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Clause 40: The OFCOM Consumer Panel
107. Clause 40 inserts new subsections (4A) to (4C) into section 17 of the Communications Act 2003. These allow the Secretary of State to direct the Office of Communications to appoint a non-executive member of the Council to the OFCOM Consumer Panel.
108. Paragraph 1(4)(b) of Schedule 1 to the Bill enables the Secretary of State to appoint a member of the OFCOM Consumer Panel to the Council.
109. This clause contains interpretation provisions in relation to Part 1 of the Bill.
110. This clause does not define water or sewerage undertaker. The Interpretation Act 1978 provides that these terms should be construed in accordance with section 6 of the Water Industry Act 1991 which relates to the appointment of water and sewerage undertakers.
Part 2: Complaints Handling and Redress Schemes
111. Clauses 42 to 52 set out the arrangements being introduced for the handling of complaints made by consumers to service providers in the electricity, gas, postal services and water sectors. In particular, this part will enable the Gas and Electricity Markets Authority and the Postal Services Commission to make regulations to prescribe complaint handling standards that will be binding on persons who are "regulated providers" (as defined in clause 42) in the electricity, gas and postal services sectors (see clause 43). This Part also enables the Secretary of State to make orders to require "regulated providers" in the electricity, gas, postal services and water sectors to belong to an approved redress scheme (see clause 47).
112. Clause 42 defines the key terms used in Part 2. In particular, this clause defines the service providers and consumers in relation to whom the powers under Part 2 may be exercised ("regulated provider" and "relevant consumer"). This clause also specifies the regulators who may exercise the powers under this part ("relevant regulator").
113. Clause 43 gives the Gas and Electricity Markets Authority and the Postal Services Commission the power to make regulations prescribing complaint handling standards that are binding on service providers. Such regulations will prescribe standards in relation to the way in which service providers handle complaints received from consumers (e.g. they might prescribe maximum response times). Regulations made under this clause are not subject to any Parliamentary procedure; however, they may be made only with the consent of the Secretary of State (subsection (4)).
114. The power to prescribe complaint handling standards does not apply to the water sector. This is because existing legislation already provides for this in the water sector in England and Wales.
115. Clause 44 sets out the procedure that the Gas and Electricity Markets Authority and the Postal Services Commission must follow before making regulations to prescribe complaint handling standards. In particular, the regulator must publish a notice of its proposals, consult people likely to be affected and consider any representations made.
116. Clause 45 requires the Council to publish statistical information in relation to regulated providers' levels of performance in complying with any complaint handling standards prescribed under clause 43 by the Gas and Electricity Markets Authority and the Postal Services Commission.
117. Subsection (4) gives effect to Schedule 5 which amends the Electricity Act 1989, Gas Act 1986 and Postal Services Act 2000 to require the Gas and Electricity Markets Authority and the Postal Services Commission to collect information from licence holders in respect of levels of compliance with any complaint handling standards prescribed by these regulators under clause 43 of the Bill. The above regulators are given the power to direct licensees to provide them with the above.
118. Clause 46 enables the Gas and Electricity Markets Authority and the Postal Services Commission to make regulations to require regulated providers to provide consumers with information about any complaint handling standards prescribed by the regulator and about the regulated provider's levels of compliance with those standards
119. Subsection (2) provides for the regulator to specify the form, manner and frequency that this information is to be given.
120. Clause 47 enables the Secretary of State to make orders to require regulated providers to belong to a redress scheme (as defined in clause 48(1)) approved by the relevant regulator or to a scheme administered by the Secretary of State or by a person appointed by him and designated by the Secretary of State as an appropriate redress scheme (in which case the Secretary of State must be satisfied that it meets the criteria for approval by the relevant regulator - see clause 47(7)).
121. "Redress scheme" is defined in clause 48 as "a scheme under which consumer complaints may be made to, and investigated and determined by, an independent person ("the independent person")". For this purpose, the "independent person" must be independent of the provider against whom the complaint is made and independent of the relevant regulator in respect of that provider (clause 48(2)).
122. The Secretary of State may limit the requirement to belong to a redress scheme to schemes which deal with certain types of complaint. Hence, it would be possible to exclude complaints in relation to certain matters from the requirement to belong to a redress scheme (subsections (2) to (3)). Before making an order to require regulated providers to belong to a redress scheme, the Secretary of State must consult the relevant regulator and persons who appear to be representative of persons who have an interest in the matter (subsection (4)).
123. Subsection (5) requires the Secretary of State to seek the consent of Welsh Ministers before making an order which relates to a water undertaker or sewerage undertaker for an area which is wholly or mainly in Wales.
