Clause
50
Approval
of redress schemes:
supplementary
Mr.
Prisk:
I beg to move amendment No. 39, in
clause 50, page 30, line 25, leave
out from ‘scheme’ to end of line
26.
Clause 50(4)
reads:
“A
regulator may, in accordance with section 51, withdraw its approval of
a redress scheme,”
but
goes on to say that
it
“may do so generally
or in relation to consumer complaints of a description specified by the
regulator.”
The purpose
of this probing amendment is simply to establish on what basis a
regulator might withdrawits approval of a redress scheme. The
wording of the subsection is a little unclear, and for the sake of the
record it would be helpful if the Minister couldclarify
it.
Lorely
Burt:
Our understanding is that the amendment is intended
to remove the flexibility of the regulator to withdraw general or
specific parts of a scheme. I have a deep and dark suspicion that the
Minister will say that it is important to keep the flexibility so that
the scheme might run as well as possible, and I have a great deal of
sympathy with that. However, will he provide an example of how some of
a redress scheme could work, but not all of
it?
Mr.
McCartney:
I thank hon. Members for their comments and
questions.
Amendment
No. 39 relates to the redress scheme approval provisions of clause 50,
and the discretion available to a regulator in considering the
withdrawal of approval for a redress scheme. Circumstances might occur
that make it necessary for a regulator that has given approval for a
redress scheme to operate to consider withdrawing that approval. The
Bill allows for a regulator to have the option either to withdraw
approval from a whole scheme or to do so in relation to a specific type
of consumer complaint. The hon. Lady was right to say that it is the
Government’s view that the regulator must have the flexibility
necessary to protect consumers.
Those circumstances could
include problems in the operation of the scheme, including processes,
service standards, outcomes of cases or other issues affecting its
effectiveness. Other circumstances might arise in future, such as the
introduction of new regulations that guarantee automatic compensation
in respect of certain types of complaint, resulting in less need for
the redress scheme to focus on a particular class of complaint. That
takes us back to a point made bymy right hon. Friend the
Member for Coatbridge, Chryston and Bellshill in amendment No. 73. For
the measure to work in practice, information is required on, for
example, service standards; the outcomes of cases; the interaction
between the processes and the individual consumer who makes a
complaint; and, in later years, complaints of such a nature that they
will be guaranteed automatic compensation. The redress scheme will then
be able to concentrate on thedifficult, complex cases that
need to be resolved in an effective way.
The effect of the amendment
would be to removethe discretion to withdraw approval in
relation to consumer complaints of a specified description. That would
not be helpful for consumers, because it would remove the flexibility
that regulators require to ensure that schemes operate effectively on
their behalf. Redress schemes are about advocacy and achieving
appropriate compensation—whatever it might be—for the
consumer. Therefore, we have to be absolutely diligent in the way in
which we operate schemes, and must be able to effect change if change
is required.
I
understand that the amendment is intended to be a probing measure, but
I have to say that being obliged to take a blanket approach to the
withdrawal of approval for a scheme would risk disadvantaging consumers
in areas in which the scheme is operating satisfactorily. That goes to
a point made by hon. Lady. On occasions, a scheme might not operate
effectively in a specific area, and the regulator will decide that
improvement is required. It would be nonsensical to have to withdraw
that scheme in areas in which it operates effectively.
That would mean that thousands of genuine complaints were not resolved
effectively and the scheme would be brought into disrepute. In
addition, it would be unfair on the companies that were paying for it
to work; they would have a way of resolving disputes but would not be
able to use it, so would become the butt, as it were, of complaints
because complainants would have nowhere else to go to. Flexibility is
important so that schemes can operate satisfactorily and the regulator
can change anything that is unsatisfactory to resolve issues. In deciding whether to approve
a redress scheme, a regulator must consider a number of factors, such
as the provisions of the scheme. We must ensure that those include the
interests of consumers and generally accepted principles of best
practice. Having given approval for a redress scheme covering
complaints in a range of categories such as billing, customer service
and metering, a regulator might need to withdraw approval in respect of
just one aspect of it. For example, a change in technology might mean
that the service being provided for a particular category of complaint
no longer met all the conditions on which approval had been given. It
would, therefore, have to change. This is about keeping up with changes
in a way that is not detrimental to the consumer who has a legitimate
complaint that needs to be resolved. The amendment could also result in
putting members of that scheme who would have a statutory requirement
to belong to an approved scheme at risk of being in breach of that
requirement if they are unable to find an appropriate alternative
scheme to
join.
11.30
am
I hope that my
explanation helps the hon. Lady and the hon. Gentleman to understand
why the clause is so drafted.
