New protection for consumers
Thursday, 03 September 2009 11:00
Kevin Brennan, the minister for consumer affairs, writes for myfinances on measures taken by the government to increase consumer protection as the recession hits the UK.
As a government we are taking a more active approach on consumer issues. This is not only in response to the recession, which has undoubtedly left many people struggling to manage their finances, but also to the fundamental changes to the way we shop and live that we have seen over the past decade.
In particular, we have seen a significant change in attitudes to debt. Personal loans, overdrafts and credit and store cards have become ubiquitous and credit has become quick and easy to access for the majority of people. This has given people the freedom and flexibility to live their lives to the full, however, it has also led people to take on unsustainable levels of debt.
We have also seen a phenomenal growth in the choice and complexity of goods and services on offer and with it new risks and sometimes confusion.
Our task now; as borrowers, lenders and as a government; is to establish a more balanced and sustainable consumer environment, where consumers feel protected and confident to spend their hard-earned cash.
Consumer Protection
Consumers now have a huge range of goods and services at their fingertips - often 24 hours a day, 7 days a week. Greater choice has undoubtedly brought with it great benefits, but it has also meant that when things do go wrong, accessing information and undertaking legal action is increasingly complicated, expensive and time consuming.
A major nationwide campaign will launch next week to educate consumers about their key rights when purchasing goods and services - whether online, on the high street, or in the home.
The 'Know Your Consumer Rights Campaign' follows research we conducted last year which highlighted a significant gap between consumer confidence and the actual knowledge people have about their rights.
The main goal of the campaign is to educate consumers about their three basic rights. Goods 'must fit the description given', 'be of satisfactory quality' and 'be suitable for purpose'.
If at all unsure of what their rights are and what to do next consumers are advised to contact Consumer Direct - the national consumer rights advisory body - either via their website (www.consumerdirect.gov.uk) or over the phone (08454 040506).
I recognise that in the increasingly complex modern consumer world we cannot always expect consumers to tackle dishonest and unfair practices on their own. The government and regulatory bodies have a role to play acting on consumers' behalf to get them the fair deal they deserve. We want to take a fresh approach here too.
For the first time we will appoint a Consumer Advocate.
Their goal will be to educate consumers, champion their rights and help them get the compensation they deserve.
In response to the new risks brought about by the phenomenal increase in the popularity of online shopping, a new Internet Enforcement Team is being established. It will bring together expertise from the police, OFT and Trading Standards. A new online fraud reporting facility, led by the OFT, will also help us to build up better intelligence and establish a national strategy for e-consumer protection.
Reforming the credit industry
The level of unsecured consumer credit has risen from around £53 billion in 1993 to nearly £231 billion in June 2009. While accessible credit can be a good thing for individuals and the economy, consumers running up debts they have little hope of paying off can only be detrimental to everyone.
A review into the way we regulate credit card and store cards will establish if restrictions should be placed on raising interest rates on existing debts, and if repayments to a credit card account could be allocated to debts attracting different interest rates on a fairer basis. The current practice is usually to allocate payments to debts attracting the lowest interest rates first. The review will also explore whether the practice of increasing borrowers' credit limits without their prior consent should be banned and if minimum monthly repayments should be raised so that debts can be repaid within a reasonable period.
We are also in the process of implementing the European Consumer Credit Directive.
Importantly, it recognises the crucial role credit card and loan companies can play educating consumers at the frontline. Once in place next June, it will make new requirements on lenders to explain their products to consumers adequately before they enter into a contract and to check the credit worthiness of their consumers before they lend to them.
Help and advice
I recognise that responsible lending is just one half of the answer. We need to create culture of responsible borrowing and do everything we can to help consumers make the right choices. And when people do get into difficulties, we need to make sure they have access to the all the help and advice they need to take control of their finances.
To assist those who are looking for credit get the deal that suits them the best, the FSA, following a consultation, will be launching an impartial credit card comparison site on their Moneymadeclear website.
Consumers will be able to compare the cost of different credit cards based on the way they intend to use them. This is part of their wider plan to expand the Moneymadeclear website into a completely impartial and non-commercial one-stop shop money guidance service.
Also under the Moneymadeclear banner, a Money Guidance Service, providing free financial help and advice, particularly for those at risk of getting into unmanageable debt, is being trialled in the North-West and North-East of England. It is hoped that it will be rolled out across the country in 2010.
To help those already in debt get back on the right track, the Money Advice Trust is leading the work on a new self-help toolkit, for launch in the Autumn, and the Insolvency Service has produced a new guide for debtors called 'In Debt? Dealing with your creditors'.
And this is all in addition to an extra short-term measures to address concerns in the current recession. £10 million of funding for longer opening hours at 330 Citizen's Advice Bureaus until March 2010 and an extra £5.85 million for the National Debtline that was made available earlier this year.
Years of easy access to credit followed by a sharp economic downturn has caused many to question their attitude to personal finance.
As a government we have acted swiftly in response to these problems and concerns. We are confident that with a continued active, positive and realistic approach we can create a sustainable consumer credit market that is beneficial to both lenders and borrowers.
Kevin Brennan is the minister for consumer affairs at the Department for Business Innovation and Skills (BIS) and the MP for Cardiff West
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