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					Citizens Advice submission to the
House of Lords EU Sub-
Committee G (Social Policy &
Consumer Affairs) inquiry on the
European Commission’s
proposed Directive on consumer
April 2009

Myddelton House | 115-123 Pentonville Road | London | N1 9LZ | Tel: 020 7833 2181 | Fax: 020 7833 4371 |       3     8
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1. Citizens Advice warmly welcomes this opportunity to provide the Committee with our
   views on the EU Commission’s Directive on consumer rights. We believe that the UK
   needs more effective consumer protection more than ever to help consumers get through
   the current economic downturn and that the Directive will be vital to securing these

2. As the Committee will be aware, Citizens Advice is the national body for Citizens Advice Bureaux
   in England, Wales and Northern Ireland. The Citizens Advice service is the largest independent
   network of free advice centres in Europe, with 430 main bureaux in England, Wales and Northern
   Ireland. Bureaux provide advice from over 3,300 outlets, including bureaux in the high street,
   community centres, health settings, courts and prisons. All Citizens Advice Bureaux are register ed
   charities. The Citizens Advice service aims are to provide the advice people need for the
   problems they face, and to improve the policies and practices that affect people’s lives.

3. Citizens Advice Bureaux clients are often disadvantaged and many are on low incomes or
   benefits, or are disadvantaged in some way. For example, research by MORI for Citizens Advice
   England & Wales found that Citizens Advice Bureaux users tend to be in social grades DE and
   unemployed, or living in social housing. 1 In 2007/8 Citizens Advice in England and Wales helped
   1.9 million people to deal with more than 5.5 million issues, including 1.7m debt issues, including
   mortgage arrears and credit problems, 115,000 issues relating to financial products and services,
   130,000 consumer goods and services issues, 95,000 utilities and communications issues and
   38,000 travel, transport and holiday issues.

4. Based on the experience and evidence provided by Citizens Advice Bureaux, Citizens Advice
   believes that the following points are vital to making the proposed Directive work for the benefit of
   consumers in the UK:

 The Directives that will be harmonised need to be updated to keep up to date with developments in
  the market. However, existing protections must not be lost in a harmonised Directive.
 The Directive, as proposed, does not encompass all consumer rights and we believe there should
  be no gaps.
 The Directive needs to complement the Unfair Commercial Practices Directive by providing rights
  of redress and common definitions and information requirements.
 The Directive must ensure that enforcement action should provide for redress for consumers but
  also a right for individuals to seek redress, again a point that is not included in the UCPD.
 The UCPD also does not include provision for Alternative Dispute Resolution (ADR), which we
  believe should be made available for all consumer purchases. We have written to the Consumer
  Minister, Gareth Thomas, to argue for the UK Government to establish a Consumer Ombudsman,
  which could run ADR in the UK.

1   Financial Overcommitment, research study conducted for Citizens Advice by MORI, July 2003

Harmonization and the need to update existing consumer
5. Citizens Advice believes that simplifying and streamlining the existing Directives will be of benefit
   as it will create rules that consumers, businesses, enforcers and advisers can understand and
   that work together in a way that makes sense. We do, however, have concerns that the Directive
   as currently drafted would not provide a balance between the rights and responsibilities of
   consumers and of businesses. We believe that existing consumer protections must not be lost in
   a harmonised Directive.

6. In practice, there is a real danger of reducing necessary levels of consumer protection across
   many EU States, as detailed in the Law Commission Paper on sale of goods law. For full
   harmonization to be of benefit to consumers and to businesses that trade fairly, the proposed
   Directive would need to be changed to incorporate the highest level of redress currently available
   in EU Member States. This would bring the standard up across the EU. As drafted, the standard
   for sale of goods is reduced to what appears to be the lowest potential standard.

7. However, Citizens Advice does agree that these four Directives need to be updated to take
   developments in consumers’ buying and businesses’ selling methods into account. Whilst some
   of the Directives have built-in requirements to be revisited, such as the Directive on unfair terms
   (93/13/EC) that was revised in 1999 when its scope was widened, the experience of Citizens
   Advice Bureaux is that the Directives are failing in certain areas:

 We believe that the new Directive should extend cancellation rights to all off-premises sales,
  whether solicited by the consumer or not. This is not part of the current Directive on doorstep
  selling (85/577/EC). The potential for pressure selling in the home is the same whether solicited or
  not and situations like marketing sales in shopping centres catch consumers off-guard. Further,
  the opening up of the utilities markets has meant that doorstep selling has experienced a revival
  from its use in 1985. Energy companies have used doorstep selling to persuade people to switch
  where they would not have otherwise done so and it is acknowledged as the most effective sales
  method available to them. Our evidence is that the information pertinent to a switching decision,
  such as the price tariff, is not given. The fuel regulator, OFGEM, is tackling this problem by
  extending their marketing licence condition, which includes doorstep selling, for a further two years
  and through consulting on strengthening it.