Mr.
Prisk:
The Minister has given us a comprehensive
explanation of the clause. The key word is “flexibility”
and he was right to emphasise it, particularly in some of his later
remarks. It will be helpful to those who want to understand how the
measure will work and the circumstances in which it will apply. On that
basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave,
withdrawn.
Clause
50 ordered to stand part of the
Bill.
Clauses
51 and 52 ordered to stand part of the
Bill.
Clause
53
Membership
of redress
schemes
Question
proposed, That the clause stand part of the
Bill.
The
Chairman:
With this it will be convenient to discuss the
following:
New clause
2—Standards of
competence
‘(1) Section 22 of
the Estate Agents Act 1979 (c.38) (Standards of competence) is amended
as follows.
(2) For subsections
(1) and (2) substitute—
“(1) The Secretary of State will by
regulations made by statutory instrument designate any body of persons
as an approved body to which people engaged in estate agency work,
including both the sale and lettings of residential property, must
belong.
(2) The approved bodies
must make membership conditional on signing up to rules and codes of
conduct, which will—
(a)
prescribe minimum competency
standards;
(b) ensure that
firms have adequate professional indemnity insurance and, as
appropriate, clients money protection
insurance;
(c) require a
minimum level of professional development per year;
and
(d) require membership of a
redress
scheme.”.’.
New
clause 4—Monitoring by Office of Fair
Trading
‘(1) The Estate Agents
Act 1979 (c. 38) is amended as
follows.
(2) After section 22
insert—
“22A
Monitoring of compliance by Office of Fair
Trading
(1) An estate agent
shall be obliged to register with the OFT and shall provide such
information as the OFT may
require.
(2) The Secretary of
State shall prescribe a scale of fees to be charged to estate agents
for registration.
(3) The OFT
shall establish, or shall cause to be established, a unit to monitor
compliance with the provisions of this Act and this unit shall have
powers to make reasonable requirementsof estate agents to
ensure compliance with the provisions ofthis
Act.
(4) In pursuance of
subsections (1) and (3), the
OFT—
(a) shall require
estate agents to certify that they comply with the provisions of this
Act and any code of practice to which they have
subscribed;
(b) may require an
estate agent to produce any records or information and to co-operate in
any investigation; and
(c) may
conduct or commission investigations and surveys to monitor compliance
with the Act.
(5) Failure to
comply with any requirement made by the OFT under this section shall be
an offence punishable on summary conviction by a fine not exceeding
level 5 on the standard
scale.
(6) This section comes
into force 18 months after the date on which the Consumers, Estate
Agents and Redress Act 2007 receives Royal
Assent.
(7) In subsection (2)
above “prescribe” means prescribed by the Secretary of
State by order made by statutory instrument, which shall be subject to
annulment in pursuance of a resolution of either House of
Parliament.”
(8) In
section 30(2) (orders and regulations), after ‘22’ insert
‘and
22A’.”.’.
Lorely
Burt:
Thank you, Mr. Weir. I shall speak first
about new clause 4, which would require estate agents to register with
the Office of Fair Trading. It is likely that for estate agents the
ombudsman will be the only redress scheme in this place. At present,
about 70 per cent. of estate agents are members of, and licensed for,
the redress scheme for home information packs. As the ombudsman is
doing a very attractive two-for-one offer at the moment, it is likely
that by the time the Bill has completed its proceedings the vast
majority will be members of the scheme.
Despite the Minister’s
comments earlier, the Liberal Democrats reiterate our concern about
competition for redress schemes and the possible danger of a race to
the bottom. However, we do not want to press that argument, because we
take the Minister’s point.
The proposal is about two
important things: first, positive, as opposed to negative, licensing.
It is
important that a service should be good from the beginning; it is not
appropriate to wait until one has to pick up the pieces when things go
wrong. Secondly, it is
about actively looking for compliance. The proposal will facilitate
things such as mystery shopping exercises. Consumers will not
necessarily know if they have been misadvised. For example, there may
be interests that the seller of a property may not be aware of, when a
lower price than might otherwise have been achieved is recommended.
Unless there are individuals such as mystery shoppers and an active,
positive constraint on how estate agents practice, the vast majority of
misdemeanours and mishandling against the interests of the consumer may
never come to
light.
As drafted, the
Bill will catch the absolute fraudsters but not the majority who
mislead customers in what for most people is the biggest purchase of
their lives, involving what to them is a very large amount of money. We
feel that this is more important than how much the fine should be when
those individuals are caught, which is covered by amendments 26 to 28.
