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Grand Committee

Wednesday, 5 November 2014.

Consumer Rights Bill

Consumer Rights Bill 3rd Report from the Delegated Powers Committee8th Report from the Delegated Powers Committee

Committee (8th Day)

3.45 pm

Relevant documents: 3rd and 8th Reports from the Delegated Powers Committee

The Deputy Chairman of Committees (Baroness Fookes) (Con): My Lords, I shall make the usual statement that if there is a Division in the Chamber while we are sitting, the Committee will immediately adjourn for 10 minutes.

Amendment 103

Moved by Lord Stoneham of Droxford

103: After Clause 86, insert the following new Clause—

“Communications services: change of service provider

In section 3 of the Communications Act 2003 (general duties of OFCOM), after subsection (2)(f) insert—

“(g) the maintenance of processes that promote the consumer interest and competition, to include a switching regime that is led by the receiving provider”.”

Lord Stoneham of Droxford (LD): I rise on behalf of my noble friend Lord Clement-Jones, who has a conflicting commitment this afternoon.

This amendment—I thank the noble Baroness, Lady Hayter, and the noble Lord, Lord Stevenson, for their support for it—is designed to ensure that consumers experience a consistent, simpler and quicker switching process when seeking to switch communication provider, led by the receiving provider.

UK consumers, now more than ever, depend on a range of communication services. Ofcom research has shown that 94% of all UK adults own a mobile phone and that 15% of UK consumers live in a mobile-only household. It is therefore vital that the communication market works well for UK consumers. However, the current switching processes, not just for mobile phones but across the communication sector, are complicated and slow, working against consumers and distorting fair and open competition.

Recent reforms mean that banking and energy customers are able to switch by contacting their new provider—a system known as gaining provider-led switching. However, mobile, pay TV and broadband customers must contact their original provider before switching.

Under current legislation, communications providers operate a losing provider-led switching regime, which forces consumers to contact their current provider to terminate their old contract before being able to switch to a new provider. Not only is this time-consuming and can lead to breaks in service or periods of double-billing when switching between providers but it has a negative impact on competition and pricing.

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Consumers who threaten to switch are usually offered preferential deals in order to stay. The retention offers made to these consumers are effectively subsidised by the supplier’s remaining customers, who pay higher prices. Competitive offers are often reserved for new customers or those who attempt to switch, with existing customers often losing out. The existing complicated switching regimes across the communication sectors are leading to real consumer harm. For example, Ofcom data show that of the 9 million UK mobile customers who switch annually, as many as 1.2 million are double-billed or experience a total loss of service. The hassle and confusion for consumers deters them from switching provider. By contrast, the car insurance market has a switching level of 38%, compared with 9% in the mobile and broadband market and just 3% in digital television.

Forcing customers to contact their original supplier often leads providers to operate poor retention practices. The best deals are hidden away and are available only to those who can play the system. This means that the vast majority of UK consumers, including the inactive, the out of contract and the vulnerable, face higher prices while only a minority of savvy customers, willing or able to game the system, get the best deals. A gaining provider-led system forces operators to place their best deal on the open market, accessible to all.

When Ofcom attempted to introduce the gaining provider-led switching system in 2007, it was subjected to appeals from the major mobile networks. Ofcom, in its 2010 strategic review of switching in telecoms, concluded that gaining provider-led switching systems perform better than those led by the losing provider, they are easier for customers to navigate and they are more likely to support competition, yet there has been no progress since then. This amendment would free the path for Ofcom to achieve the outcome it sought as long ago as 2007.

By contrast, last year Ofcom mandated a gaining provider-led switching process on BT’s Openreach network, which supports the services of BT, Sky, TalkTalk, the Post Office and EE’s broadband. This will be in place by June 2015, meaning that customers will need to contact only the provider they are moving to, not the one they are leaving. This will simplify switching for landline and broadband services and will also apply to BT’s Sport TV. In fact, the gaining provider-led system has been acknowledged by both government and the regulator as the best switching system.

In July 2013, DCMS published Connectivity, Content and Consumers, which set out its plans for the communications sector. In it, the department supported a move to gaining provider-led system switching across all communications services. It said:

“We recognise that switching processes work better for consumers when only one call needs to be made to the company the consumer wishes to switch to for the switch to happen, and there is no need for consumers to contact their existing provider … Working with Ofcom, we will do everything we can to move towards a system of gaining provider-led switching across the board. Consumers are increasingly buying services in bundles, for example, phone, broadband and pay TV. This can make switching providers more difficult as there are different switching processes attached to each component of a bundle. We will legislate to give Ofcom a duty to ensure a consistent and effective experience for consumers switching between bundles”.

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Given that Ofcom has consulted extensively on switching processes, the Government's subsequent reluctance to legislate is frustrating and baffling for all concerned. On behalf of consumers, Which? has confirmed that it agrees and supports this amendment precisely because it would introduce gaining provider-led switching across all telecommunications markets, drive forward competition and significantly improve the consumer switching experience, enabling people to switch with greater ease and convenience.

This amendment would bring communications providers into line with other markets—including energy and personal current accounts—which operate a gaining system. It would force companies proactively to offer best deals on the open market, rather than withholding the best offers to retain customers threatening to switch. Having a single gaining provider-led switching regime across the whole sector would alleviate confusion around the process of switching, and would help give consumers a consistent experience when switching. Increasingly, consumers view broadband, landline, TV and mobile as complementary services.

If consumers did not have to contact their existing provider before switching, there would be more incentive for suppliers to focus on retaining customers at all parts of the journey rather than at the end point. This would result in more competition and better- value deals for all consumers, with prices harmonising across customers of the same supplier. Gaining provider-led switching in communications markets is already standard practice across most other EU countries, where it works well. I hope that the Government will support this amendment and get this policy moving in the interests of consumers.

Lord Stevenson of Balmacara (Lab): My Lords, I am sure that I saw the noble Lord, Lord Clement-Jones, only a few moments ago, asking questions in the Chamber, so his conflicting engagement is extremely irritating because we were looking forward to his contribution here. Of course, we now have his parasitic packaging analogue who is gradually inhabiting all of his previous positions on matters to do with this, and we should not complain, because he once again has managed to introduce a very complicated and not very easy to grasp topic with exemplary clarity, and I thank him for that.

We on this side support the amendment in the name of the noble Lord, Lord Clement-Jones; indeed, we signed up to it for very much the same reasons as those just explained by the noble Lord. It is a huge gap in the telecoms area that there is no simple and easy switching regime: such a regime would be the foundation of ensuring a competitive market that would drive down prices, while at the same time empowering consumers. Who could be against that?

The problem we have at the moment is completely the reverse, because in the mobile industry—but also in broadband and pay TV—there are very complicated switching processes. These are huge disincentives to consumers to changing provider and this can lead to very real consumer harm in the form of either double

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bills—which have been well reported in recent days—or a loss of service when providers are switched, because of the difficulty of making all the ends join up.

We think that the gaining provider-led system across the communications sector will make a huge difference. It puts the customer in charge of the process; it prevents competitors in the market using different and complicated switching processes—which, as the noble Lord said, creates hassle and confusion; and it will make it much more competitive.

At the heart of the issue is an irony that does not happen in many other sectors, such as banking. If you force customers who wish to switch to contact their original supplier, you often get problems and disincentives built in, because it is not in the best interests of the supplier who is losing the customer to ensure that that egress is smooth and uncontested. That inevitably means that consumers get a raw deal, possibly do not get good price comparisons and have a lot more hassle than they otherwise would. I am happy to support the amendment.

Baroness Jolly (LD): My Lords, a requirement for the switching of communications providers to be receiving provider-led—RPL—is part of the EU Connected Continent package. The European Parliament’s First Reading version would amend the universal services directive to require RPL switching. I assure noble Lords that the UK is engaging actively in those discussions to ensure the best outcomes for UK consumers.

The Government have considerable sympathy for RPL switching in the UK. In the Connectivity, Content and Consumers paper published last year, we emphasised that we want that across the board. I am very pleased to say that, as my noble friend said, RPL switching already operates for fixed-line voice and broadband services delivered over the BT Openreach network, although it does not yet operate for mobile services or for pay TV.

Ofcom has the power to mandate RPL switching for all communications services. In July 2014, it called for inputs from stakeholders on consumer switching. Ofcom announced that it is considering mandating RPL switching for mobile services and bundles of services, including pay TV and services over the Kcom network. The Ofcom work is essential to ensure that we get any new rules right first time, so I welcome my noble friend’s interest in consumer switching but, given the good work done so far, Ofcom’s ongoing consultation and the response to it to be published before the end of the year, I ask him to withdraw his amendment.

Lord Stoneham of Droxford: My Lords, I am encouraged by the news of Ofcom’s consultation nearing completion. I should point out that Ofcom has been trying to do that since 2007. There is a danger that Ofcom and the Government are hiding behind each other. However, I accept what my noble friend said, I am grateful for the support that I have received, and I am happy at this stage to withdraw my amendment.

Amendment 103 withdrawn.

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Amendment 104

Moved by Baroness Howe of Idlicote

104: After Clause 86, insert the following new Clause—

“Duty to provide an internet service that protects children from digital content

(1) Internet service providers must provide to subscribers an internet access service which excludes adult content unless all the conditions of subsection (3) have been fulfilled.

(2) Where mobile telephone operators provide a telephone service to subscribers which includes an internet access service, they must ensure this service excludes adult content unless all the conditions of subsection (3) have been fulfilled.

(3) The conditions are—

(a) the subscriber “opts-in” to subscribe to a service that includes adult content;

(b) the subscriber is aged 18 or over; and

(c) the provider of the service has an age verification policy which meets the standards set out by OFCOM in subsection (4) and which has been used to confirm that the subscriber is aged 18 or over before a user is able to access adult content.

(4) It shall be the duty of OFCOM to set, and from time to time to review and revise, standards for the—

(a) filtering of adult content in line with the standards set out in section 319 of the Communications Act 2003;

(b) age verification policies to be used under subsection (3) before a user is able to access adult content; and

(c) filtering of content by age or subject category by providers of internet access services and mobile phone operators.

(5) The standards set out by OFCOM under subsection (4) must be contained in one or more codes.

(6) Before setting standards under subsection (5), OFCOM must publish, in such a manner as they think fit, a draft of the proposed code containing those standards.

(7) After publishing the draft code and before setting the standards, OFCOM must consult relevant persons and organisations.

(8) It shall be the duty of OFCOM to establish procedures for the handling and resolution in a timely manner of complaints about the observance of standards set under subsection (4), including complaints about incorrect filtering of content.

(9) OFCOM may designate any body corporate to carry out its duties under this section in whole or in part.

(10) OFCOM may not designate a body under subsection (9) unless, as respects that designation, they are satisfied that the body—

(a) is a fit and proper body to be designated;

(b) has consented to being designated;

(c) has access to financial resources that are adequate to ensure the effective performance of its functions under this section; and

(d) is sufficiently independent of providers of internet access services and mobile phone operators.

(11) In this section, internet service providers and mobile telephone operators shall at all times be held harmless of any claims or proceedings, whether civil or criminal, providing that at the relevant time, the internet access provider or the mobile telephone operator—

(a) was following the standards and code set out by OFCOM in subsection (4); and

(b) acting in good faith.

(12) For the avoidance of doubt, nothing in subsections (1) and (2) prevents providers of internet access services and mobile phone operators from providing additional levels of filtering content.

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(13) In this section—

“adult content” means an internet access service that contains harmful and offensive materials from which persons under the age of eighteen are protected;

“harmful and offensive materials” has the same meaning as in section 3 of the Communications Act 2003 (general duties of OFCOM);

“material from which persons under the age of eighteen are protected” means material specified in the OFCOM standards under section 319(2)(a) of the Communications Act 2003 (OFCOM’s standards code);

“opts-in” means a subscriber notifies the service provider of his or her consent to subscribe to a service that includes adult content.”

Baroness Howe of Idlicote (CB): My Lords, I am pleased to move Amendment 104, which requires internet service providers and mobile phone operators to provide default adult content filtering that can be removed if the service user opts in to adult content, demonstrating, as they must, that they are aged 18 years or over.

This is a matter that I have raised before, not least through my Online Safety Bill. As ever, I begin by recognising that progress has been made and that the Prime Minister’s intervention in relation to the big four ISPs has helped to move us forward. However, given the importance of the issue, I must say that, having been initially encouraged, I find myself increasingly disappointed by the Government’s approach. The truth is that children continue to suffer, but there does not seem to be the political will to move beyond the deal that the Government negotiated on filtering with the big four ISPs: a status quo that is simply unacceptable, for reasons that I shall set out.

4 pm

However, before doing that, I will remind the Committee why this matter is so important, by referring to a story that was in the press over the summer. This is the tragic case of a 10 year-old girl who was repeatedly sexually assaulted by a 14 year-old boy acting out pornographic content that he had seen online. Judge Robin Onions said that the boy “used, abused then abandoned” his victim after repeatedly watching internet porn that,

“treats women as objects and not as people”,

on his home computer. Crucially, it was reported that the mother of the boy in question was unaware that he had visited such sites from his bedroom in their Shropshire home. The Labour Party spokesman on these matters in another place, Helen Goodman MP, hit the nail on the head as far as I am concerned when she said,

“the Government’s failure to introduce a legal requirement for internet filters … is letting down young people”.

The first reason why the voluntary nature of the current arrangement does not constitute a credible long-term solution is that the default-on agreement between the big four ISPs does not cover the whole market. By the Government’s own admission, it leaves just over 10% of the home broadband market, representing hundreds of thousands of children, completely uncovered. The truth is that this point alone is sufficient to justify a statutory approach that applies to 100% of the market, as proposed by my Amendment 104. If the Government believe, as I certainly do, that default-on provides a better level of protection for children online

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and that persuading the big four ISPs to implement it was an important step forward in advancing child protection, then it must be important for all children in the United Kingdom.

Mindful of this, I would ask the Minister the following questions. First, what are the Government doing to ensure that all the remaining ISPs also commit to introducing default-on? Secondly, I know of at least one significant ISP beyond the big four that boasts of the fact that it has not and will not introduce default filtering—indeed, it seems to use its position in this regard as something of a marketing ploy. It seems clear to me that the only way that the Government will be able to extend their much celebrated voluntary code to 100% of the market is through legislation such as that set out in my Amendment 104. Surely the Minister will agree with that?

