art works that would be rented to businesses for display—of course, there were no business customers and no art works. The Department of Trade and Industry, the Minister's Department, eventually petitioned for it to be wound up.

Another company charged people up to £4,000 to relocate abroad and find work there. That company is one of a series fronted by the same person, who tends to operate from smart London addresses such as Pall Mall—again, they are just accommodation addresses.

The scale of the problem was demonstrated by a project carried out by trading standards officers in Islington, Hackney, Westminster, Kensington and Chelsea, Camden and Tower Hamlets. Across the six boroughs, 27 operators out of many hundreds were approached, and 24 agreed to answer questions. Even with a relatively small sample, the number of businesses registered with those operators was nearly 6,500. Less than half of those responding asked their customers for any proof of identity, or kept details of the mail that they sent on, and only five obtained signatures for that mail.

The main concern that the survey highlighted was that large numbers of businesses were registered at the addresses and few operators checked the identity of their customers. Clearly, the lack of information being kept by the operators makes tracing the perpetrators of criminal businesses very difficult; in most cases, it was impossible. That is the crux of the problem. Often by the time that investigations have rolled into action, the fraudulent trader has simply disappeared into the ether.
 
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Given the scale and range of scams that use accommodation addresses, and the number of mailing houses providing the service, what is the current legal position? I am sure that the Minister will want to cover that in his reply. It seems that there is little to protect the consumer. Statutory control of accommodation addresses used to be included in the Official Secrets Act 1920, section 5 of which required each operator of such an address to register with the police and to keep a book with the name and address of every person who requested mail to be forwarded on, the type of mail forwarded, the postmark and, if an item was delivered personally, a signature. It must be said that in practice few police forces actively enforced that legislation, and it was outdated and ineffective. Nevertheless, it was on the statute book until the Postal Services Act 2000 removed that control.

While trading standards officers have powers to require information from an operator, including the production of records where there is prima facie evidence of an offence, that does not address the issues that I have tried to describe. The information obtained cannot, under the Enterprise Act 2002, be used for consumers to pursue a claim against a fraudulent business. As I have stressed throughout my contribution, there is no requirement to keep records. As a result, the information is insufficient or non-existent. There is no requirement whatsoever to carry out checks on the information recorded, so in cases of fraud, when the information is examined, it is invariably inaccurate, bogus or almost non-existent.

In the absence of a registration scheme with teeth, tracing the activities of accommodation address users may be extremely difficult for the authorities—trading standards and the police—and impossible for consumers. I am sure that the Minister will say that voluntary regulation has been tried, but I hope that he will accept that it has severe limitations.

Some trading standards departments have promoted the so-called MAIL—mailing, accommodation, internet and locations—fair trade scheme, which is completely free of charge for traders, who join it under the aegis of trading standards. It is designed to ensure a co-operative relationship between trading standards and its members. It has the sort of voluntary approach that the Government often encourage. Unfortunately, it does not work very effectively. For example, in the borough of Westminster, which has 200 operators and is perhaps the prime example in the country in this area, only 30 operators were prepared to join the scheme. An attempt by the Trading Standards Institute to roll it out nationally has not proved successful.

In west Yorkshire, my own area, it is difficult to calculate the number of operators, but we know that only two have been prepared to join the voluntary scheme. It comes as no surprise that those who are prepared to join it tend to be those who provide the least source of worry and who operate a reasonable and effective system.

As I hope I have conveyed, there is a problem for which there is no magic solution. Tackling the abuse of accommodation addresses in itself is not a panacea, but much more could be done. I have already made the Minister aware of my concerns, and I look forward to hearing what he has to say.
 
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11.15 am

The Parliamentary Under-Secretary of State for Trade and Industry (Barry Gardiner) : This morning, we have been treated to a perfect example of what an MP's job   is. My hon. Friend the Member for Pudsey (Mr.   Truswell) has taken on board his constituents' concerns and seen that the problem is not an isolated one. It is not something that just one, two or a few people are affected by, but is symptomatic of something much bigger and wider, not only in his own area but potentially throughout the country. He has brought those concerns to Parliament to try to ensure that the wider problem is addressed through legislation.

