Consumers spend some £400 billion each year on goods and services bought from the private sector. The Audit Commission and the National Audit Office have concluded that there is scope for a real improvement in the way in which consumers’ interests are protected.
In a joint initiative the two audit organisations have looked at consumer protection in the round, the National Audit Office focusing on the central responsibilities of the Office of Fair Trading and the Audit Commission focusing on the activities of the local trading standards services*.
* Measure for Measure: The Best Value Agenda for Trading Standards Services, a report by the Audit Commission, can be obtained directly from the Audit Commission.
The National Audit Office’s report to Parliament considered how well the OFT protect the consumer by licensing consumer credit businesses; by combating unfair terms in consumer contracts; and by acting against traders who persistently flout their legal responsibilities. Many retailers, most motor traders, many debt collectors and all high street banks and mortgage brokers need a consumer credit licence, and there are currently some 150,000 active licence holders.
The National Audit Office reports that the OFT publish high quality advice for consumers; they have combated specific unfair practices by issuing guidelines backed by the threat of revoking traders’ consumer credit licences; and their work to combat unfair terms in consumer contracts secured savings for consumers in 1998 of at least £100 million, or fourteen times the cost of the OFT’s consumer protection work. The National Audit Office report highlights room for improvement, however, and in particular that:
- Local authority trading standards services are the OFT’s most important source of evidence on unfair trading practices. Against the background of rising complaints from consumers and local government reorganisation, the number of cases trading standards services refer to the OFT has declined. This has had a knock-on effect on the number of consumer credit licensees the OFT investigate and the number of licences revoked. In 1998-99 only 46 of the 180 traders who local authorities believed were persistently flouting their legal obligations were referred to the OFT. The OFT work closely with trading standards services to share good practice and foster a consistent approach, for example through their Excellence in Trading Standards Award scheme. The OFT should continue to develop closer working relations with trading standards services and other regulators to encourage a consistent approach and foster a greater understanding of each other’s roles and priorities.
- The OFT do not always have complete and timely information on behaviour that could cast doubt on traders’ fitness to hold a consumer credit licence. The OFT have particular problems in obtaining complete and timely information on convictions, since there is no mechanism which ensures that details of all convictions will be passed to the OFT. As a result, some traders obtain or continue to hold a licence despite behaviour that could call their fitness to hold a licence into question, including convictions for fraud or other dishonesty, or violence. The OFT should pursue opportunities provided by modern technology to gather better and more timely information to ensure that consumer credit licences are held only by those fit to do so.
- It is essential that casework is handled expeditiously. This is necessary to command the confidence of consumers and ensure that unfair practices are quickly stopped; to deter the minority of traders who are dishonest, and to encourage trading standards services to refer evidence to the OFT. The OFT need to monitor how quickly they take regulatory action and take measures to speed this up wherever possible.
In July 1999, the Government announced a fundamental review of the OFT’s consumer affairs functions. Many of the issues highlighted by the NAO report are being considered as part of the review, including how the OFT work with local trading standards services.
The National Audit Office worked closely with the Audit Commission in preparing its Report. The National Audit Office’s findings and conclusions are informed by surveys of consumers, used car dealers, and local authority trading standards services. The National Audit Office also consulted widely with trade associations, business and consumer representatives including Consumers’ Association and the National Consumer Council.