       A CAB in North Yorkshire reported that an elderly man was cold-called by a company about
       buying a security system. They sent someone round the same day who took £3,000 in cash
       from the client. This was all his savings. The following day, the system was fitted. The system
       comprised a burglar alarm and a 'lifeline' type emergency call button. The contract that they
       client signed stated that CCTV and a smoke alarm would also be fitted, but this was not done.
       Since then the client received several visits from the man who took the money in the first
       place, now trying to get cash off him for fitting windows and a boiler which he did not want to
       have done and could not afford. The client went to the police about the salesman harassing
       him, only to be told it was not a criminal offence. When the client came to the CAB, it was
       clear that he was not aware that he had cancellation rights. The CAB contacted Trading
       Standards about the company, and contacted the company directly to cancel the agreement
       on behalf of the client.

 The Directive on distance selling (97/7/EC) needs to be revised to take account of both the growth
  in buying through the internet and mobile phones (please see the case below) and how legal rights

  work where doorstep or shop-based interaction forms part of the buying process. For example,
  many well-known High Street businesses and supermarkets now trade online as well as through
  retail premises, which often means consumers have the option to reserve and pay for a product or
  service online and then collect it at the local retail premise of that business. Further, whilst
  distance selling rights for goods start when the goods are delivered, when rights for services begin
  is not as clear as the language used in the current Directive does not state precisely when the
  cancellation period for a service begins. In addition, it is uncertain whether it is possible for a
  consumer to cancel a service, such as installation of solar heating, once it has been started.

      A CAB in Lincolnshire reported that a man received a text message that appeared to come
      from his current mobile phone provider. As phone calls to his mobile phone provider were
      free, he rang it. It was an adult chat line and he spoke directly to a person. He did not realise
      this was an adult chat line, as these are usually 09 numbers and premium rate. After nearly
      three minutes, he decided he did not want to be part of this conversation and hung up. The
      client told the CAB that he would not have rung the phone number had he known. A few days
      later, he received a call for someone who asked if, as he had used their adult chat line, he
      could provide his name and address. The client provided these details, which resulted in a
      phone bill for over £40 from the adult chat line provider.

 The Directive on sales and guarantees (99/44/EC) has been confusing because it is not clear
  which form of redress (replacement, repair, reduced price or rescission) is applicable and whether
  consumers bear the burden of proof. As such, Citizens Advice is concerned that the proposals in
  the draft Directive seriously reduce consumer protection as they allow a business to decide which
  type of redress to offer, even though that business has breached its contract with the consumer.
  We believe that consumers who suffer breach of contract should be able to choose which of the
  four forms of redress they wish to receive.

      A CAB client from Tyne and Wear was told the TV they had bought some four weeks earlier
      from a high street chain was not their responsibility when it broke down. They told the client
      that as it was outside their 28 day returns policy, it was now the manufacturer’s responsibility.

      A Lincolnshire CAB client found the high street shop where they had bought a £300 TV
      refused to replace it. A fault became evident and the client returned the set to the shop 27
      days after the purchase. The shop has insisted on sending it away, which would take 16
      working days. The bureau commented on their failure to provide the client’s statutory rights.

      An unemployed CAB client from Northumberland accepted a repair to the mobile phone she
      had bought two months earlier. Within weeks of receiving it back it was faulty again so she
      asked for a refund but the shop was adamant that they only could offer another repair or a
      refurbished phone. The bureau commented on the lack of shop staff training as to consumers’
      rights. The client’s partner was severely disabled and needed the phone for contact with his

  In the UK, the Directive’s provisions were overlaid onto existing rights. However, in the case of
  this Directive we also have concerns as to its scope. For example, services, hire-purchase, and
  hire are not included but are commonly part of a single purchase.