The whole point about default-on is that people should be provided with access to an internet service that is free from adult content such as pornography, but with the option for them to opt in to access adult content by lifting the default filtering, subject to their demonstrating that they are 18 or over through a robust and credible age verification process. However, that is not what is happening. Under the arrangements used by the big four, there is no age verification prior to the filters being disabled. The only thing that happens is that after the filters have been disabled, an e-mail is sent to the account holder, informing him or her that the filters have been disabled.

I would argue that that arrangement is completely inadequate. If the tech-savvy children of an account holder disable the filters, and the account holder is sent the e-mail informing them that the filters have been disabled the same day and he or she manages to read it and take action, the children in question would still have had some hours of access to an unfiltered internet, during which they could be exposed to a significant amount of material from which they should be protected.

More importantly, the truth is that many people take some days to read e-mails sent by their ISPs and some never do. According to polling conducted by ComRes for the charity Care, a total of 34% of British adults—16.3 million people—say that they would not read an e-mail from their ISP immediately; 11% said that they would probably leave the e-mail unread for up to a week; and 9% would be likely to leave it for more than a week. A staggering 14% said they were unlikely to read an e-mail from their ISP. That figure rises to 18% when we look at the parents of children between five and 10 years-old.

The truth is that the failure of ISPs to deliver proper age verification of those seeking to disable the default filters prior to lifting the filters is leaving a significant number of children exposed to adult content for a number of days, weeks, or in some cases permanently. This constitutes a significant flaw in the current self-regulatory arrangements. At a time when the technology is available to age-verify, prior to disabling the filters, this approach is simply unacceptable. My Amendment 104 explicitly requires age verification before filters could be disabled. If we

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are serious about age verification, how can anything less than age verification before permitting the disabling of filters be acceptable?

I turn to equal protection offline and online. In a previous debate on this matter, the noble and learned Lord, Lord Mackay of Clashfern, set out the very important principle that if child protection is sufficiently important to merit statutory protection offline, the same must be true online. One of the most basic principles underpinning any civilised society is that those who are vulnerable—a category that certainly includes children—should be subject to particularly developed protection through the law. As a consequence of this, the United Kingdom very properly approaches the subject of child protection on a statutory foundation in the offline world. This can be seen, for example, with respect to accessing sex shops and buying adult material, or purchasing 18-rated DVDs. While the law makes clear that if something is illegal offline it is illegal online, I am convinced that the protections that we put in place to prevent children accessing legal but adult content should be as robust in legal terms online as they are offline.

Mindful of this fact and the strength of the Prime Minister’s declaration of commitment regarding child safety, his reluctance to introduce legislation is difficult to comprehend. His important Daily Mail article on online safety just before Christmas 2012 was entitled, “Nothing matters more than keeping our children safe”. Meanwhile, the final two sentences of his seminal July 2013 NSPCC speech stated:

“And all the actions we’re taking today come back to that basic idea: protecting the most vulnerable in our society, protecting innocence, protecting childhood itself. That is what is at stake, and I will do whatever it takes to keep our children safe”.

We seem to have laws—which, unlike voluntary arrangements, crucially benefit from the full sanction of the law—about everything under the sun, but not about the thing regarding which the Prime Minister has very rightly said, “Nothing matters more”.

How can it be right to carry on with a system that leaves over 10% of the market outside the agreement negotiated with the big four ISPs and with some ISPs openly saying that they refuse to submit to this voluntary agreement? How can it be right to compromise on proper age verification of the person seeking to disable default filtering before removing the filtering? How can it be right to say that nothing is more important than keeping our children safe online but to then make excuses for not introducing a legal obligation on ISPs to provide default filtering with the option of disabling that filtering subject to age verification, while providing all manner of legal provisions as regards other matters that must by definition be of less importance if nothing is more important—I stress that again—than keeping our children safe?

While I recognise that self-regulation is a step forward, it cannot be anything other than a very short-term arrangement. If we are serious about pioneering child safety online, and if we really believe that nothing matters more than keeping our children safe, we cannot accept the current arrangements, where part of the market is not covered and where there is no age

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verification prior to disabling default filters. These shortcomings, and some others, are all addressed by my Amendment 104. I beg to move.

Lord Alton of Liverpool (CB): My Lords, in the very best parliamentary traditions, my noble friend has been persistent, dogged, assiduous and determined. I have been privileged to support her on earlier occasions when she raised this issue. I will speak briefly in support of her excellent amendment today.

All of us, especially those with teenage children, know how important the arguments are that she has advanced to the Committee today. Her three basic arguments are incontrovertible. First, it cannot be right to say on the one hand that default-on is an important protection for children and yet to settle for an arrangement where over 10% of households are serviced by ISPs that are not party to the agreement and where some are completely opposed to that form of protection. Those ISPs that object simply will not introduce a protection unless they are obliged to do so by law.

That recalls an argument I had in the 1990s, when a Member of another place had promoted legislation to protect children from video violence. During a meeting with the then Home Secretary and his civil servants, I was pretty shocked to hear one of them say, “Really, this legislation will affect only a small number of people”, as though those people did not really matter. My noble friend made the point that 10% of children will not be covered by the current arrangements. Can the Minister say, when she comes to reply, how many families that means and how many children the Government estimate that 10% represents? If there was only one uncovered household left in this country with children in it, surely it would be our duty to protect those children.

Secondly, it cannot be right that we settle for a form of age verification that is not age verification at all. Anyone seeking to opt in to access adult content and to disable adult content filters must obviously be age verified before doing so, as mandated by this amendment.

Finally, if we care about children and protecting them, we must afford them protection through the law, backed by sanctions. As my noble friend said, it is absurd to have protections offline but not online; there has to be some logical consistency in the way we view these issues. If this issue is important—and it clearly is—we must bite the bullet and place the obligations on ISPs and mobile phone operators to provide default adult content filters that can be lifted subject to prior expeditious age verification on a statutory footing. We do not allow a child to buy an 18-rated DVD offline, so why do we afford them less protection online?

4.15 pm

I suspect that when the noble Baroness comes to reply, she will suggest that the Government are doing enough already because they are planning to introduce regulations that will simply require websites live-streaming R18-type content online to do so behind robust age verification. I very much welcome that, but I suggest that it is no substitute for Amendment 104 because they largely deal with different things. First, unless the Government have widened their proposals, the

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requirement relates only to R18 video on demand content and not all adult content, which could be 18-rated video on demand or indeed the vast majority of adult content that is not video on demand but photographs and articles. Secondly, it relates only to R18 video on demand content that is live-streamed from the United Kingdom. Of course, the vast majority of the content accessed in this country is from outside the United Kingdom and will be outside the scope of their proposed regulations.

I very much look forward to the regulations being laid, but they are no reason not to back Amendment 104. The amendment is vital because we do not live in a world where all online adult content, or even most online adult content, comes in the form of video on demand live-streamed from sites based in the United Kingdom. The basic issue is: do the 10% really matter? Does protection matter? If it does, the Government will surely accept this amendment.

The Lord Bishop of Truro: My Lords, I support the amendment and am grateful to the noble Baroness for providing a comprehensive and excellent introduction to it. I do not want to repeat the important points that have already been made; I simply want to underline one particularly important point.

These days, we all have a responsibility to take child protection and safeguarding very seriously. Your Lordships may or may not be aware that you cannot be made a bishop in the Church of England unless you have had statutory safeguarding training. The most reverend Primate the Archbishop of Canterbury has made that very clear in all that he has said and done, and that seems absolutely right and proper.

It strikes me that, of all areas, this is one where we should do all that we can to protect our children. I sometimes worry about the matters that we are not worrying about now. I fear that in 20 years’ time we will look back and say, “Why on earth didn’t we do something about this?”. I often think back to the days when I would have got in a car and not been bothered that I was not wearing a safety belt. It strikes me that this is an issue that we can take seriously. We are of course dealing with the Consumer Rights Bill and I am concerned that we spend a lot of time worrying about rights but do not think about responsibilities. We have a responsibility to care for and protect our children.

I declare an interest as chairman of the Children’s Society. At every board meeting, we have a representative number of children and young people. I can tell your Lordships that at every single meeting those young people teach me something about the internet and the world wide web which I did not have a clue about. They are far savvier than I will ever be and allegedly I am not as old as some of my colleagues.

Therefore, I very much support the amendment and I stress that we have responsibilities as well as rights. The word “safeguarding” and the fact that we take child protection very seriously do not undermine in any way the important points that have been made. The imbalance between what happens offline and online seems quite extraordinary. Surely this is an area where we should have legislation that regulates and protects all children.

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Lord Morrow (DUP): My Lords, I commend the noble Baroness, Lady Howe, for coming back to this matter and for bringing forward the amendment. The question, “What is more important than our children?”, has already been asked in this debate. The answer to that is surely that nothing is more important. If that is the case, it seems logical that we should adopt the amendment. I implore the Government to consider the amendment carefully and I urge them to adopt it. As far as our children in particular are concerned, safety cannot be overdone. Today, there are many pressures on children and parents. I believe that one day every parent will rise up and thank the Government for including this amendment in the Bill. I thoroughly commend it to the Committee.

Baroness King of Bow (Lab): My Lords, the Government clearly believe that default-on internet filtering is the best approach to protect children. Common sense tells us that they are right but, as the noble Baroness, Lady Howe, pointed out in her powerful speech, if they are right on this point then they are wrong to take a non-statutory approach. Such an approach leaves possibly 1 million children unprotected and, as the noble Lord, Lord Alton, said, it boils down to the question, “Do the 10% matter or not?”. Do those children matter or not?

The background context to this is well rehearsed: the digital age gives our children more opportunities than they have ever had before, but on occasion it also puts them at grave risk. The NSPCC says that 24% of nine to 16 year-olds in the UK saw sexual images in 2012-13 online or offline. Some 80% of those were worried by what they saw. A recent survey by the Asda Mumdex found that 82% of mums in this country want the Government to tackle child protection online. On top of that, Ofcom reports that over half of parents with children at home do not use parental controls, and I am sure that we are convinced that in the other half of those households the kids would be able to get around those controls in any case.

On a related issue, the blacklisting of child abuse terms by Google and Microsoft was indeed a step in the right direction, but the Government must ensure that police are resourced to deal with child abuse imagery. This cannot be only a voluntary approach when child safety is at risk. It is not only about child safety today; it is about adult behaviour tomorrow. We do not want a generation brought up to think that violent pornography is the norm. That is why we on these Benches support this amendment to require all internet service providers to provide default-on internet filters. Those filters should use British Board of Film Classification standards to define age-inappropriate material. This was the substance of Labour’s Opposition Day debate last summer in the other place.

We recognise that the online world shifts daily, but one thing is for sure: young people today spend more and more time online. Ironically, though, as the noble Baroness, Lady Howe, and one of the other speakers pointed out, the protection that they receive online is less than the protection that they receive offline in the real world. While it would be quite hard for a 12 year-old, say, to buy a pornographic DVD from a shop, it would be relatively easy for that same 12 year-old to buy or

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download it online, and that is what the average 12 year-old would prefer to do these days. Why are we helping them to damage themselves?

We seem to have a protection regime that is a bit of a nonsense. It has been set up by digital dinosaurs such as ourselves and it provides digital natives—our children—with less protection online than offline. The result is clear. Unfortunately, the Government have been too slow to tackle internet child safety. Their rhetoric, however, particularly that of the Prime Minister, has been off the scale in its attempts to pacify parents. I cannot help but quote the PM’s words that we heard earlier from the noble Baroness, Lady Howe; he said that it was about “protecting childhood itself”. He went on to say:

“That is what is at stake, and I will do whatever it takes to keep our children safe”.

No, he will not. He will not even make default internet filtering a statutory duty. Come on; that is what it takes. It is not asking the earth. As we have heard, in this country everything under the sun can be a statutory duty, but not, it seems, the critical issue of online protection for our children.

Moreover, the protection that the Government have sought to put in place via the ISPs makes digital natives laugh out loud. A 12 year-old trying to access pornography on their parents’ computer will be delighted to find that they do not have to verify that they are over 18 before secretly accessing adult content. This is because the self-regulatory approach championed by the Government has not forced ISPs to introduce proper age verification for those wishing to disable default filters. I should add that there are many areas where I agree with the self-regulatory approach; it is just that online protection for children is not one of them. The risks are too great and the dangers too apparent.

I admit that I remain baffled by the Government’s approach on this issue. I trust that they will not be baffled if and when they lose a vote on this amendment on Report. I thank the noble Baroness, Lady Howe, for tabling this important amendment and I look forward to supporting her on Report.

Baroness Jolly: My Lords, I reassure the noble Baroness, Lady Howe, that the Government remain committed to improving the safety of children online and have a strong track record of working with the internet industry to drive progress. I thank her for her continued interest in this area. I am aware that this amendment is drawn from a Private Member’s Bill and that similar provisions were debated earlier this year as part of the Children and Families Bill. Speaking as a parent and grandparent, this issue is close to my heart. I know that many noble Lords will feel similarly and I am pleased to update the Committee on recent progress in this area.

The Prime Minister’s speech in July last year set out a series of measures, to which he asked the industry to commit, to help parents to limit their children’s access to age-inappropriate and potentially harmful material. We have seen excellent progress in all these. As the noble Baroness said, the four major ISPs, which cover almost 90% of the UK’s broadband market—BT, Sky, TalkTalk and Virgin Media—have delivered on their

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commitment to provide parents with the ability to easily filter content. They all now present new customers with an unavoidable choice about whether to use free, family-friendly network-level filters. Existing companies are making good headway with the rollout of these provisions. Smaller providers are also stepping up: for example, KC launched a free parental control service for its broadband customers last month. This has been a huge and complex undertaking, but it has seen results.

The noble Baroness might be interested in public wi-fi providers. The six major providers, covering more than 90% of the market, now provide family-friendly public wi-fi wherever children are likely to be. This summer, the Registered Digital Institute launched the Friendly WiFi logo, giving parents the assurance that a particular business, retailer or public space is filtering out inappropriate material.

Three of the UK’s four major mobile network operators already automatically provide adult content filters for pay-as-you-go and contract customers, with the remaining provider, Three, committed to doing so by July 2015. This means that the great majority of mobile customers are already covered by default-on filters. The Government have also been working with mobile virtual network operators to ensure that they are doing the same. These measures could not have been achieved as quickly through legislation, given the pace of change in this complex environment.