My hon. Friend has properly brought the issue to my attention in an Adjournment debate. It is, of course, open to me to do what Ministers usually do in such debates: to read out prepared speeches for 15 minutes and give all sorts of reasons why it might be difficult to do the sort of things that are asked of us. It is probably much better that the Minister should say, "I have listened carefully to what my hon. Friend said, and I give him an assurance that we shall now investigate the matter further. We will try to take what action we can to improve things." That will be the bulk and tenor of my remarks, because my hon. Friend has performed an admirable job in identifying the problem and bringing it to public attention. It is now a matter for Government to examine it carefully and to try to take action.

I shall try to respond to some of the points that my hon. Friend raised. I was grateful to him for the measured way in which he presented them. I thought he could have been a bit more dramatic, in that he could have named some of the dreadful rogue traders and companies that perpetuate such scams.

Mr. Truswell : One of the reasons why it is difficult to give names is because some of my examples are still the subject of investigations, so clearly it would be unwise to do so.

Barry Gardiner : I appreciate that.

My hon. Friend was very measured; he realised that the issue does not have a simplistic solution. Registration in itself might not resolve all the problems. He also alluded to the Enterprise Act 2002. I will try to address that issue in my remarks, along with other ways in which we might tackle the wider problem of such scams.

As my hon. Friend said I might do, I shall set out some of the background to the repeal of section 5 of the Official Secrets Act 1920, which was contained in the Postal Services Act 2000. As he said, a key aspect of the 2000 Act was to create the framework for the introduction of competition within the liberalisation of the UK postal services sector. That was significant in enabling the UK to keep pace with the overall EU movement towards a liberalised postal market. It was also considered that increased competition would bring benefits to UK postal consumers as it would bring them greater choice and keener prices, improve the quality of service, and provide for increased efficiency within Royal Mail as it responded to the pressures of such competition.

When implementing any new legislation it is always a requirement to examine provisions in existing legislation to find whether they may conflict with the framework
 
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envisaged by the new legislation, and then to take action to repeal or amend as appropriate. During that exercise, one such item of legislation that was identified as being a possible candidate for review was section 5 of the 1920 Act. As my hon. Friend also suggested, it was considered that its requirements, if enforced, would place unnecessary burdens on postal operators in that competitive, liberalised UK marketplace. As the provision was Home Office legislation, my Department consulted the Home Office on the potential repeal of this section. The Home Office confirmed that it was a redundant provision that it no longer required for its purposes, that the police authorities had not been actively enforcing it, and that it would place unnecessary burdens on postal operators and the police force within the newly envisaged framework. The Home Office therefore suggested that it was content for the repeal to take place.

It should also be noted that the intended purpose of such a provision contained in the Official Secrets Act 1920 would not have been the regulation of accommodation address services in respect of trading standards and consumer protection issues. The Official Secrets Act of that nature was mainly instigated by the requirements of British intelligence agencies, especially at that period when there existed significant national security concerns regarding acts of terrorism and acts to infiltrate and undermine the Government. The purpose of that provision in that context was likely to be to give the police authorities a means to intercept or track mail in order to root out suspected spies or individuals engaged in activities against the interests of national security. Its intended applicability to issues other than that is doubtful. That is further supported by the fact that it dates from a period when there was only one United Kingdom postal operator, and it is doubtful whether there were many businesses providing what is now considered to be an accommodation address service.

Having said that, my Department is sympathetic to the concerns that have been raised about increasing transparency and accountability in respect of businesses and individuals who may be involved in criminal or fraudulent activities to the detriment of consumers, and who may operate some of their correspondence dealings via an accommodation address service, where such services may not hold or make available to the authorities adequate client details.