124. Subsection (6) provides that the Secretary of State may not make an order under this clause unless he is satisfied that there is (or will be when the order comes into force) at least one redress scheme which each regulated provider to whom the order applies is able to join and which will satisfy the requirement imposed by the order. This is to ensure that the Secretary of State may not make an order requiring providers to belong to a redress scheme in circumstances where the providers subject to the order are unable to join a scheme since none exists.
125. Subsection (8) enables the Secretary of State to establish or administer a redress scheme. In practice, it is expected that suppliers or a trade association will establish their own redress scheme in respect of which approval will be sought for the purposes of any order under this clause. However, in the event that business does not establish a scheme itself, the Secretary of State has the power to establish one.
126. Clause 48 defines the key terms in relation to redress schemes.
127. Subsection (3) provides that an approved redress scheme may admit persons who are not required to belong to such a scheme and that it may investigate matters other than those to which the duty to belong to a redress scheme applies.
128. Subsection (4) provides that, for the purposes of the law of defamation, proceedings before a redress scheme will be treated in the same way as court proceedings. The effect of this is to allow the redress scheme to conduct investigations and determinations freely without the threat of defamation proceedings. Similar provision exists for most other statutory redress schemes.
Clause 49: Approval of redress schemes
129. Clause 49 sets out the matters to be taken into account by the regulator in giving approval for a redress scheme.
130. Subsection (1) specifies various matters that the relevant regulator must have regard to when deciding whether to approve a scheme. These include any criteria that, in the opinion of the regulator, constitute generally accepted principles of best practice in relation to redress provision which could reasonably apply to the scheme. An example of such guidelines would be guidelines such as those provided by the British and Irish Ombudsman Association (www.bioa.org.uk).
131. Subsection (2) requires the regulator to have regard to the number of other redress schemes in relation to regulated suppliers when the regulator decides whether to approve a scheme. This is intended to avoid a proliferation of redress schemes as this could be confusing for consumers.
132. Subsections (3), (6) and (7) set out various conditions that a redress scheme must satisfy in order to be approved by a relevant regulator.
Clause 51: Procedure for refusing or withdrawing approval
133. Clause 51 sets out the procedure that the relevant regulator must follow when refusing approval for, or withdrawing approval from, an approved redress scheme.
134. Subsection (1) requires the relevant regulator to give the scheme administrator notice of the fact that it proposes to refuse or withdraw approval. The notice must give the reasons why the regulator proposes to refuse or withdraw approval and specify a time during which the scheme administrator may make representations to the regulator.
135. Subsection (2) provides that the regulator must notify the scheme administrator of its decision and the reasons for its decision.
136. Subsection (3) provides that the regulator must also notify the Secretary of State of its decision to withdraw approval from a redress scheme.
137. Subsection (4) provides that the regulator must also notify each member of the scheme of its decision to withdraw the scheme's approval.
138. Subsection (5) provides that withdrawal of approval of a redress scheme takes effect from the date specified in the notice withdrawing the approval (under subsection (2)).
139. Subsection (6) provides that the Secretary of State must follow the procedures set out in this clause (other than those in subsection (3)) if he has appointed a person to administer a scheme under clause 47(1)(b) and decides to revoke that appointment.
140. Clause 52 makes provision in relation to the enforcement of complaint handling standards prescribed by a regulator under Part 2 of the Bill and in relation to any requirement to belong to a redress scheme which has been imposed by the Secretary of State by order under Part 2. These requirements will be enforced under the regulatory regimes in the electricity, gas, postal services and water sectors (where appropriate).
141. Subsections (1) to (4) make amendments to the relevant legislation to provide for this. The effect of the enforcement provisions is that the relevant regulator may impose an order to secure compliance with the above requirements. The service provider is obliged to comply with such an order and breach of the order can be enforced in the civil courts. Breach of such an order may also render the service provider liable to pay damages to any person who has suffered loss as the result of that breach. In addition to the above, sectoral legislation permits the regulator to impose a financial penalty for breach of the above requirements.
Estate agents' duties
142. Clause 53 introduces Schedule 6 which amends the Estate Agents Act 1979 to enable the Secretary of State, by order, to require persons engaged in estate agency work to join a redress scheme dealing with complaints from buyers and sellers of residential property. In addition, the clause amends section 3 of the 1979 Act by adding engaging in estate agency work when in breach of the duty imposed by such an order to the list of grounds on which the OFT may determine whether a person is unfit to carry on estate agency work.
143. This clause also repeals sections 172 to 174 of the Housing Act 2004 (which give the Secretary of State the power to require estate agents to belong to a redress scheme in relation to complaints regarding Home Information Packs ). The intention is to bring the repeal of sections 172 to 174 into force when an order made under the Estate Agents Act 1979 (as amended by Schedule 6) comes into force.