I thank the noble Baroness for setting out the reasons why she feels that further action is needed. The Government are of course open to considering different options and it would be appropriate if we had a meeting between now and Report.

Lord Alton of Liverpool: The Minister will recall that I asked her specifically how many people are not currently covered by this legislation. How many families and children do the 10% represent?

Baroness Jolly: I have many answers here to the noble Lord’s questions. It is vital to understand the full implications of any actions that we take and whether they are likely to be effective. I am sure that the noble Baroness will agree that it is vital that we encourage parents to talk about these important issues with their children. Parents told us that they do not always feel aware of the risks that their children face when online. This is why, in May, the four major ISPs launched Internet Matters, a multimillion-pound campaign aimed at helping parents to understand filters and a range of issues related to online safety.

Education is key in all this and we are doing more to educate children. Since the start of the school year in September, the new computing curriculum has included information for five to 16 year-olds—key stages 1 to 5—about how to stay safe online. Some schools are also promoting child safety at special events for parents. As the noble Lord said, children are often savvier than their parents. Ofcom is monitoring progress in this area. Its latest report, published in October, showed that nine in 10 parents mediate their child’s access to the internet in some way, with most parents using a combination of approaches.

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4.30 pm

The noble Baroness’s amendment proposes an expansion to Ofcom’s remit, with an enhanced role to regulate standards of filtering and age verification, requiring further legislation. Ofcom continues to monitor and report on many of the issues in this area and the industry-led approach has already resulted in excellent progress. The Government do not feel that an expansion to Ofcom’s role is currently necessary.

While the development of the internet has brought many fantastic opportunities for children, we are under no illusion about the fact that it has brought risks. While we encourage children to take advantage of the many educational and social benefits online, we want to make sure that they do so in a safe and supported way. Over time, the UK has developed an effective and world-renowned self-regulatory approach to online challenges. The UK Council for Child Internet Safety—or, snappily, UKCCIS—brings together the key players from industry, the third sector and indeed government to work in partnership to help to keep children and young people safe. It develops and promotes tools and information for children and parents. The UK is a global net exporter of internet safety best practice, according to the Family Online Safety Institute—FOSI—whose website states:

“Since the emergence of the Internet in the mid-1990s the United Kingdom has been at the forefront of online safety and best practice”.

I am sure that noble Lords will agree with the intention behind the amendment moved by the noble Baroness, Lady Howe, that children should be protected from harmful digital content. However, the many recent achievements stemming from the Government’s self-regulatory approach, such as the rollout of free, family-friendly filters in the home, default filtering on mobile phones and filtered public wi-fi with an accompanying logo in stores such as Tesco and Starbucks, should reassure noble Lords that the Government’s current approach is already delivering significant progress.

Let me answer questions posed by noble Lords. The noble Baroness, Lady Howe, asked why we do not provide statutory protection online just as we do offline, as the noble and learned Lord, Lord Mackay, proposed. Progress in the past year has been significant and demonstrates the value of the current approach—working with industry. We believe that offering customers an unavoidable choice on filters—it is not an option; it is unavoidable—is delivering effective progress and we are continuing our work with industry. The noble Baroness also inquired whether we have any information about child exposure to adult content. The problem is that there is a wealth of competing data, with many surveys and many questions asked. The exact effects of exposure are difficult to confirm.

The noble Lord, Lord Alton, asked how many families and children are covered by the ISPs that refused to accept child filters. We estimate that around 10% of households—I am sorry that I do not have the number of households in the UK off the top of my head—are served by smaller providers that may not have filters available. He said that more than 10% of ISPs are opposing child protection and will not do it

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voluntarily. This is not the case. We are working with smaller ISPs and some progress is being made. We can provide more detail in writing.

Lord Alton of Liverpool: I was just about to ask the noble Baroness that very thing. If she would be good enough to write to Members of the Committee telling us exactly how many families and how many children the Government estimate will not be covered by these arrangements, that would help to inform the debate before we get to Report.

Baroness Jolly: That is a fair point. However, the noble Lord is suggesting that more than 10% of ISPs are opposing child protection, but the four major ISPs cover pretty much 90%. We have also heard that KCOM, which is quite a large player in this market as well, now offers child protection. We are working on it; we are picking off all these ISPs one by one. Perhaps the noble Baroness could let us know which provider sees it as a badge on honour not to do this; that would be useful. However, it certainly is not the case at all that 10% are against this. That is not a fair statement. For the moment, I ask the noble Baroness to withdraw her amendment. We would be more than happy to sit down and talk with her to see where we could meet.

Baroness Howe of Idlicote: My Lords, I thank all noble Lords who participated in the debate, particularly the Minister for her reply. I acknowledged in my speech the progress that has been made, which the Minister not surprisingly emphasised. I do not deny that there has been progress; I was simply trying to highlight the ongoing shortcomings as a means of addressing those shortcomings that still remain. The fact that our online safety provisions might be better than those in some other countries—or even most of the countries in the world—does not and should not release us from an obligation to address the ongoing shortcomings, especially if there is a means for doing so. I heard what the Minister said about the new regulations that pertain to video on demand.

I turn now to the commitment made earlier in the year: I welcomed it then and I welcome it now. Unless, however, the plan has changed, this is a commitment to require age verification on websites based in the UK that are live-streaming R18 material. That is welcome, but it is a quite different proposition from what I advanced in my amendment, which addresses all adult content regardless of whether it is live-streamed video on demand or, crucially, whether it pertains to websites based in this country. The Government’s plan pertains to R18-rated material and depends on whether the websites in question are based in this country or in any other country in the world. This final point is hugely important, since the vast majority of R18 material is live-streamed from websites based outside the UK.

I was slightly surprised that the Minister mentioned Tesco, where there was a little failure on a previous occasion, which I mentioned in March, the last time I spoke of this. I am certain that it will have learnt a bit of a lesson from having had a complaint made about

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it. Nevertheless, I suspect that it and Starbucks have other things to attend to and perhaps are not paying as much attention as they should to this important matter.

I am sure that other noble Lords who are interested would be delighted to have a meeting on the subject with the Minister before Report, to try to pinpoint what more action could be undertaken. I fear that, in the mean time, I must beg leave to withdraw the amendment, but I think that I shall be back again later.

Amendment 104 withdrawn.

Amendment 105

Moved by Baroness Hayter of Kentish Town

105: After Clause 86, insert the following new Clause—

“Service contracts relating to students: complaints

In cases where there is a contract under Chapter 4 of Part 1 to supply a service between a student (as the consumer) and an institution (as the trader), the following are qualifying institutions for the purposes of Part 2 of the Higher Education Act 2004, insofar as any complaint under the provisions of the 2004 Act relates to that service contract—

(a) an institution granted specific course designation by the Secretary of State pursuant to regulation 5 of the Education (Student Support) Regulations 2011 (SI 2011/1986) and section 22(1) of the Teaching and Higher Education Act 1998; and

(b) an institution granted degree awarding powers under section 76 of the Further and Higher Education Act 1992.”

Baroness Hayter of Kentish Town (Lab): My Lords, Amendment 105, in my name and that of my noble friend Lord Stevenson of Balmacara, would widen the scope of the Office of the Independent Adjudicator so that it can include students at alternative providers. This would extend existing rights of redress and review to students who are publicly funded but are at non-university higher education colleges.

The Office of the Independent Adjudicator, which reviews student complaints, was designated under the Higher Education Act 2004. Membership of the scheme is compulsory for qualifying institutions, which basically means universities and their constituent colleges. However, it does not include all higher education institutions receiving public funding, whether from HEFCE or via their students from the Student Loans Company. Because of recent changes to the higher education funding system, student loans are now available for far more students; it is a route for public subsidy of higher education on a much wider basis than was the case when the 2004 Act was passed.

Some non-university private providers of higher education therefore now get public money via students through the Student Loans Company. However, although these private higher education institutions can join the Office of the Independent Adjudicator voluntarily, they do not have to and many do not. Their students are therefore excluded from being able to take their complaints to the adjudicator. We probably all agree that effective complaint-handling is an important part of safeguarding the quality and reputation of the

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student experience. Happily, the vast majority of students never need to bring a complaint, but the system needs to be accessible to those who feel that they have been let down by their institution.

Part of the success of the OIA is that it provides a single, consistent and independent point of last-resort adjudication for students in higher education. It has considered about 10,000 complaints and appeals since it was set up, with about one-quarter being found justified or partly justified or being in some way settled. This demonstrates the demand for an independent complaints scheme, because, despite the best endeavours of universities, things occasionally go wrong.

Without this amendment, many students would have nowhere to take their cases, such as the following, which the OIA had to find ineligible as their colleges did not happen to belong to the scheme: a student seeking a refund of fees after their course was cancelled; a student complaining that the institution had not followed the UK visa and immigration requirements properly so that he could not follow the course that he had paid for; and the student who complained about timetabling and support on an undergraduate course. These are examples of the sort of situations where, if the higher education institution is not a member, the OIA cannot hear a claim.

Universities UK supports Amendment 105. The Government’s 2011 White Paper, Students at the Heart of the System, included a commitment to bringing these private and alternative providers into the OIA scheme. That welcome commitment would, as they and we both want, create a level playing field between public and private institutions, in addition to extending this right of access to a redress scheme—it is a consumer right, after all—to all higher education students who are in some way in receipt of public money. The Government said that they intended to bring forward legislation to make that change, but they have failed to do so. The Bill therefore provides the opportunity for them to make good their promise. I beg to move.

4.45 pm

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con): My Lords, higher education in this country rightly enjoys an excellent reputation, and we want to continue to ensure that all higher education students enjoy a high-quality experience. The vast majority of students report that they do: the 2014 National Student Survey shows that 86% of students are satisfied with their course, which is up on 85% last year. Statistics support the points that the noble Baroness made.

I, too, think that it is important that effective arrangements are in place for students to raise concerns and formal complaints in the relatively small number of cases that go wrong. Of course, it is absolutely right that responsibility for handling student complaints rests, in the first instance, with the autonomous and independent institutions that deliver education. I reassure the Committee that we have taken steps to ensure that all providers of higher education, including alternative providers, have a complaints policy. This is one of the expectations of the course designation process which permits students to access student support.

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Institutions will want to respond to feedback from their students, including complaints. This enables the speediest resolution of issues and helps the institution to improve quality generally—feedback is very important. Where complaints remain unresolved, a good, well established service is offered by the Office of the Independent Adjudicator for Higher Education, to which the noble Baroness referred.

These arrangements were put in place in 2004 and in my view have served the sector very well. They provide students at universities in England and Wales with access to a dispute service and so to an alternative to the courts. However, as the noble Baroness rightly points out with her telling examples, they do not apply to the newer providers now offering education courses. I will reflect on the views expressed today and think very carefully about the arguments that have been put forward. In the mean time, I ask the noble Baroness to withdraw her amendment.

Baroness Hayter of Kentish Town: I hope that those words are as warm as my colleague is suggesting they are. We were, I think, hoping that the Government were going to go a little further and ask us to withdraw so that they could bring forward their own alternative. The numbers of students who would have been caught by this in the year after 2004, when it was brought in, was just over 3,000; it has now gone up to 12,000, so it has become a big issue. Can the Minister perhaps go a little further than she indicated?

Baroness Neville-Rolfe: I confirm to the noble Baroness that my words are extremely warm. We will obviously return to this issue and, if need be, have a discussion with her, but I would be grateful if she would withdraw the amendment on that warm basis.

Baroness Hayter of Kentish Town: I think that I will take my jacket off because of the heat in here. With those words of reassurance, I beg leave to withdraw the amendment.

Amendment 105 withdrawn.

Amendments 105A and 105B not moved.

Amendment 105C

Moved by The Lord Bishop of Truro

105C: After Clause 86, insert the following new Clause—

“High-cost short-term credit: unsolicited marketing

The Secretary of State must make regulations to prevent the sale of high-cost short-term credit through unsolicited marketing calls.”

The Lord Bishop of Truro: My Lords, Amendment 105C is in my name and those of the noble Lord, Lord Mitchell, and the noble Baroness, Lady Bakewell. I declare an interest: I am chair of the trustees of the Children’s Society, which has co-ordinated this amendment as part of its campaign—of which I am very proud—on the impact of debt on children and families. We produced a report entitled The Debt Trap earlier this year.

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In September this year, the Children’s Society launched another report, entitled Playday not Payday, which looked at the effects of the advertising of payday loans on children, and in particular at the telemarketing of payday loans. The report identified a gap in the regulations which allows payday loan companies to use unsolicited marketing calls to offer people payday loans through phone calls and texts. For mortgage products, this type of unsolicited marketing is completely banned by the Mortgage Conduct of Business rules. The Financial Conduct Authority, which regulates payday lenders, said:

“Cold calling can expose consumers to high pressure sales tactics which mean they can end up with an inappropriate or over-expensive product or service. Our investment and mortgage financial promotion rules therefore ban cold calling … unless certain conditions are met”.

Why, therefore, does the Minister feel that this ban should apply only to mortgages and not to other forms of credit such as payday loans? According to a poll by the charity StepChange, a third of its clients have received an unsolicited marketing call offering them a payday loan. The average client said that they received an average of 10 calls per week. Calls at that frequency, if aimed at certain vulnerable parents and families, can have a detrimental effect on a person’s mental health and well-being.

The Children’s Society found that of those parents who had never taken out a loan, only 7% said that they were receiving calls from payday loan companies more than once a day. That increased to 42% for parents who had previously taken out a payday loan. Given that we know that young parents are more likely to take out a payday loan, I share the society’s concern that this suggests that young parents who are already in financial difficulty are receiving the brunt of those calls. Anecdotally, we hear stories of payday loan companies sending “I miss you” texts to parents who have not taken out a loan after a period of time. I am sure that the Minister agrees with me that that kind of behaviour is unacceptable.

I understand that the Department for Culture, Media and Sport has recently launched its long-awaited consultation on nuisance calls, which will also cover unsolicited telemarketing calls. The proposal to make it easier to prosecute and fine firms that break the nuisance calls rules is of course welcome and will in the long term help reduce the number of unsolicited payday loan marketing calls. However, I am concerned that this does not go far enough to protect consumers. An outright ban, similar to that applied to mortgage products, would almost guarantee protection for vulnerable families from harassing and persistent calls from payday loan firms. Will the Minister commit to looking at this issue ahead of Report to consider using the Bill to further protect vulnerable families?

