Consumers, Estate Agents and Redress Bill

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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.
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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.
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 na├»ve—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.
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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.
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.
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.
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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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