I remind the committee that this was originally drafted with a Labour
colleague and was based on an amendment that we drafted in
collaboration with a Labour colleague. We would, therefore, like to ask
the Minister to reflect on how consumers will know if they are being
ripped off and losing thousands of pounds unless there is a positive
requirement for someone actively to look at
this.
The new clause
2, which is proposed in my nameand the name of others,
similarly relates to positive licensing as opposed to negative. Here,
we give the Secretary of State the power to designate a body of persons
as an approved body to which estate agents must belong, as opposed to
the Office of Fair Trading. This does the same thing, but in a
different way.
This
amendment was first tabled in another placeby the Earl of
Caithness. It does two new and very important things. It broadens the
scope of the Bill to incorporate lettings and, in subsection (2), it
lists the things that an estate agent—or a member of a
scheme—would have to do to be eligible to join. This includes
vital things like professional indemnity insurance; a minimum
requirement for professional development; and minimum competency
standards. This
introduces—
Mr.
Clarke:
I listened carefully as the hon. Lady made her
case. How would that minimum competency be determined and who would
determine whether it met those standards?
Lorely
Burt:
The idea behind including a minimum competency
standard is that compulsory training could be introduced, but in a
flexible way. I think that it would be for the industry to determine
what those compulsory, but minimum standards ought to be.
The National Association of
Estate Agents fully supports this new clause, because it creates a
level playing field and empowers and encourages the good estate agents
and attempts to weed out the bad. The Government have previously made
some encouraging remarks. They have said that they will look at this.
Has the Minister had an opportunity to reflect further and can he give
us any assurances?
Mr.
Prisk:
The new clauses cite the arguments in favour of
positive licensing. If I may, I would like to address them
both.
The new clause
2 seeks to introduce higher standards of confidence by requiring all of
those who trade as estate agents to be a member of an approved body or
a trade organisation. While I wish—as does the hon.
Lady—to root out rogue estate agents and give greater confidence
to homebuyers and vendors, I have some reservations about this
approach. I should also preface my remarks by reminding members of the
Committee that I am a member of the Royal Institution of Chartered
Surveyors. I suspect that this is one of the organisations that the
hon. Lady has in mind in terms of the membership aspects of the new
clause.
My first
concern is that a members-only industryhas the potential to
create a barrier to entry for new players. After all, as it stands, the
new clause specifically requires firms to meet certain standards that
would require training and management procedures to be in place. The
principle of that is fine, but there are difficulties for new
entrants.
Secondly,
the new clause 2 requires that appropriate professional indemnity
insurance be secured. As anyone who has traded in this market will
know, itcan be extremely difficult for a professional firm,
particularly a new entrant, to secure insurance. It is especially
difficult for a new entrant to demonstrate the track record on which
the provision of insurance is often
dependent.
Lorely
Burt:
I am afraid that the hon. Gentleman’s
comments are not reassuring to me or to the many other people who have
suffered at the hands of estate agents. The thought that one can
receive a service from a new entrant to the market who is not required
to have a qualification and who has no insurance to provide for things
going wrong is not reassuring. Those should be minimum standards of
entry for anyone who professes to give advice to someone for the
biggest purchase of their life. If that is a barrier to entry for
people who are uninsured and untrained to give such advice, what other
measures would enable an individual to approach an estate agency with
confidence?
Mr.
Prisk:
I shall clarify that point for the hon. Lady. Her
new clause seeks specifically to have a requirement for membership of a
trade organisation. That is a separate, although important, matter from
having a qualification or having gone through a training
procedure. It is important to understand the
implications of the new clause. Of course we want to ensure that people
come into the industry with the right approach and from the right
background, but to require them to be a member of an organisation and
already to have indemnity insurance is to set an unrealistic
standard.
Stephen
Pound (Ealing, North) (Lab):The hon. Gentleman knows far
more about the subject than I do, but from the perspective of the
semi-literate layman,it appears that the new clause would
create a self-regulating cartel, which would be anti-competitive. From
the standpoint of his personal knowledge, will he either disabuse me of
that notion or confirm me in my prejudice?
Mr.
Prisk:
I always hesitate to disabuse the hon. Gentleman.
In this instance, I am happy to say that much of what he says, albeit
in more colourful language than I might cautiously use, is absolutely
right. There is a danger that, under the new clause, it would be
difficult for new entrants to come into the market. I have always taken
the view that the consumer is often well protected if there is good
competition and turnover. If there is a requirement for new entrants to
be members of an organisation—there might be several, such as
the National Association of Estate Agents, the Royal Institution of
Chartered Surveyors or others that the hon. Member for Solihull might
have in mind—we could end up with a cartel, as the hon. Member
for Ealing, North,
said.