Lord Deben (Con): My Lords, I support this amendment. It is true that we have already complained about this constant nuisance. However, it is particularly true that many parents of vulnerable children are not at work, and therefore are present when the phone rings on a constant basis to offer people money in this way. It is intolerable, and an insult to family life. I do

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not understand why we have taken so long to deal with the overall nuisance, which most of us recognise in our own homes and our own places.

On those occasions on which we happen to be at home during the week, there is no doubt that the telephone rings on a regular basis to offer us all kinds of services, none of which we may want. There is no way of stopping them—in particular that annoying habit of a machine talking to you, so you do not even have the chance to be unfairly rude to the person who has rung you up. I try to be polite to the real people at the other end, because it is not their fault—that is the job they were given. However, it is extremely difficult, because this is an intrusion which modern life has not applied itself to. Why should we have the disadvantages of the telephone without doing something to compensate for them?

In general, this is a scandal, and in general it is fair to say that Governments of both parties have been very slow to deal with it. However, in particular what the right reverend Prelate has brought forward is a crucially important problem. Once a family has taken out a payday loan and has paid it off, they are very vulnerable to a repeat performance. These people go on and on at them, and the children are very much affected by that. It is one of those habits that people have to get out of. If they are trying to get out of it, the telephone call is intended to bring them back within the thraldom of the payday loan.

We should be much tougher about payday loans, right across the board. We should be doing a lot more to encourage the provision of the much more respectable and sensible means of people taking small loans and being able to pay them back in proper ways. Credit unions, and the extension of those credit unions, are very important. That is the positive side, but the negative side is that we have to take this seriously. I have tried very hard but I cannot for the life of me think of any logical reason for opposing these amendments.

I hope that my noble friend will not put forward the argument that we are consulting on something else. I have been in politics and in Parliament for 40 years, and I do not believe that argument. It is always used by civil servants who do not want their Minister to listen to the argument; they want them to put it off. Therefore, I hope that my noble friend will not raise that point. If she is able to find another point, I shall be thrilled, because I have not been able to find one myself. If she is either unable to find another point or unwilling to raise the usual answer, perhaps she will be kind enough to say yes to the right reverend Prelate.

Baroness Wilcox (Con): My Lords, there are far too many of us in this Room who have been through this issue. I look across and see “credit unions” written right across the noble Lord’s forehead. It is a more difficult situation than we are making it sound. First and foremost, we know that we must be very careful not to push people into illegal borrowing or illegal credit. If we do that and they get into trouble, there is no way that we can get at them to save them. The issue of when to lend money to people has always been difficult. You can see that some of them will get into trouble, but at least you can see them and they can come to you for help. Credit unions are a wonderful

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idea. They are a gathering of people who come together to save money and, when they have done so, they can then take out the small loans that they need—because it is their money; they put it in there.

This is not about payday lending, which is for borrowing quickly when your child needs a pair of football boots, which every other boy has and without which he cannot play in the football match. This issue is not as simple as it sounds. I tried to tackle it, as did the Minister who followed me, and I am sure that this Minister will try again now. I remind us all that, in the best of all possible worlds, we would not want these telephone calls to happen. However, I urge us to be careful in seeing what the Minister can or cannot do because, if it is that easy, the Labour Government—a socialist organisation—would have done a lot more about it when they were in power—and they could not do it, either. I wish the Minister the best of luck today with this one.

Lord Stoneham of Droxford: My Lords, my noble friend Lady Bakewell is unable to be here today, but I am sure that she would like me to associate us with the right reverend Prelate’s amendment. There are two questions that we have to ask ourselves. First, if the selling of mortgages over the phone is banned, why should these loans not be banned as well? Secondly, there is a problem with existing debtors—principally, I suspect, because the company selling the loans has phone information. Given how vulnerable these people are, they are likely to be very mobile in terms of their telephone accounts, and therefore this is particularly dangerous for them. For that reason, the Government have to act. I accept the points that the noble Baroness, Lady Wilcox, very sensibly raised. This is something which seems to have been overlooked and needs action.

Lord Kennedy of Southwark (Lab): My Lords, I support these amendments. I very much agree with the comments of the right reverend Prelate and the noble Lord, Lord Deben, in particular. There is a real problem here. People are at home, unemployed and quite vulnerable, and they are being harassed over the phone by these people who are offering them all sorts of deals to sort out their problems. We have to deal with that: it is a really serious problem.

I am a big supporter of the credit union movement. It is not the solution to payday lending but is part of a suite of measures to deal with it. We have to deal with this, and it is right that the Government should act. It is not right that we leave people in this situation, which is completely wrong and intolerable. People can be driven into the hands of very unpleasant organisations that lend them money and allow them to get into a mess. They then offer more deals to round it all up, with a “special offer this week”, and so on. We here are very lucky that we are not in that sort of mess. Some people are having a very terrible time and I think that the Government need to take action against the people responsible.

5 pm

Baroness Hayter of Kentish Town: My Lords, most of the other amendments in this group are in my name and that of my noble friend Lord Stevenson, and I

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would like to speak to them. Obviously I endorse the first amendment, but I would perhaps widen it to all nuisance calls. Basically, I feel that enough is enough. I am sorry if we made excuses when we were in government; we have to put a stop to it now.

I do not know how many instances we need before we do something. The right reverend Prelate the Bishop of Truro has indicated the size and effect of the calls about payday loans—but, as the noble Lord, Lord Deben, said, there are also claims management companies talking about non-existent car crashes, or missold PPI or some other dubious sale on the phone at all hours, to such an extent that some people do not even answer their phone any more; we know of elderly people who do not. I have seen someone in this House phone for three rings, put the phone down, phone again for three rings and put it down again. I wondered what they were doing, and it was because their parent would not answer the phone until that code had happened. I think that that reflects a real breach of consumer law.

We know that the Information Commissioner’s Office has received 160,000 complaints about unsolicited calls and texts. MPs tell us that it fills their postbag. Ofcom says that it is its number one complaint, averaging over 3,000 a month. Given that most of us would never think to complain to Ofcom, that must be the tiniest tip of the iceberg. Indeed, it is very hard to know where to take a complaint. I looked at my phone bill and on the back, 60 lines down in immensely small print—my noble friend reckons that it is 8-point—there is a heading, “Commitment to our customers”. You then have to work out that that is what complaints come under. It says that you should complain to the provider, BT, and that if you are still unhappy you can go to the ombudsman service. Another 10 lines down it gives the address of Ofcom, though not its phone number, but without saying that you could take the complaint there. So if Ofcom is getting 3,000 complaints a month, that must be a tiny proportion of those who would like to complain.

What is more, Ofcom research shows that it is vulnerable people who are especially at risk, as we have heard, with one-quarter of customers getting at least 10 calls a week. My fear is that there are more than that—but, even worse, some people do not realise that these are scam calls; if anyone says that they have not had a call, I really worry about their likelihood of falling for one. A BT survey found that nuisance calls ranked above queue jumpers, noisy neighbours and rude commuters as the most irritating aspect of their daily life. About half the respondents found these calls so intrusive that they raised their stress levels. About seven in 10 landline calls receive live marketing calls, and that adds up to 7.8 billion a year.

Furthermore, three-quarters of the landlines are registered with the telephone preference service, which shows that that system is not working. Indeed, those on the telephone preference service list still get about 10 nuisance calls a month—my own experience is that it is probably higher than that—and we know that over half the people on the list are not satisfied with what it does. However, for some reason or other, telephone companies remain reluctant to act, despite the fact that we continue to have to pay

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them to have our phone line, even when we are unwilling to answer a call from it in case it is not from a friend or family.

So we have had reports, recommendations and complaints but no action. The Commons Culture, Media and Sport Committee reported on nuisance calls and recommended legislation to proscribe the unfair process of personal contact data, including telephone numbers, and asked the Information Commissioner to act against companies that call people who have signed up to telephone preference. The All-Party Parliamentary Group on Nuisance Calls, whose work on this I commend, called for a lower threshold for Information Commissioner action, which is particularly relevant after the commissioner lost a case because the appeal tribunal did not consider that substantial distress had been caused.

The Government have said that they will take action, but they seem to be taking their time. In March, the DCMS nuisance calls action plan set out plans to consult on lowering the threshold before the Information Commissioner can act. It took seven months—that is, until last week—for the consultation to be launched, and even then it was only about lowering the threshold from “substantially distressing” to “annoyance, inconvenience or anxiety”. We should remove not only the threshold but the need to show repeated annoyance to allow the Information Commissioner at least to proceed to take a judgment on the issue.

The Government should also ask the telephone providers to play their part. It is a bit like what we have just heard about the internet: the Government seem reluctant to say to the people who could do something, “Do it”. What we are asking for would put an onus on the telephone companies to do something. I was recently contacted by Ian Moss, who told me that for a year after she had a car accident, his wife was getting five to 10 telephone calls a day about it. Nevertheless, even if the threshold is lowered, he would still have to prove that the caller deliberately or negligently breached the Data Protection Act for the ICO to act.

We want to get rid of the threshold and let the Information Commissioner decide on a case-by-case basis. That is what Amendment 105H would do. However, as I said, we should not just leave it to the Information Commissioner, who was set up to do quite a different job. Increasingly, calls come from machines that dial every available number, so it is not even a matter of selling on information collected for some other purpose. We need to look at who is doing the calling, rather than ask some other intermediary to act. We should make it illegal for them to try to sell to people who have not given them permission to phone.

As a first stage, we should ensure that people know who is calling them. Partly, that helps them to know whether to lift the phone at all, but it is also important for stamping out the practice, as it would reveal who is calling, so complaints could be made. Amendment 105G would mandate caller line identification—in other words, knowing who is calling—for non-domestic callers doing any sort of marketing. We also ask that telephone operators make the facility to be able to read the number available free to subscribers. That does not seem much to ask.

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When I was young, or even when I was middle-aged, we had to buy a telephone answering machine to add to our phone; now it comes automatically in the phone. So should this; it is what telephone providers should do. It is, after all, the telephone line which is being misused, so providers must stop avoiding their responsibility, take action against those who misuse the lines and help innocent customers avoid those calls.

At the moment, according to trueCall Research, 44% of nuisance calls arrive without caller line identification, so it is impossible even to make complaints about them. Although a quarter of them may be from abroad, even showing that they are from abroad—unless you have a student child roaming the world and wanting money from time to time—you will know that if it is an international number it is probably not for you. Others simply show up as number withheld—and it is that, with a few exceptions, we would outlaw.

The Culture, Media and Sport Select Committee supported proscribing withheld caller identifications, as did the all-party group. Alun Cairns put it so well in moving his 10-minute rule Bill last year in the other place. He said that nuisance calls,

“could be compared to someone knocking at the door wearing a mask or a balaclava. Would we answer the door to such an unknown caller? Of course we would not. Why, then, do we allow the same thing to happen over the telephone?”.—[

Official Report

, Commons, 28/2/13; cols. 158WH.]

Finally, as we have seen from the numbers I have given, the telephone preference service, which acts on an opt-out basis, clearly is not working. Amendment 105F would make it an opt-in system, so that consumers who want to receive calls should opt in to receive them. Jo Connell, chair of the Communications Consumer Panel, strongly supports the amendment calling for this opt-in for consent to direct marketing, as well as mandating caller line identification and the provision of that facility for free, as it is a service provided by the telephone companies but paid for by consumers that is being abused. Indeed, the panel was surprised and concerned that that was not already the case. As she has said, caller line identification can help report nuisance calls to regulators, as well as enable people to block and filter certain calls.

Ofcom welcomes Amendment 105H, as it would make it easier for the Information Commissioner to take enforcement action, and Amendment 105G, which would make caller line identification mandatory for non-domestic callers. I hope that the amendment in the name of the right reverend Prelate will be accepted, but I hope in due course ours also might be.

5.11 pm

Sitting suspended for a Division in the House.

5.22 pm

Baroness Neville-Rolfe: My Lords, I am very glad that we have been joined by the right reverend Prelate the Bishop of Truro. I will, rather rudely, come to his amendment at the end, because there are some general points that are relevant to that amendment.

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Nuisance calls are an important issue; I want to make it very clear that the Government take it seriously. The calls are a scourge to consumers and I think everyone in this room has been troubled by them. We have therefore been working closely with regulators, consumer groups, parliamentarians and industry to take action. Our wide-ranging approach was set out in the Nuisance Calls Action Plan, published in March by my honourable friend Ed Vaizey, the Minister for Culture and the Digital Economy. I can circulate copies if noble Lords have not seen it, because it represented a major step forward.

Amendment 105F would require consumers to opt in to receiving marketing calls, rather than, as under the current system, being required to opt out by registering with the Telephone Preference Service. I am sure that many noble Lords have done that. While nuisance calls are certainly a problem that needs to be addressed, we also need to consider the benefits that can accrue to consumers and to balance the right of business to conduct legitimate direct marketing. Marketing calls can prove to be financially beneficial for many consumers; for example, calls on improved deals or tariffs can potentially save them money. The direct marketing industry provides employment opportunities, particularly in the regions and in support of our economy. The Direct Marketing Association estimates that its industry supports 530,000 jobs, so it is a significant economic operator. Equally important, it enables charities and voluntary organisations to generate essential funding.

Which?, which has contributed a great deal to the work on nuisance calls, agrees with our view that an opt-in system should not be sought, not least because there are many legitimate reasons why such calls might be made. They might be made, for example, by the emergency services, medical practitioners, or companies with whom the recipient has a genuine relationship. If an opt-in system were introduced, it is likely that calls of this nature might not be permissible.

The National Autistic Society, in its response to the CMS Committee, said that the telephone is,

“the single most successful way that—as a charity reliant on public donations—we raise money from individuals”.

Baroness Hayter of Kentish Town: I ask the Minister to check that quote. I checked with the chair of that organisation, which did not expect it to be used in this way.

Baroness Neville-Rolfe: I thank the noble Baroness and, of course, we will check on it. I suppose that the general point is that phone marketing is more successful than street, doorstep, direct mail, and so on. Changing an opt-in system can diminish a charity’s income, and that is our concern. Charities are subject to the same rules as those applying to marketing companies. That point may be of concern to my noble friend Lord Deben, who spoke with such energy on this subject.