 Directive 93/13/EC on unfair terms is very valuable as regular revisiting of the Directive has proved
  effective. However, the proposed Directive does not include provision for Alternative Dispute
  Resolution (ADR), which we believe should be made available for all consumer purchases. We
  have written to the UK Government’s Consumer Minister, Gareth Thomas MP, to argue for the UK
  Government to establish a Consumer Ombudsman, which could provide ADR in the UK.

Ensuring the new Directive covers all consumer rights
8. Citizens Advice believes that the proposed Directive is a significant opportunity to encompass all
   consumer rights, ensuring that there are no gaps and making it easier for consumers to access
   and understand their rights. This would mean that the Directive would be comprehensive and
   would be a single place for consumers and business to find out about their rights and
   responsibilities across all member states. For this to work, we believe that the new Directive
   would need to include and update all existing vertical consumer protection Directives and would
   need to complement the Directive on unfair commercial practices (UCPD), which is not covered in
   the proposed Directive.

9. For example, the Directive should incorporate the credit, financial services, package holidays and
   timeshare Directives. This would appear a rational step since the unfair terms provisions in the
   proposed Directive are generally within the scope of these areas of EU consumer protection. As
   currently drafted, the propose Directive excludes all provisions in these sectors.

10. In addition, this level of comprehensiveness should address the fact that Directives on doorstep
    selling and on distance selling apply to all products, including services, whereas the Directive on
    sales and guarantees is limited to sale of goods. Since the proposed Directive incorporates these
    three pieces of legislation, Citizens Advice would argue that it must extend these provisions to all
    products and services to ensure that consumers are adequately protected and that the new
    legislation is consistent and simple. We also believe that the proposed Directive must ensure that
    current gaps in EU consumer rights provision are addressed, for example through the protection
    of consumer deposits, which can often be lost when a business fails, leaving the consumer with
    no right of redress to claim back even a portion of their deposit.

      A CAB in Leicestershire reported that an elderly woman agreed to switch fuel suppliers after
      seeing a stand in the local shopping precinct. She was attracted by the green credentials
      being claimed by the fuel company and agreed to switch away from her current supplier. The
      client changed her mind inside the 12 day cooling off period but the company insisted she had
      a valid contract with them. The client’s deal with her previous supplier was a special tariff for
      vulnerable people and she only paid £13.41 per week for all of her fuel. The CAB undertook a
      number of checks which showed that she would end up paying about £45 or £50 per week
      unless she could return to the special tariff provided by her previous supplier. The CAB had
      to contact the company twice before they agreed the sale was an erroneous transfer. As the
      client’s income was limited, £45 per week was a lot of money which she could not afford.

      A CAB in North London reported that a client had found a flat to rent through a website. She
      viewed the flat with the landlord and paid a deposit of £100 cash and £235 by cheque. She
      returned a week later to move in. However, the landlord failed to turn up. When the client
      phoned her, the landlord insisted that she handed over one month’s rent in advance in cash to
      the landlord’s friend in the flat. There was no lease, the client did not see the room in the flat,
      and the landlord’s friend spoke no English. The client decided to ask for deposit back. After
      trying to telephone and write, there had been no response from the landlord and the cheque
      had been cashed.

Making certain that the new Directive is consistent with the Unfair
Commercial Practices Directive and provides rights of redress

11. As we have outlined in our previous points, our argument is based on ensuring that the proposed
    Directive is simple and consistent but also ensures that protections and rights of redress available
    to consumers are increased, not lost. So, to provide this simplicity and consistency, the Directive
    must use the same language, common definitions and similar information requirements as the
    UCPD, which would make the new Directive more consistent with the UCPD, which has proved
    effective. For example, the proposed Directive should include terms like “products”, as defined
    under UCPD, so that services, mixed goods and contracts for services, and non-goods and
    products such as digital downloads are included.

12. In addition, the proposed Directive should also complement the UCPD by providing the rights of
    redress that the UCPD lacks. It should include redress for all products and services that
    consumers normally might buy, rather than only what the four existing Directives cover on
    doorstep selling, distance selling, unfair terms, and sale and guarantees.

       A Staffordshire CAB client sought advice when an employment agency mis-sold his son a
       training course. The terms allow cancellation but include a £500 deduction if this right is taken
       up. The son did not have the details needed for him to make an informed transactional
       decision and the case appears to breach the Consumer Protection from Unfair Trading
       Regulations. He thought he had been offered a job.