Lorely
Burt:
I still do not feel reassured, particularly by the
idea that a new entrant to an industry can set up with no insurance
whatever. There is an assumption that competition will create some kind
of standard of service. I ask the hon. Gentleman to reflect on how that
can be achieved, because it seems to me that the more people who vie
for a customer’s attention, where the customer is a
naïve—nay,
semi-literate—individual—
The
Chairman:
I remind the hon. Lady that interventions should
be brief.
Lorely
Burt:
I am sorry. I am taking too
long.
Mr.
Prisk:
I was not sure what the end result of that
intervention was going to be. I shall be fair; the new clause has
serious drafting weaknesses, but I shall look at the intent behind the
words. The aim, quite rightly, is to rule out rogue estate agents. The
hon. Lady’s chosen method is by setting higher standards of
confidence. My concern is that that is perhaps the wrong way to try to
tackle the
problem.
11.45
am
Let us be very
clear who we are talking about. The rogue estate agent—that is
who we want to tackle—is often a cunning and canny individual.
They know perfectly well how to work their way around the membership
rules of professional organisations. So, simply setting new rules will
not stop them. I share the hon. Lady’s desire to tackle them and
root them out of the industry, both from the industry’s point of
view and, more importantly, from the consumer’s point of
view.
However, I
think that the unintended consequenceof this particularly
restrictive new clause would be to further burden the law-abiding firm
with just more paperwork and costs. In that sense, this sort of members
only approach is trying to tackle the root of the problem through
competence, when, in truth, the real issue is ethics, not competence.
Ethics is the issue that we must address. That is why I do not feel
that this new clause is one that I can
support.
New clause 4
similarly seeks to tackle the issue through the route of positive
licensing. There is a perfectly reasonable aim behind it, as there is
with the hon. Lady’s new clause. There are some pretty dreadful
practices undertaken by a minority, but nevertheless undertaken by some
estate agents, and we must
consider how we deal with that. Having said that, I would like to
commend the work of the Office of Fair Trading and the many local
trading standards officers who police the industry. I would also like
to commend the work of Which?; it has also sought to expose rogue
estate agents and it is right to continue that work. The key point here
is this: how will the powers of the Bill and the legislation that it
seeks to amend help us to tackle, catch and rule out rogue
agents? Therefore,
although I applaud the sentiment that lies behind the two new clauses,
the real issue is how we deter such people from entering the industry;
we will debate serious fines later on, if we catch your eye,
Mr. Weir. Also, how do we stop those rogue agents from
continuing? I must say that the approach that the two new clauses
advocate—the approach of positive licensing—is one that I
am not convinced about.
First, mandatory registration
with the OFT would only work if the OFT has the means to screen all the
businesses thoroughly. Clearly, past criminal records can be identified
when the Home Office—what remains of it— is actually
working, but what other information would be required for such
registration to be
meaningful?
Secondly,
the rest of new clause 4 merely seems to restate the provisions that
are in the Estate AgentsAct 1979, or indeed in the Bill; for
example, the issue about a liability on maximum fines for some
reconvictions.
I am
not saying that there is not a case for raising standards; there is. I
am not saying that there is not a case for trying to change practices,
in order to make it harder for rogue agents to do what they do.
However, I am just not convinced that the measures outlined in new
clause 4 are
adequate.
What matters
is what the Government’s approach is going to be. We need to
know whether there will be a clear commitment from the Minister, and
therefore from the Government, to ensuring that the OFT and the trading
standards officers will have the ability and the resources to crack
down on rogue agents. I know that the Minister has made that commitment
clear on Second Reading. However, what we need to understand better are
the Minister’s views as to whether he thinks that any form of
positive licensing would be something that he could
support.
Mr.
McCartney:
I will give a detailed response to the hon.
Member for Solihull. This is one of those clauses that deals with a
genuine issue that, for many years, people in the political field, the
professions and consumer advocacy bodies have spent a great deal of
time investigating. In some instances, they have been able to expose
acts that are totally unacceptable in undermining the individual
consumer.