Calls to consumers who are registered with the Telephone Preference Service, provided they have not given explicit consent to receive such calls, are already outlawed under the Privacy and Electronic Communications Regulations. The Government’s view is that those breaking the law by calling consumers registered with the Telephone Preference Service are just as likely to

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ignore any new law that is introduced, regardless of whether the system is opt-in or opt-out. Tackling marketing calls would, in our view, be better addressed in focusing on better enforcement, and we are taking action in this area. We have ensured that the monetary penalties, which the Information Commissioner’s Office and Ofcom can use, have been increased and issued more frequently to those breaking the regulations. Since January 2012, more than £2 million in monetary penalties has been issued by both regulators.

We have also made it clear that regulators need to continue to take strong action to send a signal that those who flout the rules will be caught and punished. Persistent offending companies are now named and shamed on the Information Commissioner’s Office website, so that those who make those marketing calls are made known to the public. Informed consumers are safer consumers.

The noble Baroness, Lady Hayter, said that it was very hard to know how to complain. Ofcom’s website, as she may know, has been revamped to provide comprehensive information for consumers on where to go about nuisance calls. I have talked to Ed Richards about this because he realises how important it is. Ofcom has found that most people go to their service provider in the first instance, which in turn passes them on to Ofcom. There is now much more collaboration between regulators sharing their knowledge and expertise to improve compliance.

Changes have been happening as the Bill has progressed. I mentioned the action plan, and on 25 October Ed Vaizey launched a consultation on lowering or removing the legal threshold for fining firms who make unsolicited marketing calls. The efforts of the Information Commissioner’s Office to impose penalties are currently frustrated by the legal requirement to demonstrate that nuisance calls cause substantial damage or substantial distress—especially given the volume of calls, mentioned by the noble Baroness, Lady Hayter. I am slightly surprised by her comments because, while there are two options in the consultation, which we have to take into account before making a final decision, the Government’s preference is to remove the threshold and give the commissioner the greatest scope to take action. This will help to solve the commissioner’s current frustrations. The consultation ends on 6 December and we expect the secondary legislation to implement the resulting changes to come into force in February—a more rapid avenue than in this Bill.

Amendment 105G would require businesses and other persons making unsolicited calls for direct marketing purposes to provide caller line identification. We are sympathetic to this amendment, as the noble Baroness knows, because we have discussed it, and agree that the current situation can be very frustrating when callers deliberately fail to provide their CLI. Unfortunately, however, mandatory CLI is not permissible under EU law. The EU privacy directive provides that callers, both individuals and businesses, must be allowed to withhold CLI. The directive allows for limited exceptions for the specific purpose of tracing calls, but that would not apply to this amendment, which covers all businesses and individuals making unsolicited calls for direct marketing purposes.

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5.30 pm

Before the introduction of CLI services in the UK in 1994, discussions were held about the privacy and data protection issues involved in enabling CLI to be provided for calls. A general agreement emerged that callers should be able to withhold their number legitimately, citing examples such as calls from refuges for victims of domestic violence, calls from informants and calls to charitable helplines. Therefore, a decision was taken that CLI services would be offered only where the caller could withhold their identity. Similar discussions took place in other countries where CLI was made available, with similar conclusions being drawn in those countries.

This agreement was reflected in the EU privacy directive. We accept that these rules need to be reconsidered in the light of the changes of the last 20 years and we will raise this issue at the EU level the next time we can. However, in the mean time, action is being taken, as set out in the Nuisance Calls Action Plan. Where the CLI is withheld, the Direct Marketing Association has a code of practice in place for its members, which requires all outbound marketing calls to include a valid calling number. Ofcom has a statement of policy on persistent misuse, which it backs up and which sets out that callers should provide valid and accurate CLI for all calls that are made by predictive diallers, which noble Lords mentioned.

In situations where CLI is withheld, consumers are advised to make a note of as much information as possible and to report such calls to either Ofcom or the Information Commissioner, so that they can monitor the situation. Interestingly, such numbers can be monitored, as the withholding of CLI by itself usually only has the effect of concealing the number from the person receiving the call. The number normally remains visible to service providers for law enforcement and for malicious or nuisance call tracing purposes.

We do not agree with Amendment 105, as the provision of CLI services for incoming calls is a commercial matter for service providers, and we do not think that it is right for the Government to intervene on that. However, we also do not think it appropriate to compel communication service providers to offer CLI services free of charge. They have invested in the equipment for this and deserve a return. I do not think that there is the level of harm needed to impose the heavy regulatory burden of introducing new equipment in large numbers of households.

However, it should be noted that competition is at work in a favourable direction. Since 15 January, free CLI has been provided for the benefit of consumers by TalkTalk, as part of its services for subscribers. My hope is that other service providers will follow that example and make CLI available free of charge too. For the benefit of consumers who are not TalkTalk customers, Ofcom publishes detailed information on its website about the main services offered by each phone company. This helps consumers to protect themselves more effectively against nuisance and other kinds of calls and to compare services and charges that may apply to them. Alongside other factors including the subscription price, this helps consumers make up-to-date and informed decisions about their choice

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of services and provider. The switching that has been encouraged under this Government has been a major boon to the consumer and has helped to keep prices down.

I am also concerned that although the intended aim of Amendment 105H might be to tackle the specific problem of nuisance calls, it would have wider consequences than merely affecting nuisance calls. The proposal is to remove the existing obligation on the Information Commissioner to consider whether a breach of the Data Protection Act has resulted in distress or damage. The proposed change to the requirement would apply in relation to any contravention of that Act or of the Privacy and Electronic Communications (EC Directive) Regulations, regardless of whether the contravention related to nuisance calls or for some other breach. We believe that this would send out the wrong message in respect of data protection. The provisions in Sections 40(2) and 55A(1)(b) apply not only to nuisance telephone calls but to the enforcement of breaches of the Data Protection Act 1998 more generally. At present the Information Commissioner is required to have regard to the consequences, or likely consequences, of a breach upon any person in terms of distress.

I am sorry to lay this all out in some detail but obviously it is very important for the debate that we look at the individual amendments. The Government agree that effective legislation needs to be in place for the protection of consumers. I fully recognise the importance of the issues raised in the debate today, which is why, as we just discussed, we will raise this issue with the Information Commissioner to see if anything can be done.

Baroness Hayter of Kentish Town: While we are talking of trying to find reasons not to take action about victims of domestic violence, the Minister will notice that in our amendment we allowed for Ofcom to be able to look at categories, either individual domestic callers or groups of them, that could be exempt, exactly in order to cover women’s refuges and things like that—if we are talking about grabbing excuses. The important issue, though, is that our understanding of the European directive on privacy was that it was about individual privacy, not about corporations, and that the individual within a company or an individual subscriber could be protected. I would be happy if the Minister could clarify that in writing.

The other issue is that no one tells you to go to the Ofcom site, which is not advertised, so there really is no way of being able to complain, particularly if you do not have the caller’s identification number. I ask the Minister to spell out for us why it is not reasonable to ask for all non-domestic callers making marketing calls to have to identify their number. I do not think that she has actually answered that.

Baroness Neville-Rolfe: Perhaps I could try harder; we will have to return to it if I cannot persuade the noble Baroness. The difficulty is that if, for example, someone rings up a domestic violence helpline and that number is public, it will then appear on the bill, so other members of the household will then know that people in their household have been ringing that number.

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This sounds like a detailed issue, although I think that our hearts are in the same place. My understanding is that this was debated at great length in Brussels at the time of this directive, and that these were the problems that came up. I thought that it was right to share that background with the Committee. I will go away to see whether the point that the noble Baroness has made about individual versus corporate stands; I think it is a legal point that I would need to take advice on. That is the difficulty; it was a combination of behavioural and legal points that reflected the concerns the EU had when it was talking about this, when obviously it was trying to do the right thing.

I turn to Amendment 105C. The Government share the concern of the right reverend Prelate and the Children’s Society about payday lenders using unsolicited calls to market inappropriate products to vulnerable consumers. Indeed, we had a long debate earlier in this Committee on the whole issue of payday loans. Such practices must not be allowed to occur, as the noble Lord, Lord Deben, said. I reiterate that the tough measures that I outlined as part of the nuisance calls action plan will capture the practices of payday firms, among other industries. Such firms will no longer be able to target consumers as they have previously been able to.

The right reverend Prelate asked why, as mortgage calls were banned, payday lenders’ calls could not be banned. I am afraid I must take that question away; I was not aware of the ban on mortgage calls, and I will investigate and write to the right reverend Prelate to see if that provides some new avenue into the debate.

To conclude, the Government take the issue of nuisance calls very seriously, and I have set out a number of ways in which we are tackling the problem and the way in which we have speeded up. The Government will continue to work with consumer groups, regulators and of course industry, which need to make changes to find effective solutions. The work outlined in our action plan is under way—new things are happening all the time—and this will help to contribute towards achieving more long-term solutions to deal with nuisance calls. I have outlined a couple of points of follow-up, which we will pursue before we get to the next stage of the Bill, but in the mean time, I ask the right reverend Prelate to withdraw his amendment.

The Lord Bishop of Truro: I am grateful to the Minister for her response, and I thank all noble Lords who took part in the debate. Clearly, unsolicited calls struck a nerve with most noble Lords here. It was therefore ironic that we should have our own version of an unsolicited call when the Division Bell rang to empty this Room.

By way of response, I thank the Minister very much for the offer of a letter on the point about mortgages, which, as was reinforced in the debate, is a significant issue. I will stress and underline a point on my amendment. I understand entirely the strength of feeling in the Room about the way in which we are affected by unsolicited calls, but I want noble Lords to imagine what it must be like if you are leading a chaotic life in a vulnerable situation, where bizarrely, the phone ringing might be seen as a good thing rather than a bad thing—as many of us would see it. In view of some of

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the amendments we will come to later, there is almost an addictive quality. Some of these payday loan firms will buy into and hook into these people, who do not have the resilience to resist in the way that I suspect we can. We can joke about it. It might be a nuisance for us—we might be able to shout down the phone at a machine—but for some of the people that we represent in the Children’s Society those strategies are just not available. This is therefore very important. I am grateful to the Minister for her assurance of a letter, and I beg leave to withdraw the amendment.

Amendment 105C withdrawn.

Amendment 105D

Moved by Lord Kennedy of Southwark

105D: After Clause 86, insert the following new Clause—

“Public communications by sellers in the high cost consumer credit market

Lenders in the high cost consumer credit market shall not target public communications about their services at people who are engaged in gambling.”

Lord Kennedy of Southwark: My Lords, I will not detain the Committee too long in moving my amendment today. There are a number of other excellent amendments on the Marshalled List. I am particular conscious that the next one is in the name of my noble friend Lady Kennedy of Cradley, who also happens to be my wife, so I will be very brief.

We have discussed many times in Grand Committee and your Lordships’ House the issue of payday lenders, and their practices have come under a lot of scrutiny. I am pleased that the Government finally took some action to curb some of the worst excesses, although they did not do that voluntarily; rather, they were forced to react to a wholly unacceptable situation. The most reverend Primate the Archbishop of Canterbury, other noble Lords, many Members of the other place and campaigners are to be congratulated on the work they did on this, forcing the Government to finally act.

However, my amendment seeks to deal with a particular problem. On some gambling websites there are adverts from payday lenders, which make it possible that while you are gambling you can log on to a payday lender and borrow more money when you may not be in the best frame of mind to do that. You could have lost money and think, “I can win it back in the next game. All I need is a hundred more pounds, but I’m still two weeks from pay day and I’m already overdrawn at the bank”. In front of you is a little thing flashing in the corner telling you to log on and get a payday loan. My amendment seeks to stop gambling websites from accepting payday lender adverts on their sites—it is as simple as that. That is a real problem. I look forward to hearing the Minister telling the Grand Committee what the Government will do to deal with this issue, which needs to be resolved.

Before I conclude, I should have mentioned in the previous amendment that I have a meeting with the Economic Secretary to the Treasury in a couple of weeks’ time. We all hear reports in the media about all these dreadful practices that financial companies get up to, and the Government keep fining them. That is

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very good; the Government fine them hundreds of millions of pounds. All the money goes to what is called the Consolidated Fund—it is tipped in, disappears, and is never seen again. I am trying to persuade the Government to use a small amount of that money to support the credit union sector, debt counselling, money advice, or maybe an advertising campaign to show that there are alternatives to payday lenders. We would need a tiny amount, perhaps £10 million, rather than it disappearing into that fund. I therefore hope that I will get some positive news from the Government in a couple of weeks’ time, and I will bring that back further on. I beg to move.

5.45 pm

Lord Stevenson of Balmacara: I endorse what my noble friend Lord Kennedy has said on this matter. These are new examples of the pernicious behaviour that is often adopted by petty lenders and similar types. It is not just them; it is also other high-cost credit providers. As the Minister indicated, we had a very good discussion on this at our last session, and many of the points there will have resonance for what is being said today.

I have two questions left in my mind after hearing what the noble Lord had to say. First, how did he know about those flashing lights at the corner of the screen? I know that his wife is present so he would not wish to reveal undisclosed secrets, but I think we ought to be told at some point. More seriously, why does it always seem to take pressure from within this House to get movement on this? If the practice were stamped on very quickly, a serious harm would be removed. I hope the Minister, when she comes to respond, will indicate the Government’s willingness at least to investigate this, to assess whether it is something they want to do. Hopefully, they will say that it is something they do want to do.

Baroness Wilcox: I will just add a word at this stage. I am very interested to hear what the Minister says about what the noble Lord, Lord Kennedy, has described, with the money all going into a fund somewhere else and people not getting their hands on it. I winced slightly, because I thought, “The Minister is listening to somebody talking about ring-fencing here”. I wondered how she was going to respond to ring-fencing money like this; I am not quite sure. The Financial Conduct Authority, as I understand it, is this big, new strong regulator that the Government brought have in, so I wondered if the Minister was going to tell us the result of the consultation paper they put out fairly recently. I have not heard too much about that since.

Baroness Jolly: I am grateful to the noble Lord, Lord Kennedy, for raising the issue of payday lenders’ advertisements targeted at people engaged in gambling. The noble Lord, Lord Stevenson, asked how he knew about these things. The answer could be that he had inadvertently fallen into the debate on the gambling Bill, where this sort of thing was raised. We can therefore tell the noble Baroness that there was nothing untoward going on.