Schedule 6: Estate Agents' redress schemes
144. This Schedule inserts new sections 23A, B and C and new Schedules 3 and 4 into the 1979 Act.
New section 23A: Redress Schemes
145. Subsection (1) of new section 23A gives the Secretary of State a power to make an order requiring persons who engage in estate agency work in relation to residential property to join an approved redress scheme. Such an order may apply to all who engage in estate agency work, or only to specified descriptions of them, and may exclude certain types of estate agency work. Subsection (3) provides for an order to limit the types of complaint that may be made under a redress scheme, doing so by reference to the types of people who can make a complaint. This order will be subject to the negative resolution procedure (subsection (5)).
146. New subsection (4) means that an order cannot require individual employees to join a scheme. The duty will be that of their employer (who may, for example, be a body corporate or a partnership).
147. New subsection (6) provides that before making an order the Secretary of State must be satisfied that everyone who will be required to join an approved scheme will be eligible to do so - but for this purpose he will not have to take account of people who are not permitted to carry out estate agency work, for example because they have been prohibited from acting as an estate agent by the OFT.
148. New subsection (7) clarifies that approved redress schemes may be open to people other than estate agents if they wish to join, may deal with a wider range of complaints than those to which the duty imposed by the order applies, and may exclude certain types of complaint e.g. complaints made after a long period of time.
149. New subsection (8) defines terms used in this clause. .An approved redress scheme is a scheme which is approved by the OFT under Schedule 3 or a scheme administered by or on behalf of the Secretary of State and designated by him as an approved redress scheme for the purposes of the new section 23A.
150. This clause also introduces the new Schedule 3 to be inserted into the 1979 Act.
New section 23B: Enforcement
151. This new section confers powers on enforcement officers other than officers of the OFT. It allows such an officer (in practice, a Trading Standards Officer) to issue a penalty charge notice if he believes a person engaged in estate agency work in relation to residential property is not a member of an approved redress scheme, contrary to an order made under section 23A(1). A penalty charge can be issued within a six month period of the breach being committed (or, in the case of a continuing breach, of the last day of it being committed). Subsection (4) requires that a Trading Standards Officer must inform the OFT if he believes an estate agent is carrying out estate agency work without being a member of a redress scheme, and therefore breaching an order under section 23A, so that the OFT can take regulatory action. Section 23B also provides for the new Schedule 4 of the Estate Agents Act 1979 (dealing with penalty notices) to have effect.
152. This new section defines "residential property" for the purposes of section 23A. The definition is broad but subsection (1)(b) provides for the Secretary of State to make an order to exclude specified property from the definition if required.
New Schedule 3: redress schemes
153. New Schedule 3 makes further provision in connection with the approval of redress schemes. The Schedule indicates the minimum requirements which must be met before a redress scheme can be approved. The provisions are broadly similar to section 173 of the Housing Act 2004 except that they enable the OFT to approve redress schemes rather than the Secretary of State. (A scheme which is administered by or on behalf of the Secretary of State does not require approval by the OFT).
154. Paragraphs 2, 4 and 5 set out minimum requirements for a scheme.
155. Paragraph 3 requires the OFT, in determining whether a scheme is satisfactory, to have regard to the interests of both scheme members and potential complainants. The OFT must also have regard to whether the scheme complies with what the OFT regards as generally accepted principles of best practice, in relation in consumer redress schemes, which may be reasonably regarded as applicable to the estate agency sector. Paragraph 3 (2) also permits the OFT to have regard to the number of other approved redress schemes in deciding whether to approve a scheme. In other words, the OFT could refuse to approve a redress scheme, even if it met the approval criteria, if it did not feel a further scheme was in the interests of the industry and potential complainants.
156. Paragraph 4 requires that a scheme must make provision for passing on information to the OFT, or any other relevant regulator, so that they can take regulatory action as a result of a complaint if necessary.
157. As it will be mandatory for estate agents to join a scheme once an order is made under section 23A, paragraph 5 of Schedule 3 requires the OFT to be satisfied that the scheme does not provide for membership to be revoked on unfair grounds, as otherwise the scheme could deprive an estate agent of his/her livelihood in an unfair way.
158. Paragraphs 6, 7 and 8 deal with procedural matters relating to the OFT's decision to approve or refuse approval of a scheme.
159. Paragraph 9 specifies a 14 day period for notifying changes to a scheme.
160. Paragraphs 10 to 13 set out the process for withdrawing approval. This will require the giving of a notice of the proposal to withdraw approval, specifying the grounds for doing so and indicating that the recipient of the notice may make representations about the proposal. Paragraph 11(c) allows a minimum period of 30 days for representations after the withdrawal notice is issued and is in line with the provisions made for energy and postal redress schemes in Part 2 of the Bill.
