Posted on January 23, 2017 by Charles Nancarrow
Scams, unfair trading, e-crime, unsafe goods – these harmed consumers to the tune of £14.8 billion in 2014-15. And that’s just the estimate of the problems tackled by consumer protection bodies; you may not even be aware of times you’ve been a victim of unfair trading. With poor consumer awareness and threats to consumers becoming increasingly complex and wide-ranging we, the Regulation, Consumers and Competition team, recently published a report. We describe here the types of consumer detriment, who’s responsible for protecting consumers, and what all this means for consumers.
Anyone who buys anything could be affected by unsafe goods and unfair trading. And with online purchases growing rapidly and e-crimes being increasingly sophisticated, we are all, rightly, concerned about e-crime. This is the most recorded crime in the UK with 5.6 million incidents of online fraud and computer misuse in England and Wales in the year ending June 2016, and 70% of all reported fraud being cyber-enabled.
Consumer detriment occurs when a consumer suffers from being accidentally, carelessly or deliberately treated unfairly by a trader. The impacts can include financial loss, loss of work and/or leisure time, stress and other psychological suffering, and even injury or death from unsafe products.
Such harm typically happens for one of three reasons:
- Trader ignorance of the law.
- Unfair, misleading or aggressive trading practices, either unwittingly or knowingly.
- Deliberate dishonest or criminal activity, ranging from organised crime groups to doorstep crime.
Consumer detriment can affect any of us, although it is often the most vulnerable who are the most at risk. Our recent report, Protecting consumers from scams, unfair trading and unsafe goods, sets out examples of detriment, those most at risk of each type and highlights some actual cases.
Five types of consumer detriment
1 – Unfair trading: unfair business trading practices, e.g. supply of faulty goods or substandard service, no access to redress, unfair terms, misleading claims, high-pressure sales.
Categories of people at risk: Everyone. A 2016 Citizens Advice consumer survey identified:
- About 35% of all UK consumers had a consumer problem in 2015.
- 75% came from TV, phone and internet, professional services, construction, home maintenance and property services.
- Poor quality service accounted for 45% of detriment suffered.
- Younger people and the highest educated reported the most problems.
Case study: A trader charged extortionate sums for shoddy repairs to roofs and drains and had been pressuring and intimidating residents. His victims included an 89-year-old war veteran from near Guildford who was cheated out of more than £42,000.
2 – e-crime: Any scams and fraud that take place on the internet, including dating website scams, misleading or copycat websites, subscription traps, online shopping fraud.
Categories of people at risk: Anybody who makes purchases online.
A 2015 Citizens Advice survey revealed:
- 37% of respondents who had purchased goods online in the previous 12 months had encountered a problem – around 10.7 million people across England and Wales.
- 44% of people aged 25 to 44 reported experiencing a problem compared with 30% of those aged 55 and above.
3 – Mass marketing scams: Any uninvited contact by email, letter, phone or adverts, making false promises to con individuals out of money, e.g. Lottery and prize draw scams, bogus product or services scams.
Categories of people at risk: Particularly older people living alone. National Trading Standards found:
- The typical victim is 74 years old and living alone.
- Older people lose the most from scams; victims aged between 75 and 79 lose an average of £4,500, and those over 85 years can lose even greater sums.
- The Alzheimer’s Society estimates that 15% of dementia sufferers in the UK, around 112,500 people, have been victims of nuisance phone calls, scam mail or mis-selling.
Case study: A 92-year-old woman who lives alone in Sutton was a victim of mail scams. She had been responding to prize draws for more than 10 years, spending an estimated £500 per month which amounts to a loss of around £60,000.
4 – Unsafe goods: Counterfeit, dangerous or unsafe goods, such as toys, clothing, cosmetics, electrical appliances.
Categories of people at risk: Every consumer, though often unsafe and counterfeit goods are cheaper, making the vulnerable more at risk:
- In 2015-16, National Trading Standards reported that 77% of all goods targeted for sample testing at UK ports were deemed unsafe or non-compliant.
- Some samples of low-cost jewellery recently imported have contained 4,000 times the permitted level of the chemical cadmium.
Case study: Five people were killed in a house fire caused by unsafe goods. A police representative said: “Following a joint investigation [we] have found that the most probable cause of the fatal house fire was an electrical fault involving a faulty charging device”.
5 – Investment fraud: Selling fictitious investments, e.g. gold, diamonds, fine wine, bonds.
Categories of people at risk: Wealthy people looking to invest their savings, particularly those over 60:
- UK-wide investment fraud reports to Action Fraud increased by 9.5%, from 2,910 in 2014-15 to 3,186 in 2015-16.
