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National Audit Office report: The Office of Fair Trading: Progress in Protecting Consumers’ Interests

The Office of Fair Trading: Progress in Protecting Consumers’ Interests

"There are areas, particularly in the management of consumer credit licensing, where the Office of Fair Trading (OFT) has been constrained in what it can achieve. The OFT should take full advantage of the opportunities presented by recent consumer protection legislation and the outcome of the Government’s review of consumer credit to improve its performance still further. In this way the OFT can build on the implementation of past recommendations made by myself and the Committee of Public Accounts in its important work of protecting the interests of consumers."

"There are areas, particularly in the management of consumer credit licensing, where the Office of Fair Trading (OFT) has been constrained in what it can achieve. The OFT should take full advantage of the opportunities presented by recent consumer protection legislation and the outcome of the Government’s review of consumer credit to improve its performance still further. In this way the OFT can build on the implementation of past recommendations made by myself and the Committee of Public Accounts in its important work of protecting the interests of consumers."

Sir John

 

The Office of Fair Trading (OFT) has improved its protection of consumers following a November 2000 report by the Committee of Public Accounts, Sir John Bourn, head of the National Audit Office, said today. He also stated that recent changes to legislation should strengthen its work further. But the OFT will need to be vigorous in driving forward the changes if consumers are to see substantial benefits.

The OFT has since June 2001 used new powers provided by the Stop Now Orders Regulations instead of enforcement powers under the Fair Trading Act that had in many cases proved ineffective. This has resulted in 58 businesses agreeing to desist from unlawful trading, and put out of business at least one company that had seriously abused consumer rights. The OFT is also implementing a more rigorous process for endorsing industry codes of practice, though it is likely to be mid 2003 before the OFT endorses the first new codes.

Trading standards services are referring more cases to the OFT questioning the suitability of persons to hold consumer credit licences, which may reflect an increasing confidence in the OFT’s ability to deal effectively with such cases. But the OFT still does not collect sufficient information to be sure that applicants for licences are who they say they are. It is, however, starting to use postcode checking software to verify the personal addresses of applicants.

The OFT has so far also been unable to gain routine access to information on past convictions of applicants for consumer credit licences from the Police National Computer. The risk therefore remains that the OFT may be issuing licences to applicants with convictions sufficiently serious to call into question their suitability. A further obstacle to checking consumer credit licence applications is the inflexibility of the OFT’s computer system which is some 20 years old. Plans to replace the system continue to be on hold.

The OFT is making good progress in reducing the backlog in its investigations of unfair contract terms. Its current target is to reduce to 100 the number of cases over two years old and it is on course to meet this target in March 2003. The OFT’s long term target is to clear all cases over two years old but it considers that this will be difficult to achieve.

The OFT relies on local authority trading standards services to handle and refer cases where the consumer has lost out. Their ability to do so is still constrained. There are still substantial variations in the size of individual trading standards services that cannot be explained by variations in the population served, and it is recognised by the OFT, businesses and the trading standards community that performance is consequently variable. There are also serious concerns in the trading standards community that the number of qualified trading standards officers is set to decline, putting at risk the future delivery of the service.

The Department of Trade and Industry has taken forward the development of performance standards for the service. The Department’s task is complicated, however, by the need to work with the other Government departments and agencies which fund local authorities or sponsor the other activities that trading standards services undertake. The Department has no control over the resources that individual local authorities allocate to trading standards services. It has made £9 million directly available to trading standards services for specific initiatives during the last two years, but there is no guarantee that such funding will continue.

 

Publication details:

ISBN: 0102920923 [Buy a hard copy of this report from TSO]

HC: 430 2002-2003

Published date: March 6, 2003