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Public Bill Committee Debates

Draft Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008

The Committee consisted of the following Members:

Chairman: Mr. Edward O'Hara
Arbuthnot, Mr. James (North-East Hampshire) (Con)
Baron, Mr. John (Billericay) (Con)
Burt, Lorely (Solihull) (LD)
Corbyn, Jeremy (Islington, North) (Lab)
Crausby, Mr. David (Bolton, North-East) (Lab)
Davies, Philip (Shipley) (Con)
Djanogly, Mr. Jonathan (Huntingdon) (Con)
Evans, Mr. Nigel (Ribble Valley) (Con)
Henderson, Mr. Doug (Newcastle upon Tyne, North) (Lab)
Seabeck, Alison (Plymouth, Devonport) (Lab)
Slaughter, Mr. Andy (Ealing, Acton and Shepherd's Bush) (Lab)
Stuart, Ms Gisela (Birmingham, Edgbaston) (Lab)
Teather, Sarah (Brent, East) (LD)
Thomas, Mr. Gareth (Parliamentary Under-Secretary of State for Business, Enterprise and Regulatory Reform)
Todd, Mr. Mark (South Derbyshire) (Lab)
Turner, Dr. Desmond (Brighton, Kemptown) (Lab)
Edward Waller, Rhiannon Hollis, Committee Clerks
† attended the Committee

Second Delegated Legislation Committee

Monday 30 June 2008

[Mr. Edward O'Hara in the Chair]