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As I have outlined previously in this Committee, the Government are fundamentally reforming regulation of the payday market through the Financial Conduct Authority’s new, more robust regulatory system. In January, the FCA will introduce a cap on the cost of payday loans, to protect consumers from unfair costs. The Government are determined to tackle abuse in the payday market wherever it occurs, including in the marketing of these loans. We strongly agree with the noble Lord that it is unacceptable for payday lenders to deliberately target vulnerable consumers with their advertising material. However, it is clear that a robust set of measures is already in place to protect the vulnerable from such practices.

We have heard about the FCA, but payday loan adverts are also subject to the Advertising Standards Authority’s strict content rules. Those apply to broadcast, as well as online, advertising. The ASA enforces the rules set out by the UK code of broadcast advertising. The BCAP code requires that all adverts are socially responsible and that vulnerable people are protected from harm. The social responsibility requirement prohibits lenders from deliberately targeting vulnerable people such as problem gamblers. The ASA has powers to impose scheduling restrictions if it deems it necessary. It also has powers to ban adverts which do not meet its rules, and has a strong track record of doing so: since May 2014, the ASA has banned 12 payday loan adverts. Just today, the ASA banned a payday advert because it encouraged consumers to take out loans to fund frivolous spending. The FCA has introduced tough new rules for payday adverts, including the introduction of mandatory risk warnings and the requirement to signpost to free debt advice. The FCA also has power to ban misleading adverts that breach its rules.

To conclude, there is in place a tough package of measures to ensure that vulnerable consumers are protected from inappropriate advertising and communications from payday lenders. I hope that that gives the noble Lord some comfort. To pick up on a point made by the noble Baroness, Lady Wilcox, the consultation paper on the cap will be published next week, before Report. I hope that the noble Lord now feels able to withdraw his amendment.

Lord Kennedy of Southwark: I first raised the issue of payday lending in 2010, soon after I entered the House, in a Question to the noble Baroness, Lady Wilcox. I remember that when I left the Chamber after that, a Conservative Peer said to me, “That is outrageous. No one ever charged me 4,000% for a loan. How dare you say that in the House? It is wrong”. He had a right go at me. I said, “I’m sorry”. I then sent him the link to the advert, and he came back to apologise. He has since become a good friend. He was shocked that anyone would charge that sort of money. That is how I felt about gambling websites. I could not believe that you can play a lot on those sites and have a sign saying that the money is there. The problem is that the advert may not be misleading; it may just give the name of the company and say that it gives payday loans. That is a matter of fact.

We say that we are trying to protect problem gamblers. How do you know that the person on the computer is a problem gambler? You are sitting there getting desperate,

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losing money and needing more, and the offer is in front of you. The Government are not going far enough on this. There is a big issue here, which we should look at. Of course I will withdraw the amendment today, but I will probably bring it or a similar amendment back at Report.

On ring-fencing, these companies are being fined a tiny amount—£10 million or £11 million. Hundreds of millions of pounds are going to the Consolidated Fund. I hope that no Minister will be too worried about the amount I am talking about when I get to see them. With that, I beg leave to withdraw the amendment.

Amendment 105D withdrawn.

Amendment 105E

Moved by Baroness Kennedy of Cradley

105E: After Clause 86, insert the following new Clause—

“Airline passengers: allergies

(1) When a consumer enters into a service contract under Part 1 of this Act to travel with an airline, the airline must give the consumer an opportunity to state whether they have any allergies about which the airline should be aware.

(2) If the consumer states that they do have an allergy, the airline must take reasonable appropriate steps to avoid the consumer having an allergic reaction while travelling with the airline.”

Baroness Kennedy of Cradley (Lab): My Lords, many of us are nervous of flying; imagine how nervous of flying you would be if you had an allergy caused by something as common as nuts and you knew that your allergy was so severe that any contact with the allergen would cause you a life-threatening reaction. Although you have done everything that you could to keep yourself safe on the flight—you have your Epipen, your medication and your letter from your GP, and you are even carrying your own food—the airline you are travelling with does nothing to try to reduce your risk of having an allergic reaction. Why? I cite British Airways as an example because it is our flag-carrying airline. It states that that it cannot guarantee an allergen-free environment. Because it cannot guarantee an allergen-free flight, it does little to help to reduce its passengers’ risk.

There are no guarantees for any of us when we travel by road, rail or air, but that does not stop Governments or other authorities putting in place measures to keep us as safe as possible. I know that when British Airways were asked by a passenger with a severe nut allergy to stop giving out nuts on his flight, it refused and therefore directly increased his risk of a life-threatening reaction.

A few weeks ago, the media reported that the father of a young girl with a severe nut allergy felt bullied into leaving a British Airways flight after it had refused to make an in-flight announcement about his daughter’s allergy. In-flight announcements cannot guarantee an allergen-free flight but they can be part of a package of measures to reduce the risk. What was highlighted by that father’s story and by my experience is that there is confusion about the British Airways policy to deal with passengers at risk of severe allergic reactions.

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At first, they told the father that they would make an in-flight announcement but, once they were on board, the cabin crew refused.

On 16 August this year, British Airways staff told me that passengers,

“can mention to the cabin crew about a nut allergy and the crew can make an announcement on board the flight”.

However, 10 days later they said they were wrong to give that advice and withdrew it. British Airways states on its website:

“We use the recommendations of the International Air Transport Association … for allergen sensitive passengers to make sure your flight is as comfortable as we can make it”.

The problem is that the IATA recommendations say very little. As far as I can see, they only refer to meeting the general standards in terms of first aid kits and cabin crew first aid training. There is no mention of any of the practical operational steps that some airlines carry out, such as in-flight announcements. The policy and practice around how an airline supports a passenger with a severe allergy is therefore completely up to that airline. This policy vacuum leads to a lack of action on the part of some, and confusion for the many airline passengers and staff.

This is despite the huge and growing number of children and adults affected by allergies. According to the European Academy of Allergy and Clinical Immunology, allergies affect more than 100 million people in Europe. One out of every three children has an allergy, and it expects allergies to affect more than 50% of all Europeans in 10 years’ time. We know that for those at greatest risk, the tiniest trace of a food allergen can trigger severe symptoms and, in some cases, fatal or near-fatal symptoms. According to the Food Standards Agency, in the UK about 10 people die every year from food-induced anaphylaxis. Allergies and fear of a severe allergic reaction affect the daily lives of millions of children and adults. It is a growing problem that deserves some attention, especially when a person with a severe allergy is in a closed environment like a plane, where escape is impossible and the medical help you need is not available because you are trapped 35,000 feet in the air. Thankfully, anaphylactic shock on a plane due to an allergy is rare, but it does happen.

Noble Lords may have read over the summer about the case of the little girl, aged four, who went into anaphylactic shock and lost consciousness on a plane due to a severe allergic reaction to nuts. She was saved thanks to an ambulance worker on board who responded to the cabin crew call for medically trained passengers. In this case, Ryanair did make an in-flight announcement—in fact, it was reported to have made three in-flight announcements—but one passenger ignored the warnings, and his actions caused the girl a severe life-threatening reaction.

The two media reports that I have mentioned highlight a number of important issues: the risk of a life-threatening allergic reaction is possible and not as rare as we may think; airlines’ policies vary to a great extent; there is confusion among airline staff on the policy positions held by that airline; and there is a significant lack of passenger awareness of the risks posed to some passengers from allergic reactions, which means that in-flight announcements alone are not a complete solution.

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I recognise that no airline can guarantee an allergen-free flight, but the amendment I have tabled today does not ask airlines to give a guarantee; it asks them to take reasonable steps to decrease the risk to flyers with severe allergies when the airline has been informed that an at-risk passenger is aboard. It asks the airlines to help create as safe an environment as possible, and would lead to the development of a set of recommended guidelines that airlines operating in the UK would adopt to help reduce the risk to allergen-sensitive passengers. This would protect not only the at-risk passenger but the airline and all the other passengers on board.

Many airlines are already taking action. For example, some airlines have removed peanut snacks altogether. Others will remove nut-based snacks when notified in advance. Some airlines have introduced a buffer zone—seats around the passenger with an allergy, which they keep as allergen-free as possible. Some airlines allow passengers to pre-board so they can wipe down the seating area. Some advise customers when the aircraft is cleaned, so that passengers can book travel when the aircraft is at its cleanest. Some, as I have stated, make in-flight announcements to ask passengers to stop eating nuts. Because airline meals pose a particular risk for allergy sufferers, some airlines do more by letting passengers know what the meals are in advance—for example, at the time of booking. If some airlines can take steps to mitigate the risks to their passengers, why cannot they all? I think that they can, and should. The amendment asks them to do that.

I hope that the Government will agree and support the amendment, and that they will facilitate a discussion with the Civil Aviation Authority, the International Air Transport Association and any other appropriate authority to develop coherent guidelines on this important matter. I beg to move.

6 pm

Baroness Wilcox: My Lords, I promise that this is my last intervention but I could not resist this one. Some years ago I was asked to chair a Select Committee on aircraft travel and health and deep vein thrombosis. It was an unusual piece of work because it was based on anecdotal evidence that people were coming off planes and were in hospital shortly after. It was unusual because most of the evidence that we took was from the general public, and we then got the reaction of the airlines, et cetera. So this is an area that I know very well indeed. As to whether it is relevant to this Bill right now I do not know, but at that time, the answer was that you could tell people that you had something wrong with you—the flu, or an allergy, although I am not sure that everybody thought so much about allergies in those days. There was great use of hyperfilters, which are still relied on. The air exchange is so quick and so localised to you that, generally speaking, you are safe because you are only within the range of one or two people. I advise the noble Baroness to get a copy of the Bill because it is quite possible, having listened to her today, that she might want to take this forward herself.

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It was interesting to hear her speech. I have no doubt that the Minister has a wonderful answer, but as far as I know all the big airlines used the hyperfilter system and air exchange, which was so fast that it was pretty well the best they could do at the time. Things may have moved on since then. I do not know whether it is relevant to this Bill at this time, but it was excellent to hear the noble Baroness speaking about it. It is the first time I have had an exchange with her and I have enjoyed it, so thank you.

Lord Mendelsohn (Lab): My Lords, I congratulate the noble Baroness, Lady Kennedy, on introducing this amendment and on her very thoughtful and persuasive speech.

I have an interest to declare. Two of my sons have severe nut allergies. I can still recall when the elder of the two suffered his first anaphylactic shock. He was almost five years-old and had never been diagnosed with an allergy. I think it is almost certainly the case that were it not for the fact that it occurred on a cruise liner with appropriately trained staff available and with the right supplies, our son would have died. My personal experience tells me how fortunate you can be.

The amendment does not ask airlines to guarantee a peanut-free or nut-free flight—no airline could or would ever give such a guarantee—but it does ask airlines to provide a reduction in the risks and to provide safe alternatives. The amendment addresses the key issue of the risk of a major incident on board, and what can be done to minimise that risk.

Let me set out the considerations and context for our views on this issue. First, this is an appropriate measure to be under consideration. We are, naturally, in favour of airlines being responsible and taking reasonable and proportionate steps to protect passengers. Secondly, we also consider that the amendment, while referring to allergies in general, is particularly focused on a distinct and significant area. Most allergic reactions present with mild or moderate symptoms. However, anaphylaxis is a severe allergic reaction that is potentially life-threatening. It is a medical emergency that requires immediate treatment, hospitalisation and observation for up to six hours.

Thirdly, there are very significant increases in diagnosed allergies and the trend line is continuing to rise. Surveys showed that an increase was initially seen in countries such as the UK, Europe and USA, but can now be found in all countries undergoing industrial development. The pattern of allergy is also changing and the distribution of those facing severe allergies is becoming increasingly widespread. I would be grateful if the Minister had some data she could share on the prevalence in the UK—especially in comparison with other OECD countries and how the Government project the likely incidence of such allergies and the trend line towards the future.

Fourthly, there is a clear and distinct problem with air travel. The very nature of the reaction and the treatment requirements mean that an anaphylactic incident is likely to cause a flight to change its route to meet the medical emergency. In the recent incident referred to by my noble friend Lady Kennedy, the flight to New Jersey was compelled to return to Dublin to ensure that proper medical attention was received.

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The elevated level of risk caused by being airborne means that air travel should be considered as distinct from other environments. I would be grateful if the Minister could provide us with any information the Government have on the number, severity and location of incidents; whether they have had any discussions with other countries on providing an exchange of information; and whether they have any information on the costs associated with plane diversions, or the department’s assessment of the performance of airlines in dealing with incidents.

Fifthly, there are risks that, while they can never be eliminated, could be managed better and where public policy expressed through legislation could help to encourage this. More can be done to ensure that allergy sufferers are not put at risk by particles, or even though the provision of food on the airline. Reasonable management measures and appropriate provision of meals and the like are deliverable. Providing obligations would mitigate the mistakes that can sometimes occur, both with ingredients and provision, in the way that airlines currently treat this condition.

Sixthly, the current advice and guidance places great burdens on passengers, who do have a responsibility—and I suspect that were it not for their vigilance we would be conscious of many more incidents. Advice and guidance are inconsistent between airlines and in particular in airlines’ implementation. There are a number of useful guidance notes and codes, but implementing simple data-capture arrangements, amending contracts with suppliers and introducing compliance checks within the existing oversight of food suppliers—as well as arranging for the effective management of the cabins and the provision of alternatives—seems to be proportionate, readily implementable and not highly fiscally challenging. The fact that some airlines do some of these things already would suggest that they are all able to do so. Can the Minister provide us with more details on how the airlines and her department view the deliverability and affordability of such changes?

I would also be grateful if the Minister could provide the department’s assessment of the guidance notes that are available and in use, and what evaluation or commentary there has been on their continuing practicality or previous effectiveness. Has the Minister’s department held any recent discussions on how they might be improved? What evidence have they received from third parties on their strengths and weaknesses?

Finally, there are already some moves towards legislation and regulation in other parts of the world. I understand that the US Department of Transportation started to look at banning nuts on planes in 2010 and has commissioned, or has called for, peer-reviewed scientific data on these matters. Have the Government discussed this with other international parties—specifically the US Department of Transportation—and have they independently sought and reviewed scientific data on these matters? Do they have any more thinking on the current position in America and on the current thinking of the Department of Transportation? In addition, the New Jersey Senate passed a resolution concerning nuts on planes. Has the Minister any information on the measures it has introduced and on any evaluation on their effectiveness?

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It would also be very helpful to know what other authorities, experts and models the Government consider it would be appropriate to consider, and, in addition, whether such moves in countries where incidence is lower than our own is a strong indicator that action and acceptance of the amendment would be appropriate now.

