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«EXECUTIVE SUMMARY VISION WHY CONSUMER PROTECTION MATTERS THE CURRENT UK CONSUMER LANDSCAPE AND THE IMPACT ON SCOTLAND PROPOSED CONSUMER LANDSCAPE IN ...»

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Consumer Protection and

Representation in an Independent

Scotland: Options

CONTENTS

EXECUTIVE SUMMARY

VISION

WHY CONSUMER PROTECTION MATTERS

THE CURRENT UK CONSUMER LANDSCAPE AND THE IMPACT ON

SCOTLAND

PROPOSED CONSUMER LANDSCAPE IN AN INDEPENDENT SCOTLAND

BRINGING TOGETHER CONSUMER FUNCTIONS IN AN INDEPENDENT

SCOTLAND WITH ECONOMIC AND COMPETITION REGULATION

CONCLUSION

ANNEX A CURRENT UK OMBUDSMEN WHICH COULD BE MERGED

INTO A SINGLE SCOTTISH CONSUMER OMBUDSMAN

CONSUMER PROTECTION AND REPRESENTATION IN AN INDEPENDENT

SCOTLAND: OPTIONS

EXECUTIVE SUMMARY

Consumer protection and representation are important because they allow a free market to operate effectively, ensure the vulnerable are protected, guard against unscrupulous traders and put consumers, businesses and local communities at the heart of regulatory decisions.

Economic activity flourishes when consumers can trust businesses, so consumer trust is necessary to ensure a flourishing economy. Good consumer protection systems also protect businesses from rogue trading practices.

The existing UK approach to consumer protection and representation is fragmented, confusing for consumers and businesses, not fit for purpose in Scotland and the UK Government have recently rejected calls for greater devolution in Scotland in this important area.

An independent Scotland could develop a more integrated, simplified consumer landscape that provides a single point of access through which the people of Scotland can be directed to the support they need. A single consumer body could oversee the provision of high quality, efficient consumer advice and protection which increases trust and transparency and provides confidence and clarity for those in need of assistance.

This unified approach would allow the consumer body to take Scottish specific issues into account in a way that the current fragmented UK arrangements have failed to do. For example: on unfair delivery charges to rural Scotland, on pay day loans and on nuisance calls.

The unified consumer body would work closely with the two other key regulatory bodies in this area – the sectoral economic regulator and the competition and markets regulator, to ensure that consumer interests are at the heart of the regulatory process.

This paper is the latest in the series of publications setting out the opportunities that would exist in an independent Scotland to take a distinct approach to delivering for Scotland’s people and economy. It takes as a starting point the macroeconomic framework set out by the Fiscal Commission Working Group.

Independence creates an opportunity in Scotland for a unified consumer body to be combined with the competition authority, potentially bringing benefits of closer alignment between market arrangements and consumer interests. This arrangement is already being implemented in other countries, such as Ireland and the Netherlands.

Independence would allow Scotland to create a “one stop shop” Consumer Ombudsman (with the potential exclusion of financial services) where consumers could submit complaints through a single portal and receive fast, simple, accessible redress.

VISION

On 18th September 2014, the people of Scotland will have the opportunity to cast their vote on the most important opportunity Scotland has had in 300 years.

If the people of Scotland choose to become independent, all decisions about Scotland will be made by the people of Scotland through the Scottish Parliament.

The Scottish Government’s vision for an independent Scotland is of a thriving and successful European country, which reflects Scottish values of fairness, prosperity and social cohesion.

At one level, independence is about allowing the people of Scotland to have their say on key issues of international affairs, how we run our welfare system or whether we invest in growth or continue to face public spending cuts.

At another level, independence would give us the opportunity to ensure that the organisations, systems and legislation that govern what happens in Scotland are fit for purpose.

We have already set out proposals demonstrating how Scotland could improve the system of economic regulation, in areas like telecoms, postal services, transport, energy and competition, to better serve its needs.

In this paper, we build on those proposals and set out the ways in which the system of regulation and protection for consumers could be improved with independence.

WHY CONSUMER PROTECTION MATTERS

Consumer protection and representation impact on our everyday life – whether through the charges we face for postal deliveries, the kind of financial loans that are available, or the support energy companies provide to vulnerable customers. When consumers are let down by businesses and institutions, it can result in not only financial detriment, but a loss of essential services, overall trust, and an increase in stress.1 As households face continuing challenges, with incomes squeezed and prices for essential goods and services rising, consumers may become increasingly vulnerable to making distressed purchases, and being tempted by high risk products and high cost sources of credit. Those on low incomes, the elderly and others in disadvantaged situations may be particularly susceptible to exploitation by unscrupulous businesses seeking to benefit from consumer vulnerabilities.





Consumers are more likely to experience difficulties in paying for essentials such as food, utilities and road fuel; finding affordable accommodation; gaining access to credit and managing debt; and trying to increase income. As such, they are particularly vulnerable to unfair business practices in these areas. Scams, fraudulent activity and illegal money lending are also a significant risk to consumers.

http://www.oft.gov.uk/news-and-updates/press/2006/detriment A successful economy requires informed, protected and empowered consumers. To achieve this consumers need to be supported by a framework that works as hard to educate them about their rights as it does to campaign on their behalf and protect them from unfair and unscrupulous practices. The Scottish Government recognises the fundamental importance of providing a robust legal framework of consumer protection, supported by consumer bodies with a voice strong enough to be heard, and powerful enough to take action when consumers are harmed or at risk.