My officials have advised me that they have not yet been presented with sufficient robust evidence to support those concerns or to suggest that the problem is so widespread that it merits a national solution. However, my hon. Friend has provided a good amount of evidence, and I ask him to come to see me, perhaps with trading standards officers from his area—and officers from other areas, if they have been in contact with them—so that we can establish together exactly what is the calibre of the evidence and make a good case to the Department. Officials should have a sound body of evidence to work on in order to address this problem.

I turn briefly to the Government's approach to consumer protection and scams in general. We remain committed to improving Britain's consumer regime—a regime that protects and empowers consumers, and that is as fair to business as it is to consumers. I am aware of my hon. Friend's keen interest in consumer protection and policy issues, and although I may cover some areas
 
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of which he is already aware, I would like to highlight some of the work that the Government already undertake regarding protection for consumers against scams and frauds.

The Government set out how they would achieve their aim of improving the UK consumer regime in their consumer strategy, "A Fair Deal For All—Extending Competitive Markets: Empowered Consumers, Successful Business" which was published last year. The strategy recognised that enforcement needs to be more effective at stopping the rogues—those who deliberately set out to defraud consumers, often targeting the most vulnerable, as my hon. Friend has highlighted in some of the dreadful examples that he has given.

The Government have provided funding to trading standards services to pilot their specialist "scambuster" team initiative; £1.79 million is being made available over two years. Those dedicated teams will work across local authority boundaries, focusing on the hardest to tackle scams that are normally beyond the capacity of an individual local authority to deal with. The firm intention is that they will crack down on the genuine crooks. A further £1.2 million has been made available over two years for trading standards services to set up an intelligence network to help underpin the effectiveness of "scambuster" teams and local trading standards departments. That network will play a part in ensuring that the real rogue traders find it much more difficult to hide and continue their dishonest activities.

My hon. Friend spoke about the Enterprise Act 2002, and I want to make him aware of Government proposals to amend it to make it easier for consumers to get the kind of information that he referred to from trading standards departments so that they can pursue civil cases. Part 9 of the Act relates to the disclosure of certain types of consumer and competition information. Currently under the Act, public authorities such as trading standards departments are unable to disclose information to individual consumers or businesses for the purpose of civil proceedings. That is to protect sensitive competitive and commercial information, and, as such, it is perfectly proper. However, the Government are currently moving to amend the Act to make it easier for consumers to obtain such information from public authorities in order to pursue civil cases, while protecting sensitive competition information. For example, consumers will find it easier to obtain such
 
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information in situations where they are the victim of a scam and wish to reclaim money they have lost, wish to seek redress for personal injury arising from a dangerous or defective product, or seek to obtain information such as a trader's name so that they may serve court papers.

Part 9 of the 2002 Act will be amended in the Company Law Reform Bill that is currently passing through the other place. That will be an enabling provision and the definition of the civil proceedings for which disclosure can be made and the types of information will be enacted through secondary legislation, which at present is planned for some time next year. I hope that that gives my hon. Friend an idea of what the Government are doing to improve the regime by which individuals can seek redress and act to prevent fraud.

The EU directive on unfair commercial practices will also help in combating scams. That directive encompasses significant new enforcement provisions that will help trading standards officers and other enforcers take more effective action against scams. Annex I contains specific provisions prohibiting scams where no prize is awarded at all, where false impression is given that those who participate are likely to get a prize, or which require the consumer to incur a cost. The directive also prohibits misleading actions or omissions, which will outlaw many scams, and, as a final catch-all, it introduces an overarching duty on businesses not to treat consumers unfairly.

I do not want to give my hon. Friend the impression that nothing is being done in this area. It is an important area, and much is being done, both at national level through the Enterprise Act 2002 and the Company Law Reform Bill, and at European level. We are trying to address these dreadful practices.

I congratulate my hon. Friend on this debate; it is an exemplary piece of parliamentary activity. I give him a commitment that if he brings that evidence to me and my officials, we will take it forward through my Department, and do our very best, in conjunction with other Departments with an interest in this area, to ensure that these scams are eradicated once and for all.

11.27 am

Sitting suspended until half-past Two o'clock.

 
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