On 11 February, I was called to the House of Commons to give evidence about the new Bill that brings together all existing consumer rights legislation.
On the whole, it’s a good thing. Rights should be more consistent, there will be new digital rights covering downloads, and a new rule that if you take faulty goods back within 30 days you get a full refund. Yet as always with complex legislation, it’s not perfect.
For the record – below is a cut and paste of the uncorrected transcript from my evidence session. Rather scarily, I was the only person other than the minister scheduled to do it alone, so unlike when normally I post these, I haven’t had to highlight my bits. You can also read others’ evidence, watch the session or read the proposed Bill.
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Martin Lewis gave evidence.
The Chair: Welcome, Mr Lewis. Could you explain who you are, who you represent and why you are here?
Martin Lewis: My name is Martin Lewis. I am from MoneySavingExpert.com, which is the UK’s biggest money and consumer website. I do not represent anybody; that is your job. I am here to give an opinion on how consumers think about consumer rights and where the new Bill will take us.
Stephen McPartland: I am interested to know whether you think this is a good Bill and whether you think it will help consumers more than the different sets of legislation that we currently have in place.
Martin Lewis: First, it is wonderful that we are discussing consumer rights. That does not happen very often, and there are many problems out there. The Bill goes some way to addressing them. Yes, it is a good Bill; yes, it is good that we are doing it.
However, we need clarity and we need to help people understand what is going on. I have to be honest, I have not read every line of the Bill’s 120 pages, nor will every consumer. Although there is some way further to go to make it a perfect Bill, there are many things in it that are a step change for consumers. But overall, yes, good, wonderful.
The biggest problem that I have, which I may as well start with, is that it does nothing to address what I call the toaster problem. The toaster problem is this: I am a man who knows my consumer rights; I have had many arguments with shop staff when they have given me incorrect information — we also need to address the fact that many people who work on the other side do not understand their rights—and I buy a toaster that costs me £35.
I get it home and the light is faulty; it flickers on and off. It is definitely faulty; we all know it is faulty. I take it back to the store and say, "It is faulty." They say, "You have to take it to the manufacturer." I say, "No I don’t. My right and responsibility is with you. I would like you to fix it." "We don’t think it is faulty. It is still working; you can still put toast in it." "Well, of course it’s faulty. The light is flickering. It goes on and off." "Well, we don’t think it is."
I have a £35 toaster, and I have to take them to court. My court fees are higher than that. Yes, I will get it back when I win, and I will win in this case because it is clearly faulty under the current law and the new law, but I am not going to do that because going to court is too scary for most people out there. It is a very big thing, and there are risks.
If you go to the small claims court—it is important that you address this—you are not guaranteed to have a small claim, because complex cases can be put on to the normal court schedule.
The reason I am going into that is because when I explain it to people it is a brown trouser moment—if you will forgive me—for most members of the public. Although it is very unlikely to happen, as someone trying to help them I have to say, "It is possible. You are not guaranteed that your no-cost small claim will be no-cost, because it could be escalated."
Instantly, in a case such as the example of my toaster, that is very big thing putting me off. I have never been to court before, and it is already difficult for me to have to write the court particulars, and now I do not know what is going to go on. In a way, the problem is that the court system is not fit for purpose, certainly on small consumer rights claims.
The public are not willing to use it. I know that we are looking at ADR coming in in a Bill in 2015, but I think that unless you join the two you are going to have a wonderful Bill that gives people many new rights that they are never going to be able to use.
Sheila Gilmore (Edinburgh East) (Lab): One issue that is still a big question for people is whether services are dealt with as well as goods. The legislation does not really change the definition of what is a satisfactory service. Do you think it should, and if so, how?
Martin Lewis: In some ways, I find the idea that we should differentiate between goods and services rather difficult. Of course there is the different nature of the product and the way that you operate it, but I would think that what you want to do as much as possible is homogenise the rules.
Even though they have relatively similar phrasing, we still have different sets of rules—my colleague Wendy, behind me, is the one who has had to read 129 pages—for goods, services and digital content. If I were doing this for consumers, I would want one set of rules with some addendums for each different type at the back, because I have to be able to teach people what their rights are.
At the moment, I use what I call the SAD FART rules for consumer rights—it stands for "Satisfactory quality, As Described, Fit for purpose And last a Reasonable length of Time". That is a good way to remember it—go and be a SAD FART and make sure that your consumer rights are enacted—and you know what? People remember it.