- Figures from a police-led operation show that men aged 65 are the most likely victims of investment fraud.
Exploring consumer problems
A key source of information describing the scale and nature of consumer problems is consumer complaints to Citizens Advice. In 2015-16 the service received 958,880 consumer contacts and alongside our recent report we published an interactive data visualisation enabling you to explore consumers’ use of the Citizens Advice service in local authority areas, including by categories of products and services. You can also use the visualisation to get an insight into how consumers in Britain purchase different products and services by exploring the payment methods used in each category.
Who is responsible for protecting consumers?
The Department for Business, Energy & Industrial Strategy has overall responsibility for consumer policy. There are about 200 organisations involved in delivering this in some way. The key bodies and their associated activities are summarised below.
Consumer information and education
Citizens Advice is now the key point for consumers for free, independent, confidential and impartial advice on consumer rights and responsibilities. As set out on the government’s Consumer rights page, Citizens Advice sits alongside the Money Advice Service and the ombudsmen for different industries. Citizens Advice also receives consumer complaints, which are passed to Trading Standards.
Competition and Markets Authority may produce consumer advice where it has carried out a project on a particular sector, and it is best placed to do so.
Business guidance and education
Chartered Trading Standards Institute provides business advice regarding consumer protection legislation, and runs the European Consumer Centre.
Competition and Markets Authority produces guidance material in relation to unfair contract terms and produces business advice to support its wider compliance measures.
Local Authority Trading Standards Services offer businesses advice on consumer law.
Inspections, investigations, law enforcement and deterrence
Local Authority Trading Standards Services investigate consumer complaints and prosecute traders who break the law. They cover areas such as: consumer safety, counterfeit goods, product labelling, weights and measures, under-age sales and animal welfare.
Competition and Markets Authority investigates consumer issues that have a market impact, and enforces consumer protection legislation, particularly tackling practices and market conditions making it difficult for consumers to exercise choice.
Many other organisations, such as the National Crime Agency, the Police Service and HM Revenue & Customs, work with these consumer protection bodies on issues such as trader fraud and imported counterfeit goods. One such issue that requires inter-agency co-operation is online fraud, which is the only crime with a single national body for reporting and disseminating cases – the National Fraud Intelligence Bureau. There’s also now a UK-wide fraud and cybercrime reporting centre – Action Fraud. Many other bodies also play a role in tacking online fraud which can impact consumers, including the new National Cyber Security Centre, the Metropolitan Police Cyber Crime Unit, Ofcom, as well as other local and regional organisations.
What does this mean for consumers?
Our report found that consumers are facing increasingly complex and wide-ranging threats, in particular from the rise of e-commerce, and scams becoming more targeted. Simultaneously, there has been a significant loss of resource and downsizing of Local Trading Standards, the largest consumer protection organisation. It has lost 56% of its full-time equivalent staff since 2009, which has led to gaps in coverage at the local level.
In the light of these developments, consumers should be more vigilant. As consumers we can all do more to know our consumer rights and the risks posed when we buy goods and services. For example:
- Did you know that your right to return differs depending on whether you bought online or in store?
- We can familiarise ourselves with common scams, including online scams such as ransomware, spyware, scareware, and wi-fi eavesdropping.
- By registering the product details of your white goods on the AMDEA Register My Appliance portal you can be contacted swiftly in the event that a safety repair is needed.
- Citizens Advice also has guidance on cutting your fuel bills, buying second hand cars, pay-day lending, home maintenance issues and much more.
As we note in our report, data and evidence on consumer detriment is highly important to allow the consumer protection system to formulate appropriate responses to issues. When things do go wrong and you experience a consumer problem you should contact the correct organisation:
Citizens Advice: The single point of contact for all consumers with queries / problems
Action Fraud: The single point of contact for anyone who suspects that they have been victim of a fraud.
We welcome your comments and invite you to contact us if you would like to discuss any aspect of the NAO’s work on consumer protection.
About the authors:
Charles Nancarrow leads the NAO’s work on consumers and competition, and is strategic lead for the NAO’s markets work on consumer protection in public and private markets, and on the UK competition regime. He is a regular speaker at conferences and seminars.
Ivan O’Brien is a Senior Analyst on the NAO’s Regulation, Consumers and Competition team. He has particular interest and experience working on consumer protection and financial services regulation projects.
Anna Sydorak-Tomczyk is an NAO Analyst. She has worked on the consumer protection and the UK competition regime projects and has particular interest in international dimension of consumer and competition policies.
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