It is
important to consider the issues related to what people call positive
licensing, and the alternatives to it. I tend not to use the phrase
“positive licensing” myself. Why? It gives the impression
that, if there is a genuine alternative, that alternative is a negative
approach. In drafting the Bill, I wanted to do the best by the consumer
and those elements in the industry—the overwhelming
majority—that want to support good practice and open up the
transparency of relationships within the industry to protect not only
their reputation
but their ability to work effectively in a marketplace, providing goods
and services, against a minority of people who could have a
disproportionate effect on the purchase of a property because of their
unacceptable conduct in the running of their business and their
relationship with their
client. I hope that I
can explain in detail the intellectual thought processes behind our
approach to this and its evidential base. I know I will not be able to
persuade the hon. Lady, who has a legitimate view about she would like
us to proceed, and nor am I attemptingto do so. She may want
to divide the Committee. However, I shall give her a detailed response
which will try to set out the reasons why we are doing this in the way
that we are and not in a way that people would describe as
“positive
licensing”.
Clause
53 gives effect to schedule 6, which makes provision for the Secretary
of State to make an order requiring all persons who engage in estate
agency work in the United Kingdom to belong to an approved redress
scheme. Schedule 6 sets out the detail of the estate agents’
redress scheme provisions and how they will be enforced. More
specifically, it enables the Secretary of State to make an order to
require persons engaged in estate agency work in relation to
residential property to be members of an approved redress scheme. It
allows enforcement officers to issue penalty charge notices if an
estate agent is in breach of the duty to be a member of an approved
redress scheme. It requires enforcement officers to inform the Office
of Fair Trading of estate agents not complying with this duty and
finally it defines “residential property”. Clause 53 also
amends section 3(1) of the Estate Agents Act 1979, so that not
belonging to an approved redress scheme will become a ground for the
OFT to issue an order banning unfit persons from practising. It will
affect both individuals and companies. This is vitally important. It is
a major tool, in the hands not just of consumers, but the regulator and
those in the industry who want to operate in market in the sure and
certain knowledge that they are not competing against dodgy characters
in dodgy companies with dodgy practices, but in an open and fair way,
providing excellent and transparent services for the consumers who want
to use their company for the purpose of buying and selling
property.
We want to
ensure that consumers have access to redress for complaints against
estate agents related to home buying and selling. Having an ultimate
sanction of losing your livelihood should ensure that estate agents
comply with the obligation to belong to a redress scheme. That goes
back to a point that my hon. Friend the Under-Secretary of State for
Trade and Industry made earlier. My hon. Friend the Member for Ealing,
North also alluded to this. There are those out there at the moment who
believe that they can operate with impunity and consequently do quite
significant damage to individuals who wanted them to provide a
first-class service. That can range from a very big problem to a small
problem and nothing seems more challenging in terms of one’s
mental well-being than buying or selling a property. We all know what I
am talking about.
New
clause 2 seeks to increase the regulation of estate agents beyond what
is proposed in the Bill and seeks to introduce bureaucracy where I do
not think it
is necessary. The Government are going further than
any Government before by putting in place redress
schemes to act as gatekeepers to the high street. If people are not in
it, they cannot practise. That is a big incentive. It is big and
legitimate barrier. It is not the kind of barrier that the hon. Member
for Hertford and Stortford described. For the first time, every
consumer will have the certainty of knowing when they walk into an
estate agent’s office, that they have access to redress if
something goes wrong. For the first time, every consumer who has been
misled about a property will have access to redress. For the first
time, every seller who has had an offer withheld will be able to seek
redress. For the first time, all consumers who received a bad service,
even if an estate agent has not acted illegally, will have access to
redress. This comes to
a point that the hon. Lady made in moving the amendment. She asked how
someone could tell that they had been badly treated. The Bill will
improve the audit trail for transactions by requiring estate agents to
make and keep records, including records of offer letters, not for six
weeks, six months, or a year or two, but for six
years.
The Bill gives
the OFT and trading standards officers the powers to go into premises
and inspect records in a wider range of circumstances. That will enable
them to investigate all breaches of the law and of undertakings given
to enforcers, and not just criminal offences. The Bill also expands the
circumstances in which the Office of Fair Trading may consider the
fitness of an estate agent to practise, and take regulatory action
against them. That is in addition to the estate agents regulations 1981
and the Money Laundering Regulations 2003, which also contain a
requirement to maintain records, for obvious reasons. This is a huge
improvement, even when a consumer does not realise what has happened,
and it allows the investigation of the operations of a company that
someone has expressed concern about. These audit trails and that
information will provide valuable opportunities for trading standards
officers and the OFT to investigate complaints, or cases in which there
has been a cover-up by an organisation in relation to its relationship
with its consumers.
Lorely
Burt:
I have been listening carefully to what the Minister
has said, and I welcome the requirement for estate agents to provide
satisfactory and appropriate records for an audit trail. However, a
customer still needs to have an idea about whether he or she has been
“ripped off”—and I cannot think of a
more parliamentary phrase—before anyone
investigates a complaint. The point of these new clauses is that they
make provision for something like a mystery shopper, so that a company
that is systematically misleading customers can be detected; otherwise,
it may not
be.