Baroness Neville-Rolfe: My Lords, I, too, am grateful to the noble Baroness, Lady Kennedy, for raising this issue and for tabling the amendment. I am delighted to be able to welcome the noble Lord, Lord Mendelsohn, who I have known for some years, to his maiden contribution at the Dispatch Box, and thank him for bringing his expertise and family experience to this important debate on this very important subject. He is most welcome to our deliberations.

I am very sympathetic to the intention of the amendment in the name of the noble Baroness, Lady Kennedy, which seeks to relieve the suffering of those with allergies. As she said, allergic reactions can be very distressing to those who experience them, not least in the confines of an aircraft cabin, where it can be particularly scary. I know that no carrier would wish that to occur on its services. I am also grateful to the noble Baroness, Lady Wilcox, for sharing her experience on another troubling issue, deep vein thrombosis, and her knowledge of travel filters and air exchanges, which are an important technological part of the debate that we are having today.

I assure the Committee that industry practice is for carriers to request passengers to pre-notify prior to travel if they have any medical conditions, including allergies, and that most passengers do so. Most airlines will then take all reasonable measures to prevent passengers from having an allergic reaction while on board the aircraft. I know that, where given prior notice—and that is an important duty for us as passengers—airlines take steps, such as broadcasting requests to passengers not to eat nuts.

For some allergies, a carrier is unlikely to be able to guarantee an environment totally free of the trigger substance. For example, an aircraft may have been used by another carrier only hours previously, other passengers may bring their own food with them which can contain a trigger substance, or a passenger may be accompanied by an assistance dog, which may be a source of allergic reaction for some people.

I note that the amendment is specific both to airlines and to allergies. While I appreciate that there is a distinction, which the noble Lord has explained, the amendment would place a duty on airlines that is not placed on operators of any other modes of transport such as trains, ships, buses or taxis, or the airport operator responsible for the airport environment. However, there may well be steps that operators in those modes could take to reduce the risk of a person with an allergy having an attack during their journey. Furthermore, there may well be conditions other than allergies where an operator could take reasonable steps to reduce the risk of an attack during the journey—for example, photosensitive epilepsy. Moreover, the majority of airlines already do what the amendment would create a duty for them to do.

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I am grateful to the noble Baroness for bringing this issue to our debate, but I do not think that we can justify the addition of this regulation to the Bill. I will ensure that the remarks made on the subject today are conveyed to my right honourable friend the Secretary of State for Transport, and that the points that have been made are considered. I shall also ask the department to pass the comments to British Airways because of the examples that she cited. I know from my own extensive experience of travelling that the company always seems very keen to provide a good service. As the noble Lord said, good management systems make a very big difference in these sorts of cases.

I was interested in the good practice outlined by the noble Baroness and, as I said, in the experiences of my noble friend Lady Wilcox, and in the international developments that have been mentioned, which I was not aware of. I also commend to the Committee the advice that the charity Anaphylaxis Action gives on its website to those with allergies when they travel by air. That advice includes stating their needs to carriers, discussing their proposed flight with their GP or specialist and, if concerned, taking their own food and medication, such as antihistamines or an adrenaline auto-injector, when they fly. In the circumstances, I ask the noble Baroness to withdraw the amendment.

Baroness Kennedy of Cradley: I thank all noble Lords who have spoken today, particularly the noble Baroness, Lady Wilcox, for her intervention. I was very interested to hear about the fast air exchange; I shall take her advice and look it up. I do not see that the fast air exchange helped the little girl aged four who became affected by a passenger who ate nuts a few rows behind her, but it could be that that is not a technical solution that is available to all airlines. I will certainly go and investigate that. Presumably, that is one of the reasons why buffer zones have been created by many airlines, such as Delta Airlines, to create a space where the passenger can sit and feel risk-free from their allergy.

I thank my noble friend Lord Mendelsohn for his contribution and his list of questions, which the Minister did not address. Actually, I was quite disappointed with the Minister’s reply. She said that most airlines do this. Most airlines do but not all of them, and that is the central point of my amendment. We need to ensure that there is a level playing field across the airlines in relation to security. There is good practice but there is also bad practice; there are good initiatives but there are also no initiatives; actions are taken but there is also a refusal to take action.

6.15 pm

It seems to me that this would be quite an easy amendment to add to the Bill. It would allow regulations and guidelines to be developed by the industry so that consumers could be clear that, when they flew with any airline that operates in the UK, they would be given a certain level of protection by the cabin crew. The current policy is confused and actions are not taken. I feel that British Airways has let down a

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number of its passengers. We should not have to wait until somebody dies before we see the need for legislation in this area.

Although I will obviously withdraw the amendment, at this stage I would be very grateful if the Minister could reply to the questions put by my noble friend Lord Mendelsohn and facilitate a meeting with the Secretary of State for Transport for me and other interested parties before Report, when I shall probably want to bring the amendment back. In the mean time, I beg leave to withdraw the amendment.

Amendment 105E withdrawn.

Amendments 105F to 105J not moved.

Amendment 105K

Moved by Lord Stevenson of Balmacara

105K: After Clause 86, insert the following new Clause—

“Credit broker fees

(1) The Consumer Credit Act 1974 is amended as follows.

(2) In section 160A (credit intermediaries), after subsection (4) insert—

“(4A) Persons engaged in credit intermediary activity under this section or credit brokerage under section 145 shall not charge or take any fee from a debtor in respect of these activities until such time as an introduction results in the debtor entering into a relevant agreement.””

Lord Stevenson of Balmacara: My Lords, I declare my interest as the retiring chair of StepChange, a debt charity which is the UK’s leading independent debt advice and solutions service. StepChange offers free-to-client debt management plans, and the charity estimates that it is administering over a quarter of the total number of DMPs that are currently in place.

We know that people who face unmanageable debt often delay, sometimes for as long as a year, before seeking help. By that stage, they are often so desperate for help that they will enter into a plan with the first provider they happen upon, whether it is telephone or web-based, or whether they have just read about it in the newspapers. In a previous debate, attention was drawn to the volume of marketing calls or texts offering fee-charging debt management services. Of course, there is also the scourge of daytime advertising of such products on television and radio.

In its 2010 review of the debt management plan sector, the OFT concluded that commercial debt management companies,

“are not giving the advice or offering the solution that is in the best interests of the consumer but instead that which is most profitable to them”.

That is quite a serious accusation but, compared with what charities such as StepChange offer all its clients, which is the best independent advice with the client at the centre of the discussion, it is fair to point out that in many cases commercial debt management firms simply do not have the expertise to help resolve people’s debt situations in their best interests even if they want to do so. For instance, out of the hundreds of debt management firms that exist, the Insolvency Service lists only four as able to set up a debt relief order—one

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of the key tools to help debtors on lower incomes. In contrast, StepChange spends about £2 million a year on DROs for its clients.

The October 2014 report on this sector produced by the newly formed Competition and Markets Authority says:

“We consider that there is … a case for the FCA to conduct a more broadly-based review of the activities of lead generators”,

including,

“the role of fee-charging brokers ... possibly timed to take place during the authorisation process ... that is now getting underway”.

It is estimated that there were about 600,000 DMPs at the start of 2012. Of these, about 350,000 were with commercial fee-chargers. In 2010, the OFT estimated that debt management firms were making some £250 million profit from these plans—from clients who were, by definition, already over-indebted. It must be obvious to all concerned that, if fees are charged by commercial debt management companies to people who are suffering from unmanageable debt problems, the consequence will be that the extra costs taken will divert funds away from the creditor to the fee-charging DMP provider, and that will ensure that the time taken to repay the debt is extended. That cannot be good for consumers. It cannot be good for the creditors, who will wait longer and get less, and it is not good for the economy because it is a drag on GDP and will slow the recovery.

In this Committee we have discussed the role of the FCA and other sectors of the credit market, and have raised similar concerns in other Bills, not least the one that originally set up the FCA. Although I think highly of the FCA and respect the intentions of senior staff I have come across, it is becoming clear that there is a fundamental problem with the way it is established. Although its paperwork states and its staff will assert that the consumer is at the centre of its thinking, in practice the FCA has a different objective, which it takes as a surrogate for consumer welfare but which is not correct. It ensures that, across the financial services sector, markets are functioning well.

This means that we get perverse results. Almost irrespective of the consumer detriment or harm, the FCA appears to be content if a smaller number of well capitalised firms are trading, such that they are making reasonable profits—which I suppose means reasonable in relation to the capital employed. That is why cleaning up the payday loan market will not in fact eliminate payday lenders or other high cost credit operators, and why its tougher, more proactive regulation of the debt management market—while long overdue and very welcome—will not remove the problem of commercial DMP providers. If, for example, the FCA determines that the DMP market is functioning well, the FCA will be happy—even though the existence of fees will make it much harder for clients to repay their debts, and it will take them longer to do so.

A good example of this is the cap the FCA has introduced on charges in the DMP sector. We think fees should be abolished altogether on the ground that all clients’ money should be utilised to repay their debts. However, the cap has been set at a relatively high level: firms can charge a maximum of 50% of a customer’s repayments, although that must decrease once set-up costs have been recovered. Thereafter,

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however, monthly management charges—as distinct from set-up fees—can be charged at a flat percentage of customer repayments. Most of our clients pay about £200 to £250 per month into their DMP. If 50% of the early payments, and let us say 10% of the rest, go to a commercial operator, you can see how the impact will work out. This is absurd. It means that a client of a profit-seeking debt management company with £20,000 of debts will typically pay hundreds of pounds in set-up fees and thousands of pounds in monthly management fees over the term of the plan—money they cannot afford, which should be being paid to their creditors. Compared with a free debt management plan, this will extend the time it takes to pay down debts by as much as several months, and sometimes more than a year. There is substantial consumer detriment here in this market, and it is hard to believe that such a high level of charges is consistent with promoting good consumer outcomes. Our amendments would ban upfront fees for credit brokerage, and clean up DMPs.

Finally, I will touch on one other issue. As a result of FCA regulation, commercial debt management companies are starting to exit the market, and under the amendment, this would accelerate. There will be some transitional problems; for example, when a fee-charging debt management company closed its doors earlier this year, StepChange Debt Charity was on hand to pick up the pieces—and that was good. It was able to support over 400 people, but it is important to note that in so doing, the charity found that more than half of those people had been sold a debt management plan which was not suitable for their circumstances. As the FCA authorisation process starts to clear out the worst operators in this market, it will be up to charities such as StepChange, working with the regulator, to pick up the pieces and help rebuild people’s lives. That will be a significant amount of work. I have written to the FCA to suggest that a plan needs to be put together with the creditors, StepChange and others in the charitable sector to ensure that clients whose DMPs fold under them can be offered a free DMP or other appropriate debt solution. I hope that the FCA will take up that offer to engage. I beg to move.

Baroness Jolly: My Lords, I thank the noble Lord for raising such an interesting and critical point on this aspect of consumer credit, and I acknowledge the excellent work of StepChange. The Government have fundamentally reformed regulation of the consumer credit market. Consumer credit regulation transferred from the Office of Fair Trading to the Financial Conduct Authority—FCA—on 1 April 2014. The Government have ensured that the Financial Conduct Authority has robust powers to protect consumers. It has a broad enforcement tool-kit to punish breaches of its rules, there is no limit on the fines it can levy and, crucially, it can force firms to provide redress to consumers. The FCA also has flexible rule-making powers to take further action if it is deemed necessary to protect consumers.

Turning to Amendment 105K on the issue of credit brokers, it is clear that there is a real risk in this market of consumer detriment being caused by unscrupulous brokers. FCA rules already require credit brokers to

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disclose their status and any fees payable before the consumer enters into a brokerage contract. The FCA has made clear that disclosure must also cover the consumer’s right to a refund if no credit agreement is entered into within six months following an introduction. The FCA requires credit brokers to comply with the high-level principle of “treating customers fairly”. However, the Government share the noble Lord’s concern about the continued bad practice in this sector. The Government and the FCA are currently jointly considering what further action is needed to protect consumers, and will provide an update in the coming weeks.

Turning to Amendment 105M on the issue of debt management companies, the Government are concerned about the potential for detriment to occur to vulnerable consumers using debt management plans. Our focus is on comprehensively reforming regulation of this sector, as part of our wider reform of consumer credit regulation. Consumers participating in debt management plans are far better protected under the new FCA regime. The FCA has introduced a range of binding rules designed to protect consumers; it has made it clear that fees should not undermine the customer’s ability to make significant payments to the creditors throughout the duration of the debt management plan.

The FCA is thoroughly assessing every debt management firm’s fitness to trade as part of the authorisation process—a process that is already under way. Firms that do not put their customers’ interests first and comply with the FCA’s threshold conditions will not be authorised. The FCA is also undertaking an in-depth thematic review of the debt management sector. The Government therefore firmly believe that the new FCA regime will deliver—and is already delivering—a cleaned-up debt management market that is able to meet consumers’ needs in supporting them to deal with their debts.

The noble Lord suggested that the FCA review lead generators for debt-management providers. The FCA is undertaking this in-depth review of the sector, including looking at how use of these lead generators may be affecting consumers, so that is all part of the mix. I would be very grateful if the noble Lord would consider withdrawing the amendment.

Lord Stevenson of Balmacara: I thank the Minister for her very considerate response. It is a very complicated area, one that is in much flux, but I do not think that that should just be taken as a given, because the pressures, the pain and the anxiety that all this causes to vulnerable consumers—and also to ordinary people who are not necessarily too vulnerable in the conventional sense—are very substantial. We must always think of them as well as of the broader points that have been made in response to the amendments.

My central point, which, with respect, I think the Minister did not mention, is our increasing concern about the difference between saying that consumers’ interests are at the heart of the operation—which I absolutely accept is like a piece of rock built right through the FCA; you cannot have a conversation without it saying how much it puts consumers at the centre of it—and the reality that the measures that it

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uses in its day-to-day work are about market efficiency and fairness. I am not saying that that is wrong: I am just saying that I am not entirely sure that this is a one-to-one fit. Establishing a market involving payday lenders that is efficient and fair, may not remove the detriment that the remaining payers will be caused. I do not think that there is an easy answer to that; it is just something that we all should bear in mind when we think about how we regulate these matters.

