Consumer Protection Contents

1Protecting consumers

1.On the basis of a report by the Comptroller and Auditor General, we took evidence from Ofwat, Ofgem, Ofcom and the Financial Conduct Authority (FCA) about their work to protect consumers.1

2.Access to good quality and affordable water, energy, communications and financial services is essential for people to live and function in modern society. In 2017, UK households spent a total of around £140 billion purchasing these services mostly from private companies.2

3.The characteristics of some markets mean that, left to their own devices, they risk failing to meet the needs of consumers or other areas of public interest, such as the environment. Each sector is therefore overseen by a regulator to ensure that services are provided in a way that protects consumers and meets public policy objectives. The four main regulators of these sectors—Ofwat, Ofgem, Ofcom and the Financial Conduct Authority (FCA), respectively—were set up to be directly accountable to Parliament, and each has a primary statutory duty to protect the interests of consumers. These regulators vary substantially in size, have different remits and oversee sectors of varying sizes, features and complexity.3

Common problems for consumers

4.Consumers are still facing serious problems accessing essential services. We received submissions from a number of organisations which outlined the challenges people are facing. We also asked the regulators about some of the most pressing challenges that consumers face in their sectors. Issues such as affordability constraints, difficulties accessing the best deals, and problems understanding bills are having a significant impact on people’s daily lives and disproportionately affect people in vulnerable circumstances.4

5.Many consumers struggle to afford all of their essential services, and often owe debts to more than one service provider at a time.5 The National Audit Office noted in its report that of those people reporting debt problems to Citizens Advice, 32% had problems in two of the four sectors in this review, while 11% had problems in three of the four.6 Price rises in utilities have placed greater pressure on affordability challenges for people, including real-terms increases since 2007 of 37% in electricity, 28% in gas and 6% in water.7 Vulnerable consumers are also more likely to use high-cost forms of borrowing such as unarranged overdrafts, including to pay household bills.8 Ofwat highlighted that about 12% of people currently struggle to pay their water bill, and estimates that over the next five years the number of households receiving assistance to pay their water bill will nearly double.9

6.The regulators acknowledged that consumers who do not routinely switch provider typically pay more for their service.10 Estimates suggest that people who do not switch their energy, telecoms and financial services providers could be overpaying by up to £1,000 a year.11 This is a particular issue for vulnerable consumers who may find it more difficult to shop around for the best deal. For example, Ofgem’s research has found that elderly and lower social grade consumers are a third less likely than the average consumer to switch energy supplier.12 Citizens Advice told us that regulators lack a consistent approach to tackling vulnerability and that more could be done to share best practice. It said that regulators and regulated companies should improve how they identify vulnerable customers and suggested that this was an area where a consistent approach would be extremely beneficial.13

7.In all four sectors, consumers increasingly need to access or manage services and information online (for example, internet banking, digital utility bills or price comparison websites). It is much more challenging for consumers without access to a computer or the internet to find the best deal or tariff.14 Some areas of the country are less well connected than others, and some consumers can find themselves excluded on that basis, while others may simply need additional support to help them navigate complex systems.15 Scope, the disability charity, told us that digital exclusions means some disabled people find it more difficult to access the most accessible deals. It highlighted that 20% of disabled people have never accessed the internet, compared to just 5% of all adults in the UK.16

8.We also asked the regulators about the challenge some consumers face reading and understanding bills and other information. The quality and accessibility of the information available to consumers will influence their ability to choose deals, know what support is available or avoid being mis-sold inappropriate products. Ofcom has found that how telephone companies provide information to customers has a material impact on whether they switch provider at the end of their contract. The regulators acknowledged that despite making progress, companies still provide consumers with bills, statements and contracts that are often not particularly user-friendly and can be overly complicated.17

Differences in regulators’ approaches

9.We asked the regulators to explain how they tackle common consumer issues, including what redress is available when things go wrong, how firms treat consumers in problem debt, and how firms provide information to consumers such as in bills.18

10.Each sector has different rules for providing compensation and redress when things go wrong. For example, Ofcom introduced a voluntary scheme in 2019 involving most big providers, whereby consumers receive an automatic flat rate compensation for specific problems with their landline telecoms services. This includes £25 should an engineer not turn up to undertake repair work and £5 a day if an installation does not happen when scheduled. In energy and water, compensation is not automatic but is available at different rates for supply interruptions or other problems. By contrast, the level of redress that consumers are entitled to in financial service is calculated based on the level of detriment they experience.19