Mr.
McCartney:
I am trying to follow the logic of that. How
can a regulator, whether working as a trading standards officer, for
the OFT or the National Consumer Council, look into the mind of someone
who does not know that he or she is being ripped off? I am trying to
get my head around that.
Mystery shoppers have many
legitimate uses. The public and private sectors use them, and they can
be effective. I think that I am a mystery shopper for the national
health service, and I have found it most satisfactory so
far.
Stephen
Pound:
The hon. Lady makes an interesting point. I know of
three cases in which people have offered their houses for sale through
an estate agent and sold them to an apparently legitimate purchaser,
but it subsequently transpired that the estate agent was making the
purchase through an agent, who happened to be a member of the same
fraternal organisation. How would the victim know about that without
the sort of protection that the hon. Lady is asking
for?
Mr.
McCartney:
I am trying to suggest to you that that is what
we are trying to provide in practice. It is not just an audit trail in
respect of an individual, but in respect of the whole company. One
complaint may be made or one concern expressed, but it is only when the
OFT, the trading standards officers, or both get into the company that
they can look at the extensive records. At the moment, that is not
possible. The activity that my hon. Friend was talking about is already
a criminal offence. In addition, there would now be a redress scheme
for compensation, and, when someone pleads guilty to such a serious
offence, I imagine that the OFT would take action to close the entire
business.
Mr.
Prisk:
Without wishing to interrupt the Minister’s
flow, I must say that the point here is that, rather than try to
second-guess what may or may not be in the mind of a mystery shopper,
we should put a system in place that deters those who would behave in
that way, whether an estate agency or other business. That would make
it crystal clear that these practices are unacceptable, that there is a
clear redress scheme, and that there are penalties, which such
businesses would rather not face. Therefore, the deterrent element is
important. Does the Minister
agree?
Mr.
McCartney:
The hon. Member has put it more eloquently than
I have managed in the past five minutes, and I thank him. He is
absolutely right, and that is why the capacity to establish the records
and maintain them is so important as a deterrent. There must be
absolute certainty that there is an evidence trail and that it is an
offence not to maintain it. Failing to maintain the records in order to
try to get away with ripping somebody off or undertaking a dodgy
activity would itself be an offence. It might be a serious enough
offence for the individuals concerned—separately or collectively
as a company—to be prevented from practising. The Government has
a big role to play in incentivising industry, in terms not only of good
practice and the way in which companies are run, but of how industry
increases the skills of its staff. Significant financial pay-outs are
at stake—for example, up to £25,000 under the current
voluntary scheme—so estate agents would be mad not to take up
the proposals.
Professional development
schemes for staff, to ensure that standards rise rather than fall, are
important and, as the survey published yesterday by Ernst and Young
shows, it is in a company’s best interests to deal effectively
with customer complaints. That is the key to customer satisfaction.
Most companies providing goods and services that do that get a benefit
from it. Not only are they well run, but the customers want to buy
their goods and services because they are certain that if something
goes wrong it will be dealt with.
I believe that that approach
will give estate agents the incentive to address not only big issues,
such as not passing on offers and lying in respect of properties, which
my hon. Friend the Member for Ealing, North mentioned, but service
issues, such as not turning up to show people around and not returning
keys on time. Consumers will have access to redress for those things
too, even if they are not on the scale that would trigger serious
enforcement actions or investigations, including criminal
investigations.
Slapping on more bureaucracy
would be an easy option. Our approach will get the same results without
the disadvantages associated with blunt regulatory
measures.
12
noon
Lorely
Burt:
The key to this is the point that I was struggling
to make earlier. When someone wishes to sell or buy a home, they cannot
necessarily tell from indications on the high street who has had
training and who has not, or who is a member of an appropriate scheme
and who is not. Every consumer, whether buying or selling, should be
able to expect a minimum standard of service. However, when they walk
through the door, there is no way in which uninitiated individuals can
tell whether the person whom they deal with has no experience or
insurance and does not provide a service that meets specified
standards. That is the situation that we seek to
address.
Mr.
McCartney:
I understand what the hon. Lady is saying.
However, estate agents, whether companies or individuals, must be
members of the redress scheme or they cannot practise, so somebody
walking throughthe door with a complaint—whether a
small one or a major one—will get redress. That does not happen
at the moment, except in the context of the recent scheme that will
build on good practice. However, the scheme will not cover two thirds
of the industry; it will cover all of it. That is important, and it
seems to be forgotten when we talk about the positive aspects of
licensing. We cannot get more positive in my view than preventing
people from practising unless they belong to the redress scheme.