6.30 pm

There is a corollary to that. I do not want to accuse the FCA in any sense on this matter, but it is clearly a strain for it, used as it is, with the experience that it has, in applying to commercial operators, to be faced with a substantial not-for-profit operation which is clearly running under completely different principles. The fact that StepChange is a charity means that the board is not the same as the board of a commercial company from whom it could reasonably expect a considerable load on each member of the board in terms of risk assessment, guidance, and establishing principles throughout the operation. Those would be the normal dialogue in any investigation or meeting with a commercial operator. They do not apply to a charity where the board is there to be a critical friend of the management and the bodies that it would expect to test whether its exhortations, practices and regulatory requirements are being met do not exist. We will get over that, and we are in dialogue with them.

My third point in my generic worry about this is that we are talking about relatively long lead times. There is the curious phrase of “landing slots” about when companies expect to land within the regulatory safe zone established by the FCA. What we are supposed to be doing while we are flapping outside that zone, I do not know and do not wish to know. We are flapping around outside with interim authorisation, but so is every other player in this operation. No one yet has authorisation in the sector, so there are lots of people for whom the end result will be that they are unacceptable who will probably be exiting the market, and have yet to be fully assessed. Obviously, that takes time, but our landing zone is not until spring 2016, which is a long time for vulnerable people to have to worry about whether their debts are being authorised, their plans are being underwritten and their support is being provided by an authorised person. That is the context out there.

I hear what the Minister says. I am grateful to her for her interest and support for the work that StepChange is doing. She mentioned a meeting between the Treasury and the FCA. If there is anything that I or my colleagues at StepChange can do to contribute to that, we stand ready and willing to do so. Perhaps that message can be passed back.

Having heard what the Minister said, I am happy to withdraw the amendment, but I hope that the Government will keep an eye on this issue, because it bears considerable investment. With that, I beg leave to withdraw the amendment.

Amendment 105K withdrawn.

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Amendment 105L

Moved by Baroness Hayter of Kentish Town

105L: After Clause 86, insert the following new Clause—

“Practices of rent-to-own companies

(1) This section applies to credit agreements and consumer hire agreements taken out in respect of household goods specified in rules by the Financial Conduct Authority.

(2) The rules under subsection (1) shall—

(a) include a requirement on lenders to include in pre-contractual information adequate explanations and information allowing prospective customers to compare both the cash price of goods and the total cost of the credit agreement to a representative retail price for those goods;

(b) prohibit lenders from requiring customers to take out insurance sold or brokered by the lender as a condition of obtaining credit;

(c) set out specific steps lenders must take before taking action to enforce the agreement or recover possession of goods; and

(d) set out the steps lenders should take to check that the agreement is affordable and suitable for prospective consumers.”

Baroness Hayter of Kentish Town: My Lords, this House has done much important work in tackling high cost and exploitative credit, thanks largely to the most reverend Primate the Archbishop of Canterbury and my noble friends Lord Mitchell, Lord Stevenson and Lord Kennedy of Southwark.

Amendment 105L concerns a new, unregulated and somewhat exploitative form of loan that has sprung up in the high street—along with other high-cost credit, mostly in low-income or deprived areas. It is known as rent to own: one well known example being BrightHouse. It works by having consumers rent products, which can be from household essentials, such as washing machines and beds, to games consoles, with the rent being eventually used to pay for the product. However, because it is deemed to be rent, there are none of the safeguards that would cover a loan to buy the product—for example, hire purchase or a straight bank loan. There are no checks on the ability to repay. There are no rights over the property. There are no safeguards against the property being repossessed because, until the final payment is made, it is only being rented, not owned by the people in the house. So, although the consumer is theoretically renting the product—in their minds, they are of course in the process of buying it—any failure to meet a payment can lead to it being immediately repossessed. There is evidence that such stores show little forbearance over mispayment and are unwilling to accept a breathing space or to negotiate payments where personal circumstances change. That is despite the fact that the consumer may have already paid well over the true value of the goods—sometimes, several times over.

There also appears to be a degree of heavy-handedness when it comes to repossession, with customers rarely informed of their rights and, in some cases, intimidated. There is no protection for the consumer, who is legally neither the owner of the product nor a borrower of a

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loan, so none of the normal protections associated with hire purchase apply. Protections apart, let us look at the prices. They far exceed the normal purchase price, even including any interest from a bank, which, if one were buying it with a bank loan, would then be added on to the price. The products include a washing machine. If you bought a washing machine from BrightHouse, a not unrepresentative example would leave you paying £1,404 for the machine, which could be bought somewhere else for £535.70—by monthly instalments in both cases, so I am comparing like with like. That means you are paying almost three times the price. However, if you get the games console rather than the washing machine, you end up paying more than three times the initial price. Buying an Xbox console bundle—I admit that I do not know what that is but I am assured that people buy them—elsewhere would cost you about £400. At BrightHouse it is £1,500 over a 130-week period. The APRs are between 60% and 90%. These are not my calculations; they are from BrightHouse’s own catalogue, where buying an HP Platinum Pavilion touch screen laptop would cost you £1,560, paying an APR of 94.7%. So adding up these so-called rents amounts to far more than the full list price, even adding on the interest if you bought it with a bank loan.

Furthermore, the company—I mention this one because it is the only one that I have found time to go and visit—often stocks absolutely top-of-the-range products, despite its shops being in deprived areas and its business model being aimed at those who want to pay weekly. On top of that, BrightHouse adds in compulsory and expensive insurance, even though the goods still belong to the company as they are being rented, so insurance is probably not needed. Then, just to add insult to injury, the marketing of the goods uses every trick of behavioural economics to tempt in the buyer, highlighting the price per week rather than the total cost or the length of repayment. The laptop that I just mentioned costs £15 per week but the catalogue does not tell you how many weeks you will need to pay off the price of £1,560. As we discussed in Committee last week, this is “drip pricing”, where the first number you see—in this case, the weekly amount—gives little indication of the full price. We know from research that consumers tend to overvalue a benefit that they will receive now, which in this case is a small weekly payment and immediate possession, while underestimating the impact of deferred costs.

Amendment 105L would require such a company to include information about the price of the good; an indication of the price the customer might pay elsewhere; the cost of the credit agreement, which should be in money terms, not percentage terms; and clarity about possible repossession, including any allowance for a breathing space or renegotiation of payment. It would ban making insurance compulsory, as I am sure the insurance itself adds more in cost than it does in value, and you have to pay the interest on it because it is part of the weekly charge. The amendment would also require the lender to check on the consumer’s ability to pay the full price.

This is not an attack on any weekly payments system, which can help those on lower incomes with their household budgeting. However, the business model

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used by companies like BrightHouse is so stacked against the customer that it is little short of exploitation. I therefore hope that the Government will accept this measured approach, which does not ban this form of credit but introduces greater transparency alongside adequate safeguards. I beg to move.

Baroness Jolly: My Lords, I hope that I shall be able to shed some light on this. Again, we share the noble Baroness’s concern about the risk of consumer detriment in the hire purchase credit market. The rules for the consumer credit market, put in place by the FCA from 1 April this year, were made with the stated aims of, first, ensuring that firms lend only to borrowers who can afford it; secondly, increasing borrowers’ awareness of the costs and the risks of borrowing unaffordably; and, thirdly, ensuring that consumers have access to support if they have financial difficulties.

The noble Baroness suggests that some organisations show little forbearance and are heavy-handed. The FCA specifically requires firms to adhere to debt collection rules, including in treating customers in default or arrears difficulties with forbearance and due consideration; provide pre-contractual explanations and information in line with European requirements, including the total amount payable; assess creditworthiness and affordability, including the potential to impact adversely on the consumer’s financial situation and their ability to make repayments as they fall due; and, where firms sell insurance products, do so in line with the FCA’s requirements around assessing consumers’ eligibility to claim on a product, and the high-level principle of “treating customers fairly”.

The Government believe that the tough and decisive action being taken by the FCA, following its detailed rule-making process, will ensure that consumers are far better protected under the new regime. The Government also recognise the importance of affordable credit, which is why they are supporting the credit union movement, including through investing £38 million through the expansion project. Given the new regime, I wonder whether the noble Baroness would feel her way to withdrawing the amendment.

Baroness Hayter of Kentish Town: I think that the Minister has completely misunderstood. This is not about a loan—this is about credit, not debt. The proposal is completely outwith that regime because it is not a loan. It does not come under the FCA, it is rent. These people are renting the television—if they rent it for three years, they will then be given it and own it. It is not covered by the affordability test, by forbearance or by anything that she is talking about.

Baroness Jolly: I apologise for the misunderstanding. I think that we will probably need to have a conversation fairly urgently.

Baroness Hayter of Kentish Town: That will be helpful. It is called “rent to buy”. You rent the item and own it only at the end, when it is given to you. You are renting it, and there is absolutely no hire purchase

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agreement or anything like that. In the light of that, and assuming that it will be possible to discuss this to clarify the issue, I beg leave to withdraw this amendment.

Amendment 105L withdrawn.

Amendment 105M not moved.

Amendment 105N

Moved by Baroness Howe of Idlicote

105N: After Clause 86, insert the following new Clause—

“Direction by Gambling Commission to block financial transactions of person or organisation without remote gambling licence

In section 33 of the Gambling Act 2005 (provision of facilities for gambling), after subsection (5) insert—

“(6) The Commission may give a direction under this section if the Commission reasonably believe that—

(a) a person or organisation who does not hold a remote gambling licence is providing remote gambling services in the United Kingdom; and

(b) failure to give such a direction would deprive consumers of remote gambling services in the United Kingdom of the protection afforded by the licensing objectives in section 1 of this Act.

(7) A direction under this section may be given to—

(a) a particular person operating in the financial sector,

(b) any description of persons operating in that sector, or

(c) all persons operating in that sector.

(8) A direction under subsection (6) may require a relevant person not to enter into or continue to participate in—

(a) a specified transaction or business relationship with a designated person,

(b) a specified description of transactions or business relationships with a designated person, or

(c) any transaction or business relationship with a designated person.

(9) Any reference in this section to a person operating in the financial sector is to a credit or financial institution that—

(a) is a United Kingdom person, or

(b) is acting in the course of a business carried on by it in the United Kingdom.

(10) In this section—

“credit institution” and “financial institution” have the meanings given in paragraph 5 of Schedule 7 to the Counter-Terrorism Act 2008;

“designated person”, in relation to a direction, means any of the persons in relation to whom the direction is given;

“relevant person”, in relation to a direction, means any of the persons to whom the direction is given.””

Baroness Howe of Idlicote: My Lords, there cannot be a more basic aspect of consumer rights than protecting British consumers from unlicensed providers. This is particularly the case where gambling is concerned, because of the sad reality of problem gambling and the need to protect the vulnerable from providers who are not subject to the social responsibility conditions associated with securing a UK Gambling Commission licence.

The imperative to properly protect British consumers from unlicensed gambling providers is yet further compounded in the context of online gambling because of its association with higher problem gambling prevalence

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figures than gambling generally. The 2010 general problem gambling prevalence figure was 0.9%, but it was more than 9% for online on an annual basis and more than 17% on a monthly basis.

When the Government introduced the Gambling (Licensing and Advertising) Bill in another place a few years ago, the point was soon made that it lacked any credible means of enforcement. The Bill proposed a new arrangement whereby online gambling operators based anywhere in the world would, for the first time, be able to access the UK market and advertise here so long as they secured a Gambling Commission licence. The difficulty was that the Bill contained no credible provision for preventing unlicensed gambling sites accessing the UK market. There was, and is, consequently a very real concern that its principal effect will be to allow companies that currently cannot advertise in the UK to do so but without introducing any mechanism to prevent unlicensed providers from accessing the UK market.

6.45 pm

Without providing a new means of prohibiting unlicensed providers from accessing the UK market, there is concern that the primary impact of the new arrangement could be to increase the scope for advertising gambling in the UK, and advertising specifically for a form of gambling associated with a significantly higher problem prevalence figure than gambling generally.

In the other place and in your Lordships’ House, the Government were pressed repeatedly on the lack of any credible enforcement mechanism in the Bill. They argued that the Bill provided for enforcement because, first, unlicensed providers would not be able to advertise in the UK. That was not relevant. Just because a provider cannot advertise in the UK does not prevent it accessing the UK market. Secondly, they argued that players could be educated not to use unlicensed sites. That is true but does not remove the obligation on the Government to make sure that the laws they introduce have enforcement mechanisms. Thirdly, the Government could ultimately seek to prosecute unlicensed sites. The idea that the Government would have the time and resources to chase hundreds of small online gambling providers through multiple jurisdictions across the world simply was not credible, and unlicensed websites know this.

In response, amendments were tabled in another place to introduce IP and financial transaction blocking in order to block unlicensed sites or transactions with unlicensed sites. When presented with IP and financial blocking, however, the Government responded by rejecting these solutions on the basis that the evidence suggests that they are not always effective. This seemed very odd given that, while no one ever sought to suggest that they would be 100% effective, it was always clear that they were much more effective than the three mechanisms advanced by the Government. Indeed, the truth is that they constitute the most effective available enforcement mechanisms. Financial transaction blocking, for example, has been deployed to good effect in the US, Norway, France, Belgium and Estonia. Other jurisdictions have also implemented policies

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that reflect the blocking of the financial flow to illegal websites—for example, in Israel, Turkey, Singapore and Malaysia.

After I moved my financial transaction blocking amendment in Committee and tabled one on Report all those years ago, the Government invited me to a meeting just before Report. They explained that, while they would not accept my amendment, they were ready to announce that the Gambling Commission had reached agreement with the major financial transaction providers—notably MasterCard, PayPal and Visa Europe—to block transactions between people living in the UK and unlicensed gambling websites.

Naturally, I welcomed the news but expressed serious concerns because it seemed to me that, even if the big transaction providers were party to this agreement, problem gamblers desperate for the best odds would simply migrate to alternative financial transaction providers. That remains my concern and it is why I have tabled Amendment 105N. It would require as a matter of law that no financial transaction providers processed transactions between UK consumers and unlicensed gambling sites. Moreover, when I met the Minister and officials in those days, I was told that a better place for my amendment to the gambling Bill would be a future consumer protection Bill. Indeed, they suggested that they may insert an FTB provision in a future consumer protection Bill. The Bill before us today provides the perfect context for my amendment and I very much hope that the Minister will accept it, recognising the importance of protecting all British consumers, not just those lucky enough to use MasterCard, PayPal and Visa Europe.