11.The regulators set different rules and principles guiding how firms treat consumers in debt or other vulnerable situations. Consumers in vulnerable circumstances are likely to face additional challenges with all services they access. But despite this, each sector has different requirements regarding discounts or support available, how firms collect debts, and how they serve vulnerable consumers in general.20 The regulators explained that some of these differences are due to differences in the tools and powers that they have available.21

12.Each regulator also imposes different rules on how firms provide information to customers, such as in bills, bank statements or contract terms. Despite good work to improve the readability of such information this is not universal, and the sectors differ in what information is presented and how it is described.22 Ofcom also told us that it is just about to introduce new rules about how companies notify customers that their contracts are coming to an end, where similar rules have already been in place in other sectors.23

13.The regulators have forums to discuss common challenges and share insights, lessons and methodologies that may help improve outcomes for consumers. For example, the UK Regulators Network includes these four regulators as well as a number of others. Senior representatives from the regulators meet approximately ten times a year through this network, while the Chief Executives meet three to four times a year.24

14.We asked the regulators to provide examples of the joint solutions that have been developed as a result of their collaboration. The regulators highlighted consumer vulnerability as the current focus of the network and a key priority for the regulators over the coming 18 months. They pointed to ongoing work looking at power of attorney and using data sharing to identify customers in vulnerable consumers. But they did not provide any examples of successful joint initiatives or solutions that have led to tangible improvements for consumers.25

The need for regulators and government to work together

15.Regulators have both the statutory responsibility to protect the interests of consumers and the powers to intervene to discharge these responsibilities.26 However, the regulators explained to us that they also face several constraints outside their direct control that they need to work with government to overcome.27

16.The regulators particularly highlighted legislative barriers to data sharing that prevent firms and regulators from providing more joined-up support to consumers. With appropriate safeguards, data sharing can help essential service providers identify potentially vulnerable consumers who may need additional support or protection, such as those who are disabled or experiencing debt problems.28 But Ofgem and Ofwat explained that the regulators’ efforts to introduce new data sharing approaches between energy and water companies have made limited progress so far due to data protection laws. Specific consent is required from customers, and the regulators foresee it being even more difficult to extend to telecoms or financial services providers.29

17.Ofwat also highlighted that there is no statutory body within the water sector, such as an ombudsman, to independently adjudicate on consumer complaints and levels of compensation. An ombudsman would provide an additional source of data on consumer issues, and another mechanism to keep pressure on water companies to be consumer focused. But establishing an ombudsman would require legislative change.30

18.The regulators also noted a number of areas where they need to work more closely with government on social policy objectives and priorities to help manage potential conflicts or trade-offs that affect consumers when making regulatory decisions. For example, the FCA raised the question of whether and how it should best maintain the provision of local bank branches and cash machines, when technological changes mean that fewer consumers use these functions but they are still vitally important for some.31 Ofgem also told us that it needs greater clarity over its role with respect to promoting decarbonisation while managing the costs to consumers. This would, for example, help the regulator to make decisions around whether to extend Britain’s gas network, how to fund the infrastructure to support the roll-out of electric vehicles, and the extent to which consumers should pay for decarbonisation through energy bills.32 The regulators also highlighted concerns over the regulation of online content and cyber-security, particularly with complex new issues such as the marketing of crypto-assets through social media.33

1 C&AG’s Report, Regulating to protect consumers in utilities, communications and financial services markets, Session 2017–2019, HC 1992, 20 March 2019

2 C&AG’s report, para 1

3 C&AG’s report, paras 1–2

4 Qq 2–33, 45–50, 85–88

5 Qq 30, 35, 45; C&AG’s Report, para 11

6 C&AG’s Report, para 2.7

7 Q 25; C&AG’s Report para 2.8

8 Qq 2, 48–50

9 Q 24

10 Qq 16, 88

11 Citizens Advice Report, The cost of loyalty, February 2018

12 Q 19; C&AG’s Report para 2.9

13 CON003

14 Q 16

15 Q 22

16 Written evidence from Scope (CON0005)

17 Qq 15, 86–88

18 Qq 2–35, 43–51, 85–91

19 Qq 26–34

20 Qq 25–28, 31, 33–35, 44–46

21 Q 45

22 Qq 85–89

23 Q 88

24 Qq 27, 66–67

25 Q 68

26 C&AG’s Report, para 2.1

27 Qq 34–44, 95, 102–106

28 Qq 27, 35

29 Qq 36–44

30 Qq 34, 102–103

31 Q 95

32 Qq 62, 105, 115

33 Qq 83, 89–90, 101, 115

Published: 12 July 2019