Without that, they cannot open their doors, advertise or take in
customers. In future, the minute that any of us walks in the door, we
will have certainty that the individuals who we are dealing with, as
well as the company in which they are employed, must be part of the
redress scheme.
Mr.
Ben Wallace (Lancaster and Wyre) (Con): I understand the
Minister’s point and recognise the correct angle of it. Are the
Government planning to publish a list, so that people can go online and
find out that estate agent X is listed under the redress scheme? If
that were the case, we would know; we would be able to
check.
Mr.
McCartney:
That information will be available through the
Office of Fair Trading and local trading standards offices. It will
also include whether regulatory action is being taken against someone,
including closing the organisation down. That information will be in
the public domain if an offence
has been committed, and I thank the hon. Gentleman for raising the
matter, which enabled me to make that point.
The OFT report on estate agents
looked in detail at licensing them. The OFT unearthed little evidence
that competency standards would prevent rogue agents from entering the
market. Its findings clearly showed that dodgy dealings are not the
result of a lack of qualifications or knowledge, but a lack of
integrity in the management and running of the company—a point
made by the hon. Member for Hertford and Stortford. That is why the
measures are so important as a disincentive and to provide certainty
that estate agents will be apprehended if they operate in those ways.
If necessary, individuals and the organisation as a corporate body will
not be allowed to offer services in what is an effective and lucrative
marketplace.
The OFT
concluded that licensing estate agents would raise costs for consumers
and inhibit competition in the industry, without delivering adequate
benefits to justify it. That is why, on an evidence base, the scheme in
the Bill was proposed. It has the benefits of being a positive scheme,
for which hon. Members have argued, and it has none of the disbenefits.
It provides certainty for consumers who come off the high street and
seek an estate agent’s
services.
We are
confident that requiring estate agents to belong to approved redress
schemes will improve standards in the industry, but we are not
takingany chances. The Bill lengthens the stick as well as
introducing a carrot. At the same time as requiring estate agents to
belong to an approved redress scheme, we are strengthening the 1979
Act’s enforcement powers. The Bill will ensure that breaches of
statutory undertakings and enforcement orders, as well as criminal
offences, can result in an investigation of an estate agent’s
fitness to practise, which will include its records as evidence. It
will enable enforcers to deal more effectively with rogue agents and
take them out of the market
altogether.
New clause
4 may be dressed up as a lighter-touch regulation, but it just
replicates, in a confused way, what is already happening or will happen
shortly. First, the 1979 Act already requires estate agents to provide
information to the OFT and to trading standards officers. As I have
explained, the Bill will extend those powers, so that trading standards
officers can require information to investigate a much wider range of
wrongdoing—a point made by the hon. Lady. If an agent fails to
provide that information, the OFT will be able to consider that
person’s fitness to operate as an estate agent, and it could
lead to it ultimately banning him or her from practising. Their ability
to hide their wrongdoing by not supplying their records would be a
disastrous strategy if they tried to deploy it. They would end up with
the same result at an earlier stage and simply be banned from
practising. The threat of a banning order is a more serious deterrent
than the fine of £5,000 proposed in new clause 4.
Secondly, the OFT already has a
statutory duty to keep the estate agency market under review, as
required under section 25 of the 1979 Act, and has a unit dedicated to
investigating complaints against estate agents and taking enforcement
action. It is a matter for
the OFT how it carries out those functions and is not something that
needs to be set out in
statute. Thirdly, if
the OFT wishes to require all estate agents to register with it and to
charge a fee for doing so, it will be able to do so under the third
money laundering directive that will be implemented in the UK in
December. As the hon. Lady said, the OFT has the capacity under that
directive to take action if it wants to do so. It is an independent
regulator, and it is for the OFT to make that
decision.
Finally, I
fail to see any benefit whatsoever in getting estate agents to certify
that they comply with legislation or a code of practice. They are
already required to comply with the Estate Agents Act 1979 and other
legislation, such as the Enterprise Act 2002. Knowing
that consumers can bring complaints to an independent
ombudsman is much more of an incentive to raise standards than making
an empty promise.
A
serious set of arrangements therefore protects access to the market for
legitimate estate agents. Not just in individual cases, but when there
is a lack of integrity, it provides an opportunity for
regulators—either local regulators or the OFT—to
investigate appropriately and to use the records to do so. Regulators
can look at the level of offences taking place, not just significant
offences with the capacity for criminal investigations, but the small,
niggling problems that make people’s lives an absolute misery
when trying to buy and sell property. We will deal with those problems
as well.