       A Cambridgeshire CAB reported that a disabled couple in their 70s sought advice when they
       experienced pressure selling by a doorstep salesman. He had phoned the clients about a
       massage bed and offered to demonstrate it in their home, with no obligation to buy. However
       when the salesman arrived he stayed until very late. After some discussion he said he could
       see they needed the bed and would phone his superior to see if he could get a discount for
       them. He then offered to reduce the price from £5238.35 to £2795. Whilst the practices of
       staying when asked to leave and appearing to reduce the price and falsely claiming limited
       access to the reduced price to obtain an immediate sale are in the list of banned practices, the
       CPRs do not provide for redress for those who experience these unfair practices.

Ensuring enforcement action leads to redress for consumers and
that individuals can seek redress themselves
13. Contract terms that are unfair cannot be enforced against consumers . However, there is no
    provision for active redress for those consumers affected by the unfair term. Consequently, whilst
    it is important to ensure that the proposed Directive includes rights of redress, Citizens Advice
    believes that these rights should be linked to enforcement action. Contractual remedy provisions
    must be clearly linked to enforcement provisions, so that enforcement action acts as a trigger for
    redress. In order to achieve this, we suggest that Article 41 on enforcement, which is included in
    Chapter 6 of the proposed Directive, could be widened to provide for redress. In addition, we
    believe that enforcers should require traders to provide redress for customers affected by the
    breach as part of any enforcement action. Incorporating these provisions into the propos ed
    Directive would mean that when enforcement action is taken for a breach, redress for those
    consumers affected by the breach would be available. It would also prevent consumers from
    experiencing similar breaches in future.

14. Finally, the Directive should also provide for consumers to seek redress for themselves if they
    have experienced unfair commercial practices. This is not currently available in the UCPD and
    could be achieved as part of the proposed Directive through including a provision for a private

   right of redress. In addition to enforcement action to protect future customers, those already
   affected need to obtain a refund, for the sanction to be proportionate.

      A CAB client from Merseyside purchased a pram on the internet. It never arrived and the
      bureau discovered there have been some 500 complaints in six months about this trader.

      A CAB in Derbyshire reported one of their clients had paid £2,000 to a photography business,
      following pressure selling. When she decides to use her cancellation rights, the business
      sought to rely on an unfair correct term that prevented cancellation. Trading Standards
      negotiated a settlement for this client but the bureau was concerned that the firm needed to be
      stopped, to protect future consumers.

Securing Alternative Dispute Resolution provision for all consumer
purchases and establishing a consumer ombudsman for the UK
15. Rebuilding consumer confidence will be vital to tackling the global economic problems facing both
    EU institutions and the UK Government. Consumers and businesses will need to understand and
    be confident in the cross-border rules that the proposed Directive will cover. Part of this must be
    the provision within the proposed Directive for easy methods for dispute resolution. This could be
    achieved by including Alternative Dispute Resolution (ADR) in the Directive, also under Article 41.

16. At present, there are some purchases where ADR is sometimes available via self-regulation and
    others where it is a statutory requirement, such as for telecoms, fuel and estate agency
    businesses in the UK. For UK consumers, this means that the ADR provision is uncertain. For
    the UK Government, these inconsistencies do not fit with the policy of making court action a last
    resort and with meeting the European Commission’s objective to make cross-border buying

17. Citizens Advice has written to the Consumer Minister, Gareth Thomas, to argue for the UK
    Government to establish a Consumer Ombudsman. This Consumer Ombudsman could run ADR
    in the UK, providing straightforward access to dispute resolution for UK consumers. Citizens
    Advice has long advocated for the provision of an overarching consumer ombudsman service,
    which could both combine existing ombudsman services and fill the gaps in provision we have
    outlined above.

      A CAB client in Hampshire sought advice about a conservatory that leaked. It cost
      £13,000.The client spent two years trying to resolve this problem. The trader would not
      remedy the fault, they were not members of the trade association they claimed membership of
      and the warranty the client paid for was not valid. The local Trading Standards were unable to
      help. The bureau called for an ADR system where consumer complaints could be adjudicated
      on once normal dispute resolutions failed, without the need for expensive court action.

      An Essex CAB client sought advice when a firm who supplied and fitted a blind broke a piece
      of furniture in the process. The fitter stood on it. The business failed to pay for the breakage
      and the client felt that a taking the case to court would be too expensive. The bureau
      commented that companies should be required to deal with customer complaints in a more
      effective way that does not have to involve the courts.