When a person purchases goods or services, the law gives them consumer rights.

These protect the individual from being treated unfairly by a trader. For example, a person may have received poor service or may want to switch energy suppliers or cancel a contract. Consumer rights are protected by legislation, but people need to know what these are and how to take action. A substantial number of consumer protection laws operate in the UK, covering, for example, unfair advertising, distance selling, and consumer credit.

There are four pillars necessary to create a robust system of consumer protection:

advocacy advice and education enforcement and redress.

Through advocacy, the rights of consumers can be represented to Parliament or regulators, so that new policies can be pursued or refined. Through education and advice, individual consumers can be made aware of their rights and become more empowered, making it easier to avoid unscrupulous businesses, or to take action when they suffer harm. Through enforcement, traders who flout consumer protection or competition laws can be held accountable. Through redress, consumer detriment can be overturned and consumers gain access to justice. Effective protection requires that each of these individual areas is strong in its own right, and that all four complement and support each other.

On the ground education and advice can empower consumers, making it easier for them to avoid harm in the future. Moreover, if aggregated properly, this on the ground experience can be used to identify problem areas and unscrupulous practices. With this knowledge, it should be possible to respond quickly with enforcement measures to prevent further detriment, or advocate for needed policy changes. And, when consumers are harmed, a simple and easy dispute resolution system ensures consumers are able to get access to justice. There is room in the existing landscape to better integrate and coordinate the four strands of consumer protection, and independence provides the opportunity to achieve this.

Scottish consumers are estimated to spend £56 billion each year 2 but, under the current constitutional arrangements, the Scottish Government is not responsible for how these consumers are protected. Independence provides an opportunity to build a model of consumer protection which simplifies the complex UK model and better meets the needs of Scottish consumers. To do this, we want expert, informed and reliable sources of consumer advice from a small number of trusted and clearly Audit Scotland (2012) Protecting Consumers identifiable bodies. Any proposed structure would need to be kept simple, so as to be visible and attractive to consumers. An essential part of our vision is a far more effective and efficient system that puts individual consumers, small businesses and local communities at the heart of its work.

THE CURRENT UK CONSUMER LANDSCAPE AND THE IMPACT ONSCOTLAND

The UK consumer protection and representation framework remains fragmented and does not meet the needs of consumers in Scotland. In its consultation document, Empowering and Protecting Consumers3 the UK Government recognised that it needed to improve consumer protection and help to empower consumers, by simplifying the cluttered UK landscape.

It outlined plans to:

abolish the Office of Fair Trading (OFT), moving some of its reserved competition functions to the new Competition and Markets Authority and contracting with local government bodies for delivery of a range of enforcement of trading standards activities currently delivered at a national level;

move the Consumer Direct helpline to the Citizens Advice Service abolish Consumer Focus, and transfer the relevant statutory and reserved functions relating to consumer advice, advocacy and education to the Citizens Advice Service.

create a Regulated Industries Unit, with responsibility for consumers across regulated markets. This responsibility will transfer to Citizens Advice Service in 2014.

The UK Review of Public Bodies, published in October 20104, that informed these changes, recognised that different arrangements would have to be put in place for Scotland, acknowledging that a “one size fits all” approach would not work. This is consistent with the findings of the Calman Commission on Scottish Devolution which stated that “in general, responsibilities of government should be exercised at the level of government closest to the people, unless there are good reasons not to.” Reflecting this approach, the areas of consumer policy, advocacy, education, information and advice are already successfully devolved in Northern Ireland.

Empowering and Protecting Consumers (PDF) The UK Review of Public Bodies, published in October 2010 A Scottish Working Group5 was set up to consider the feasibility of implementing the proposed UK model in Scotland. A summary of their findings is set out in the box below The Scottish Working Group on UK Reform of Consumer and Enforcement Bodies On 14 October 2010 when Vince Cable, Secretary of State for Business, Innovation and Skills announced outline plans to reform the UK’s consumer landscape the phrase “specific arrangements may need to be made in Scotland and Wales”6 signalled clearly that the UK Government had not considered what would be in the best interests of consumers in Scotland.

In order to promote policies which would work for Scotland, the Scottish Government established a working group with representatives from COSLA, the Society of Chief Officers of Trading Standards in Scotland, Consumer Focus Scotland and Citizens Advice Scotland. Their report highlighted scope for further devolution of relevant powers, recognising that consumer policy, advocacy, education, information and advice are already devolved in Northern Ireland.

Despite the precedent of Northern Ireland and support within the Scottish Parliament for the creation of a strong, integrated and independent statutory consumer organisation for Scotland, the UK Government rejected further devolution in December 2012. The UK Minister for Consumer Affairs, Jo Swinson, wrote to the Scottish Government stating that full devolution of policy and operational responsibility for all consumer education, advice, information and advocacy in Scotland, at this time, would result in detriment to other GB and Scottish consumers.

Despite the changes proposed by the UK Government, it is clear that a very fragmented consumer landscape will remain. In its response to the UK consultation

on the proposed changes, the Office of Fair Trading called the reforms:

“A missed opportunity to consider bigger changes that would make consumer protection 'fit for the 21st Century'. In particular, more radical reforms could potentially more directly address challenges posed by the UK's fragmented consumer enforcement structures – which were established to meet the needs of an era before large national and multinational businesses, operating through multiple and sophisticated sales channels, became so prevalent in the UK retail environment.”

It also stated that



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