My problem is that under the new Bill you have gone closer to bringing service rights nearer to goods rights —I am still not quite sure on the definitions—and then you have digital content rights. But in a way, what the consumer needs is to be told, "Here are your rights when you deal with a company. You must be treated reasonably and fairly; if goods are involved they must be of satisfactory quality, and the services that you get must be of satisfactory quality too."
I will give you an example that I tried to come up with before—I have written it down. Someone buys a DVD-ROM to install software on their PC—that is a good. It comes with a year’s licence agreement to provide technical support—that is a service. It includes downloadable updates to the software in that time frame—that is digital.
I am confused about what my rights are under the new Bill, and where it applies, because each one has a different category of rights. Is it that I have bought a DVD, so it comes under the goods rights? But if the software update that I was guaranteed does not happen, and then it breaks and causes a virus on my computer, where does it fit?
Again, I want to put this in a positive light. I am not sitting here saying, "What on earth are you doing?" I am sitting here saying that it is still overly complex for me, and having gone through the explanatory notes I am not 100% sure that I understand it. This might sound slightly arrogant, but if I do not understand it, I do not think that many members of the public are going to be fully empowered with their rights.
The most important thing I would like to say to you is that you need to be able to give people something very simple, which you could teach children in schools when financial education starts next September, that says, "These are your rights when dealing with a company." At the moment I am not quite sure you are there. You are nearer, but I am not quite sure you are there. I am not sure that that fully answers your question.
Stella Creasy: Martin, all the arguments you are making are for intermediaries who can help you with what your rights are—someone who could resolve that question about whether something is a good or a service, for example, on digital issues. That leads to questions about ombudsmen, and I know you feel very strongly about ombudsmen.
Will you tell us a little about your concerns are about the Bill and the role of ombudsmen, and the fact that the Bill does not really cover the issue of alternative dispute resolution? What problems might remain when you are trying to enact those rights?
Martin Lewis: First of all, it is not just intermediaries; it is simplicity, as well—having a really clear understanding, when you are drafting the Bill, of how you explain it to members of the public. The Bill is about consumer rights, not business rights, and these are people who do not have lawyers and are not necessarily educated on terms and conditions.
You have to make the Bill something that you can, if you will forgive me, SAD FART. There needs to be something that you can take away and carry with you. We have a little wallet gift that we give people—I carry one, and you can have one to take home—that says, "Here are your consumer rights."
We print it so that you can put it in your wallet and carry it whenever you are dealing with a shop. It is very powerful, and people like it. We have to be able to do that for all of these things: goods, services and digital. It should be able, in the main, to fit on that card, for it to be powerful for the consumer. It has to be under-drafted—I am not saying we want a one-page Bill, but the base rights must be consistent.
In terms of intermediaries, the work that Citizens Advice is doing now on Trading Standards is very useful. It was a shame for me to see it moved away from Consumer Direct, but that has happened. The problem I have, again, is that I can go to Citizens Advice and it can tell me what my rights are, but still, how do I get the company to agree to that? At the moment, you are right, the only remedy, certainly in retail, is primarily going to the courts.
I am a big fan of ombudsman systems. I think they have worked particularly well in finance. It is a lot easier to get somebody to go to the free financial ombudsman, the independent arbiter of financial justice. If they rule against you, there is no cost and the company cannot do anything negative to you. That is compared with having to fill in your particulars of claim and put a cheque in. The difference, psychologically, between the ombudsman and the court process is huge.
We do have to think about alternative dispute resolution. However, there is one problem we have had with the financial ombudsman that policymakers need to learn from. I will take payment protection insurance as a classic example. I started talking about PPI problems in, I think, 2002 or 2003. I started my "reclaim" campaign in 2006-07. It was 2010 before the regulator intervened.
Already by 2008 we were having something like a 90% uphold rate at the ombudsman. In other words, banks were deliberately rejecting consumers’ claims in the knowledge that the vast majority of consumers would not go to the ombudsman, but knowing full well that, if they did go to the ombudsman, 90% of cases would be upheld against them.
But it did not matter, because the maths was simple: say no now and it is far cheaper if 10% of people go to the ombudsman, even though they will all win.
What must be done with alternative dispute is to make it joined-up both on the individual case—Joe Bloggs and his broken kettle, which is a one-off—but also on the systemic level. Ombudsmen have to be able to look at the systemic problems that are going on with consumer rights, and then be able to empower it.
I spoke to the ombudsman at the time, and I know it was a frustration for them, too. We had a very obvious systemic failing that was not being picked up by the regulator. So I believe in ombudsmen, but I think we have to be able to pick it up there.