161. Paragraph 14 provides that in the case where the Secretary of State has designated a scheme administered by him or on his behalf he must give notice to scheme members if he no longer wishes that scheme to be designated an approved scheme, just as the scheme administrator would have to give notice to every member if the OFT was withdrawing approval from the scheme ( paragraph 13 (b)).
162. Paragraph 15 ensures that proceedings under approved schemes (in relation to the investigation and determination of complaints) are covered by the defence of absolute privilege for the purposes of any action for defamation. This means that words spoken, published or reported in the course of redress proceedings cannot be the subject of an action for defamation. This follows the corresponding provision in the Housing Act 2004.
163. The new Schedule 4 to the 1979 Act sets out detailed requirements relating to penalty charge notices. These are very similar to the provisions in Schedule 8 of the Housing Act 2004. The amount of the penalty charge will be set by regulations but cannot exceed £ 1,000.
Clause 54: Duty to keep records
164. At present, it is an undesirable practice under the 1979 Act for an estate agent to fail to pass on an offer to the seller promptly and in writing (except where the client has indicated that he does not want particular types of offer to be passed on), or to misrepresent an offer (see Articles 1 and 2 and Schedule 3 to the Estate Agents (Undesirable Practices) (No.2) Order 1991). An undesirable practice is one of the triggers for considering a person's fitness to engage in estate agency work under section 3(1) of the 1979 Act and hence can lead to a prohibition order. However estate agents are not currently required to maintain records of offers made and passed on.
165. The clause inserts a new section 21A in the 1979 Act. Subsection (1) of the new section introduces a requirement for persons engaged in estate agency work to keep records (referred to in the section as "the permanent records"). Subsection (3) requires persons engaged in estate agency work to ensure that records of certain information and events are included in those records. The details of what must be included are specified in subsection (4) (e.g. information to clients regarding their prospective liabilities to the person carrying on estate agency work, information about offers and other information of a description prescribed by the Secretary of State). The records must be kept for a period of six years. The period of six years is the period for which accounting records under the Estate Agents (Accounts) Regulations 1981 9 have to be kept and is also the basic limitation period for most claims.
9 1981 No. 1520 The Estate Agents (Accounts) Regulations
166. The new section makes special provision for persons who are engaged in estate agency work as employees. The duty under subsection (1) to keep records is that of the employer and not the employee (see subsection (2)). But the duty under subsection (3) does apply to employees so they must, for example, ensure that information about offers received by them is included in the records. Under subsection (5) employers, as well as employees, are also required to ensure that records are kept up to date in this way, but the employer is not in breach of the duty if he can show that he took such steps as were reasonably practicable to ensure that his employees complied with their duty. Regulatory action can be taken against the employer for failing to keep records or to keep them up to date (subject to the defence just mentioned) and against the employee for failing to keep the records up to date.
167. Section 3(1) of the 1979 Act lists the triggers which allow the OFT to consider the fitness of an estate agent. Subsection (2) of this clause amends section 3(1) so that the OFT can consider the fitness of estate agents where they have committed an offence even if the individual has not been convicted of the offence. For example, the individual may have accepted a police caution, or the OFT may have evidence from Trading Standards Officers or the Financial Services Authority of an offence having been committed where these authorities do not wish to prosecute for some reason (e.g. the FSA may decide to revoke someone's authorisation instead).
168. In addition, subsection (3) further widens the circumstances in which the OFT can consider a person's fitness to engage in estate agency work to include circumstances where an estate agent has breached a statutory undertaking given to the OFT under section 217, 218 or 219 of the Enterprise Act 2002 or breached an enforcement order made against him under section 217 of that Act in relation to estate agency work.
169. Subsection (4) of the clause provides that section 5(4) of the 1979 Act is omitted. Section 5(4) provides for the automatic revocation of orders based on a conviction which becomes spent. Its repeal means that an individual who is subject to a prohibition order on the basis that he has committed an offence and who has been convicted of that offence will have to apply to the OFT to have the prohibition order revoked when the conviction becomes spent. The OFT would be expected to revoke the order in these circumstances. An individual who is subject to a prohibition order due to having committed an offence but who has not been convicted of the offence will also have to apply to the OFT to revoke the order, after a suitable period of time, should they wish to practise as an estate agent again.
170. Subsection (5) amends paragraph 1 of Schedule 1 to the 1979 Act. The amendment makes it clear that in determining whether to make a prohibition order on the ground set out in section 3(1)(a) (as amended) the OFT may not rely on convictions that have become spent.
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