Draft Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008

4.30 pm
The Parliamentary Under-Secretary of State for Business, Enterprise and Regulatory Reform (Mr. Gareth Thomas): I beg to move,
That the Committee has considered the draft Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008.
The regulations provide a consumer with the right to cancel a contract for goods or services made during a visit by a trader, regardless of whether the visit was solicited. The regulations apply to contracts made during visits by a trader to the consumer’s home, their place of work or the home of another person, or on an excursion organised by the trader away from their business premises.
There are certain contracts to which the regulations do not apply. They include contracts made during solicited visits that relate to consumer credit and home purchase sales, for which current regulation is already adequate and satisfactory.
The consumer will have the right to cancel a contract at any time during a cooling-off period of seven calendar days starting from the date of receipt by the consumer of a notice of the right to cancel. The regulations apply to contracts with a total payment value of £35 or more.
The regulations require that the notice of the right to cancel must be prominently displayed in a contract that is completed wholly or partly in writing. The notice must be easily legible and, when incorporated in a contract, must be set out in a separate box with the heading “Notice of the Right to Cancel”.
For certain types of contract when a consumer has agreed to performance of the contract beginning before the end of the cooling-off period—for example, regarding the sale of perishable goods—the trader must include in the notice of the right to cancel a statement that payment may be required if the contract is subsequently cancelled. The regulations also require that for such contracts, the consumer must record their agreement in writing to performance of the contract beginning before the end of the cooling-off period, if that is what the consumer wishes. That will give the consumer and the trader more certainty about what has been agreed and when performance of the contract can begin. In the event of a dispute, it will provide the enforcement bodies—trading standards operators, for example—with a much clearer audit trail.
The potential for consumer detriment is high with contracts for home improvement and maintenance, mainly because of the value of the goods or services provided. Indeed, they remain one of the top areas of complaint to Consumer Direct, the Government-funded consumer advice body. The regulations therefore extend to contracts for the construction and repair of extensions, conservatories, patios and driveways. It is right that such contracts should fall within the scope of the regulations.
As to the consequences of non-compliance, failure to provide a written notice of the right to cancel a contract or to provide the information required, or failure to do so in accordance with the regulations, would mean that a contract was unenforceable against a consumer. In the worst cases, another consequence is that a maximum penalty of £5,000—a level 5 fine—could be imposed on a trader. With that introduction, I commend the regulations to the Committee.
4.33 pm
Mr. Jonathan Djanogly (Huntingdon) (Con): The regulations, if approved, will replace the Consumer Protection (Cancellation of Contracts Concluded away from Business Premises) Regulations 1987. The 1987 regulations currently provide consumers with a seven-day cooling-off period when they agree to buy goods or services worth more than £35 from a trader during an unsolicited visit to their home.
The 2008 regulations maintain that safeguard, extend it to solicited visits—it is thus expected that traders such as plumbers, electricians and decorators will now come under their remit—and require a notice of the right to cancel the contract to be prominently and clearly displayed in the contract if it is wholly or partly in writing. We basically agree with the proposed regulations.
In 2002, Citizens Advice made a super-complaint to the Office of Fair Trading regarding doorstep selling. It highlighted what it felt were the key problems: lack of awareness of consumer rights; consumers being misled and subjected to high-pressure sales techniques; cancellation rights and cooling-off periods being limited to certain types of doorstep sales, which could confuse customers; cancellation rights being ignored by salespeople; and goods sold to consumers being unsuitable for their requirements.
The OFT subsequently commissioned a report on the issue, and the Government publicly consulted up to 2004 on the measures recommended by the OFT to provide better protection to consumers from salespeople in the home. Given consumer interest in the matter, it would be helpful if the Minister would explain the consultation process that was undertaken and its results. The response came out in September 2006, and we are where we are now.
I have a few questions for the Minister. Is he satisfied that there is sufficient clarity in the definition of what constitutes a solicited visit? Can notifications and cancellations be made by e-mail in any circumstances? Will he explain what discussions he has had with the Treasury as to how the regulations tie in with the provision of financial services? I appreciate that there are exemptions between the two, but it is clear that there are areas where consistency will need to be considered.
I received a briefing this morning from Citizens Advice. It raises a few points that I think it would be worth the Minister addressing. First, it says that regulation 9 could negate the extension of cancellation rights to solicited sales because consumers might find that permission for the commencement of specified contracts before the end of the cancellation period had already been written into the paperwork that they were asked to sign. The concern is that consumers might then be easily persuaded that they have signed away their cancellation rights, despite the provisions of regulation 8.
Secondly, Citizens Advice says that it is unclear whether items such as intruder alarm systems are excepted under paragraph 1(b) of schedule 3, which covers contracts for the supply of goods and their incorporation in immovable property. Finally, it says that consumers could benefit from a time limit during which a business must repay any outstanding moneys already paid by a consumer on cancellation of a contract. I would be interested to hear the Minister’s response to those remarks.
4.37 pm
Sarah Teather (Brent, East) (LD): I am broadly happy with the regulations and feel no need to detain the Committee for an extended period of time. The hon. Member for Huntingdon has already read out the Citizens Advice briefing, so I do not have many more points to add.
In addition to the points raised on regulation 9, on intruder alarms and on a time period within which businesses would need to pay back any moneys, my only other question is why the Government chose seven days as opposed to 14, which was the recommendation of Citizens Advice. There are not many occasions when there are two bank holidays in a week—the only one that I can think of is Easter—but if somebody were to buy something on Maundy Thursday, they would not have much time in which to cancel the contract.
4.38 pm
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): I shall not detain the Committee very long at all. I just want to make a general point. This is one of those statutory instruments that we bring in as the result of a directive. As the explanatory memorandum says, these are minimum regulations across the European Union. What we are doing is absolutely right, but I wonder whether the Minister thinks that Parliament has been involved sufficiently in the debates, given that, even though the regulations are not contentious, we are discussing them in just this one small Committee.
4.39 pm
Mr. Thomas: Let me try to address the various questions that have been asked. If Opposition Members will forgive me, I shall begin with the question asked by my hon. Friend the Member for Birmingham, Edgbaston.
Unusually—certainly from my experience in the past 12 months—this statutory instrument is not driven by European legislation, although I agree that much of the consumer protection legislation that has come from the Commission is something that we can all welcome and, indeed, champion. It is true that we have welcomed directives on this matter in the past.
As the hon. Member for Huntingdon recounted, these regulations emerged as the result of complaints by Citizens Advice that the OFT took up and investigated in 2004. The Government took seriously the seven recommendations of the OFT report, one of which—the matter that we are discussing today—required significant legislation. The regulations were drawn up in response to concerns that were generated in the UK by the excellent citizens advice bureaux. We now seek to address those concerns.
The predominant area of concern is the gap between the definitions of solicited and unsolicited visits. The biggest problem for enforcement bodies in implementing and taking advantage of the current framework of legislation to protect consumers has been around the question of whether a visit was solicited. We seek to resolve that problem through the regulations. Frankly, one of the issues that drove our decision to go for seven days as opposed to 10 to 14 days was the need to bring the two situations into line.
The hon. Member for Brent, East may be aware that a consultation is presently taking place in Europe on this broad area of consumer law, and there may well be a debate about cooling-off periods—indeed, I am sure that there will be. That will be the time to have the more general discussion about the length of the cooling-off period. We will obviously want to talk to UK consumer and business organisations, enforcement bodies and so on, but the crucial thing now is to close off the definition problem that enforcement authorities have found to be a real concern.
The hon. Member for Huntingdon asked about levels of consultation. Consultation occurred at a series of points. Not least, the OFT consulted various stakeholders when it drew up its recommendations. We consulted a range of players in the usual way when we set out to work on our response to the OFT’s report, and we consulted again, in January this year, when we put together the draft regulations that we are considering. Again, we sought to consult business, consumers, enforcement authorities and beyond, and the results are in the regulations.
Of course we have had discussions with the Treasury. It is in part as a result of those discussions that we have excluded certain areas of financial services that involve doorstep visits but are already regulated—in our view, effectively—under, for example, the Financial Services and Markets Act 2000. Frankly, if we were to include them in the scope of the regulations, we would add unnecessary complexity and increase the regulatory burden on business. I am sure that the hon. Gentleman would not want the Government to go down that road.
We believe that the definition of solicited visits is clear. It reflects case law on what constitutes a solicited visit, of which there is a considerable amount. Obviously, if there were any doubt as to whether a visit had been solicited, the matter would have to be determined on a case-by-case basis in court.
Lastly, the hon. Gentleman asked about e-mail. Yes, a consumer can cancel a contract by e-mail. The cancellation must reflect the seven-day requirement in the regulations, but e-mail is permissible. On that basis, I again commend the regulations to the Committee.
Question put and agreed to.
Committee rose at fifteen minutes to Five o’clock.

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