If you are not going to have an ombudsman for consumer rights, we have to ensure that there is a system for when companies deliberately reject claims from members of the public because it is cheaper to do that, even though they know the public have a fair claim. There needs to be some penalty in the courts, so that for the few people who do push it towards the courts, there is a penalty added on top for the company.
I am not saying that if a company loses a consumer rights claim it is automatically fined on top. I am saying that in those cases where it is clear-cut that under consumer rights law there was no discussion of fact—it was faulty, and you deliberately sent the person away and did not deal with it because you expected they would not enact their rights—there needs to be an additional penalty. That should discourage companies from mistreating consumers at the first point of complaint.
I am sorry for taking so long to answer your question. However, this also stems from the education of company staff in consumer rights and good information at point of sale and transaction. That is absolutely dire at the moment. I would put a form of compulsion in the Bill about consumer rights.
It could be drafted as standard wording—I will write it for you, if you like, and would be delighted to do so—that could go everywhere. We would get that out so that consumers know what their rights are.
This the biggest complaint about consumer rights in shops that I have at the moment: "I bought a jumper. It was the wrong size when I got it home. They won’t allow me to change it." My answer: "They are quite correct. It was not faulty. Unless you bought it online, you have no right to change it." The fact that consumers get it wrong as well means that we have a real problem, because they are not empowered.
When I went into a shop to buy a jacket and my wife cleverly spotted a faulty button on it, we decided to get a discount. I went and haggled, as I do, as it was a very nice jacket. I haggled for a discount and the lady said, "We will give you a discount, but you can’t then bring it back for any faults."
I said, "I’m afraid my statutory rights say I have accepted the fault with the button. I am not accepting any other faults with the jacket. If there are any other faults with the jacket, I will be bringing it back." She said, "Our shop policy doesn’t allow that." I said, "No, but the statutory rights do, and they overcome your shop policy." There are not that many consumers like me out there.
What you are doing is good. Make it clear. Make it simple. Give an easy and free way for people to go and get help, and make sure that if companies are playing silly devils when people go in, they cannot get away with it. That last point is my worry. You can give people all the rights in the world, but if they are not empowered to use them because the process is too complicated, this is all slightly flaccid.
Laura Sandys: Do you feel that the legislation offers the opportunity to put a spotlight on companies when they are found by Trading Standards to be exploiting their market or not delivering products in the right way, and so give a lot of publicity to those companies?
You talk about redress. Trading Standards has a range of different tools, and if we could have started to shine a light on these companies, with you as a very important stakeholder within this, payment protection insurance would have unravelled much quicker.
Martin Lewis: I am not sure it would. I was doing national television programmes about PPI in 2007. Our problem was that everyone in the industry knew about PPI but, if you will forgive me, no politician was brave enough to take up the issue. We knew that there were billions of pounds out there. I am not sure that publicity is enough. We can handle publicity. The problem is rights.
Collective redress, which is in the Bill, is very important to enable under-resourced people to gang together, whether with a lawyer or with a consumer group, or whether with Trading Standards or with Government help.
If you contrast CPP with PPI for a second, PPI has been going on for years and years. While it was systemically mis-sold, it was not mis-sold in totality in the way that CPP was, which is the difference. But with CPP, in the next few weeks people will be getting a letter that they just have to fill in, and then in the main they will get the money back. That is because the company did something wrong. It sold a product that was primarily worthless.
We have to look at easier and quicker ways to get redress for people both in collective and individual action. Publicity is always helpful, but there are rights and expectations when you deal with companies. You have to be in charge of the rights. You have to make sure that the rights are strong enough and can be enacted.
People like me can help to deal with expectations by shining a spotlight when a company is not breaking something by law, but is breaking the pact that a company and consumers have together. One of the advantages of the ombudsman system that Stella mentioned a moment ago is this, if I can tell a story. I was talking about PPI, I am now going to talk about PIP breast implants. How that worked and the difference between an ombudsman and the court system is quite significant.
When the breast implant tissue went wrong with PIP, many people went to the medical centres that had implanted them. These medical centres were small companies that knew that if they had to give serious payouts—I was going to say they would go bust, but that is probably not the most appropriate expression—they would go bankrupt, and so they fought tooth and nail.
People were not getting their money back. But I wrote something at the time and suggested that anybody who had paid for these on their credit card—section 75 means they have a joint right with the credit card company, and they can go to whichever they want—should go to the credit card company. First, the credit card company has deeper pockets and secondly, if they reject them, instead of going to court they can go to the financial ombudsman.