The Bill is
the right way forward. Making estate agents belong to a redress scheme
will raise standards; enforcers will have the powers needed to catch
the minority who continue to rip off people. That is why I reject the
hon. Lady’s proposals and hope that my explanation has helped
her to understand how effective the scheme will
be.
Lorely
Burt:
The Minister is being extremely patient with me. I
want to raise a point that I did not catch in his remarks. I am sure
that the fault is mine, because I alluded to it only fairly briefly:
new clause 2 would broaden the scope of the Bill to include lettings. I
am very concerned because of developments in the market—I let
out properties myself—and it would be of great benefit if the
scope of the Bill could be broadened to include lettings, as there are
many similarities. Before he concludes his remarks, would he care to
comment on
that?
Mr.
McCartney:
That issue will come up later today, so I shall
leave my remarks on it until then. I think that it will be a sparky
debate by all concerned. That was not meant to be threatening, but
there is a genuine debate to be had about the best way forward, as
there was on the matter just discussed. I look forward to that and
apologise to the hon. Lady, but let us keep our powder
dry.
An estate agent
will have to provide consumers with the details of the redress scheme
to which they belong. In my view, they must therefore provide such
information on their premises, so that when people enter to seek to use
the estate agent, they can find out which redress scheme the agent is a
member of. That is important.
If a
consumer complains to trading standards or the OFT, the latter will
check immediately whether the agent is a member of a redress scheme. If
they are not, it will take enforcement action against them. Let us say
that someone walks off the high street and into a company’s
premises and says, “I want to buy a property in this area. Are
you a member of a redress scheme?”, and the company replies,
“Yes, here are the details.” If an issue arises at some
point, and the consumer goes to trading standards or the OFT and is
told, “Well, actually they are not a member of that
scheme”, under the Bill, trading standards or the OFT do not
have to wait; they can take immediate action.
The consumer will suffer no
detrimental effects. People can say, “I am sorry about that, but
they should have been a member of a redress scheme”. That is a
big incentive for and signal to those who want to act improperly. They
will not be able to do that anymore. At every level of their engagement
with the consumer, the consumer will be protected, and if the
organisation wants to hide impropriety, it will not get away with it,
because the records will provide a significant audit trail, not just of
individual cases, but of the management and running of the business as
a whole.
I hope that
the hon. Lady understands what weare trying to do: inventive
positive licensing plus, if Members do not mind me putting it like
that, to protect those in the marketplace operating effectively, to
allow legitimate businesses into the marketplace and to provide no
hiding place for rogues who want to rip off
customers.
Lorely
Burt:
I have listened very carefully to the points that
the Minister has made, and I am intrigued by the expression,
“positive licensing plus”. I look forward to further
discussions on that concept. I understand completely that his primary
motivation is the protection of the consumer. Having said that,
however, new clause 2 in particular is supported fully by the National
Association of Estate Agents. I am not convinced that the
Government—
Stephen
Pound:
I am sorry; I did not mean to interrupt the hon.
Lady in the middle of her sentence, but I thought that she might be
drawing her peroration to a conclusion.
The hon. Lady refers to mystery
shoppers. Like a lot of people who consider the matter open-mindedly, I
find that an extremely attractive and sensible option. Before she winds
up, will she give some indication of the extent of mystery shopping as
she envisages it? Surely, she is not anticipating an entire purchase
and sale of a property being undertaken by a mystery shopper. Does she
imagine that someone will simply inquire at an estate agent’s?
What will be the limit of the mystery shopper’s participation in
the process? I am very much attracted to the
proposal.
Lorely
Burt:
I am very grateful to the hon. Gentleman for his
interesting and supportive remarks. Perhaps I can direct him to the
Which? report entitled “Move it”, for which such
an exercise was undertaken. I do not feel that I have the
qualifications to specify how it would take place, but people with a
great deal more expertise could recommend how it should be
done.
12.15
pm
Mr.
Wallace:
I am sorry to interrupt the “happy
shopper” debate. Does the hon. Lady accept that, whatever
consumers purchase, they are already protected to some extent by the
Consumer Protection Act 1987? Plenty of avenues are open to consumers,
even without the protections in the Bill, which the hon. Lady is
understandably keen to
reinforce.
Lorely
Burt:
I am very grateful to the hon. Gentleman for
pointing out that true and relevant fact.
The new clauses have
prompted a useful, interesting and appropriate debate. I shall not
press them, but the Minister might see something similar to them appear
at a later
stage.
Question put
and agreed
to.
Clause 53
ordered to stand part of the
Bill.
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