One of the differences between the financial ombudsman and the courts is that the financial ombudsman can look at three things. It can look at the law, same as the courts. It can look at standard industry practice, which means that if everybody else is paying out, you have to too. It can look at fairness. It can look at the basic call for equity—is this fair, and has the customer been dealt with fairly?
You do not get that in the courts in the same way. So an ombudsman system gives the consumer far more rights to fairness than a court system. If it is basically, "Well, I haven’t broken the law," but we all know that it is out of order, the ombudsman can say, "It is out of order. Give them their money back."
It is very interesting that I would far rather go to the financial ombudsman. I would tell a consumer: "If you have a problem with your mortgage, rather than relying on consumer rights laws, go to the financial ombudsman, because you have a right to fairness." Fairness is not a bad principle to have within consumer rights, too. I am sure it is very difficult to draft, but it would be slightly better to have a redress system which includes the ability to look at fairness on a case by case basis, as an ombudsman can.
On the point about publicity, of course there is a small opportunity here. If a company is breaking the law that makes it very easy for a journalist, because then they are not libelling them—"We’re know you’ve broken the law, and we’re not libelling you, because the court said that you had broken the law, so we can call you whatever names we want."
In my forum, we get more legal notices than could be imagined when people say that a company has dealt with them badly. We have to try to get a balance, and this is quite difficult to deal with because we do not know the exact case. I think it will help, but I am far more concerned about people having rights and being empowered to put them into practice than I am about driving publicity on bad practice.
Mark Durkan: On payment protection insurance, there is a sense that, when people buy consumer goods, there is the equivalent of product protection insurance—extended warranties and all those sorts of things that are put in front of people, particularly at the point of sale. People think that they are buying more rights.
If they had the experience that you described the last time they bought a toaster, they think that buying a warranty the next time they buy a toaster leaves them better protected. Of course, that raises the issue that this is a service: someone is buying a service related to the purchase of a good.
Are there areas there that we should look at? Increasingly, people seem to report being subjected to something of a racket.
Martin Lewis: Extended warranties are a known racket that has been going on for a long time. If a purchaser looks at the likelihood of product breakdown and the cost of repair and does a simple assessment to compare that to the cost of insurance, it is very rarely worth getting. If someone is going to get one, it is generally better to buy a standalone policy or a multi-appliance policy, which is a bit more like general insurance.
I absolutely agree that one problem is the two big confusions people have at the moment about consumer rights, which go back to buying products and goods in store. One is the idea that they should be covered by the warranty. Well actually, no, your great relationship is with the store. A product not lasting a "reasonable length of time" is a terribly difficult phrase to explain to people.
In case this is helpful, I usually say to people, "If you bought a 10p plastic whistle and it broke after three months, is that reasonable? If you bought a £2,000 plasma TV and it broke after three months, is that reasonable?". You might say that the first one is and you would definitely say that the second one is not, but this is quite nebulous.
One confusion is the interaction between when something is a warranty and when it is a statutory right, and that depends on the good. The other one is the terrible myth about the European consumer regulations. Everybody says, "Ah, you have an automatic two-year right to take back goods, because of Europe." Actually, that is not right. The statute in Europe is a minimum of two years, and we have six years here, so we are far better off here, but there is still a big urban myth about it.
On extended warranties—sorry, I tend to drift off topic—there is certainly a real knowledge clash. If we could make it simpler and improve people’s understanding of what consumer rights they have when they buy goods, that would deter people from buying unnecessary warranties. They would then know that they were protected for the first year or year and a half—possibly longer depending on the product—and if it breaks down it is not their fault.
There are so many of these problems out there, from extended warranties to the other issue that is getting bigger and bigger at the moment—unofficial websites. I know that is somewhat covered in the Bill, and I commend you for looking at it. People go to a passport website that they think is the official Government site and pay £70, or they go to a European health insurance card or driving licence website, or to tax self-assessment websites that are not official and only provide processing.
People should at least have a right to get their money back if that happens to them. We have been lobbying and campaigning and trying to warn about that. I must get 20 or 30 tweets a week from people about these various sites. I am not asking for them, but people just tell me that they have been caught by these sites.
We need consumer rights and the simple clarity of getting what you pay for—"You have to tell me, and if you didn’t tell me clearly then I deserve my money back." I would think that would be another issue for collective redress. You should go to these companies and tell them they have to give everybody back their money who did not get an additional, added service from them.
The problem is that it does not happen. This is what I keep coming back to, if you will forgive me. My big point—I am not quite sure that I know how to address this either, so I am not berating anyone—is how you give people the rights that they can then use. I keep going back to the same thing.
Rehman Chishti: On the question of redress and the small claims court, which you started with, we know that in April last year mediation was introduced in small claims courts, meaning that before someone’s claim can go any further they have to go through a mediation process, which helps them to resolve matters before they go into a court process.
Picking up on your point, yes, even if a case is listed as a small claim, if a judge deems it to be too complex, it has to go to a higher level. We know that the small claims court, out of all the courts we have in our country, is supposed to be the most informal process, with no rules or evidence as such.
For clarity, mediation helps with that. I agree that we need to look at the issue whereby, if it starts there it should stay there, rather than go elsewhere. What else would you want in a small claims court to make it more user-friendly?
Martin Lewis: We need to improve the language a little bit, such as "particulars of claim". Let us contrast it with the financial ombudsman. The financial ombudsman is not without its faults. It takes far too long to deal with things, but it is something that people have found they can do by themselves.
What the financial ombudsman says is, "What is the problem and what happened to you?" When people ask, "What can I write?", I always say, "It’s not high-falutin’ language; tell me what the problem is", and they say, "Well, I signed up for this PPI and the company told me I had to have it. I’ve now found out I don’t have to have it. What should I write?" I say, "Well, that sounds pretty good. I would put that down on your piece of paper, if I were you, because that is a pretty clear example to me that you were mis-sold it".
The court needs to be a little bit closer to that in the small claims provision. I am very glad that you picked up on my point about the very small number of cases where there is the psychological impact of me not being able to say to someone, "You won’t have to pay costs—you will not go". It is a huge deterrence factor. I just think that there needs to be a little bit more clarity about how it works if, for example, you are taking back a £50 toaster. It is difficult.
As well as language, there is ease of access. It is great online, but it is far more difficult for people who do not put forward a claim online and get help. The problem is dealing with anything legal. I will be plain with you: I have the same issues myself.
When we are doing stuff on the website we tend to be petrified of anything that tells people to go to the small claims court, because we are worried that it will come back on us, and if it goes wrong, people will say, "You mis-advised me legally". So our lawyers want to put big lines at the top of any article which has an ultimate resolution of going to court, saying, "This cannot be construed in any way—".
I do not want to do small print, because I hate it. But anything that becomes quasi-advisory in this nature becomes very difficult. So there is a bit of a vicious circle as well.
Rehman Chishti: On that very point, do you have research saying how many cases listed at the small claims court then get transferred out, which then increases the risk? Is it a large or a small percentage?
The Chair: Mr Lewis, just before you answer, we have only two minutes left and Mary Glindon has been waiting to ask a question.
Mrs Glindon: Do you think there is a case for giving ombudsmen the regulatory powers not just to deal with problems but to report to Government any emerging bad practice in the industry, so it can be stopped?
Martin Lewis: Yes—until the very end bit, I agreed. That is, I am not necessarily sure it is to Government, but if we say, "Should an ombudsman have a right and responsibility to report to an appropriate regulator or Government"—to somebody who has the power to enact something across the system—very definitely that is needed.
One other point about ombudsmen is very important. I hope I can tell you this because I am here to give evidence, but you need to make a law that says that an ombudsman has to be a proper ombudsman. There is no protection of the term "ombudsman". I could set up an ombudsman tomorrow if I chose to do so.
For me, an ombudsman should be something that is appointed either by statute or delegated legislation by the Government. The furniture ombudsman is not, in my eyes, a real ombudsman. It does not have official governmental power in the same way as the financial ombudsman. If we are going to set up an ombudsman system that has real veracity, then we should not allow the term to be debased by other companies using it when it is not appropriate.
So I think Government need to get a handle on the question of what is an ombudsman, and anyone calling himself an ombudsman who is not one needs to have the term taken away from them. The furniture industry "dispute resolution process", fine; but "ombudsman"? That should be something where I know I have statute-driven independence from the people I am complaining about.
The Chair: Did you want to answer Mr Chishti?
Martin Lewis: The very quick answer is no. My problem is not the numbers; my problem is that, to be fair to you as a consumer, I just have to tell you, because it could happen. But you would have to ask the court system.
Rehman Chishti: Sure, I am just trying to get the scale of the problem—[ Interruption.].
The Chair: Order. Mr Lewis, on behalf of the Committee, thank you very much indeed. I sense that the Committee enjoyed listening to your evidence and it is a shame that we had such a relatively short time.