Consumers, Estate Agents and Redress Bill [HL]

My Lords, I listened with great interest to the arguments made by the noble Baroness, Lady Wilcox, and others on this issue on Report. I agreed to give it further consideration, as the importance of the need for service providers to deal effectively with consumer complaints is in no way in doubt. The position that we have adopted is to give regulators the power to make regulations to prescribe complaint-handling standards that would be binding on suppliers. We took this approach because we believe that a sectoral regulator is best placed to take a view on what is appropriate and necessary within its own sector. These provisions will need to be adaptable and will need to be applied on a sector-by-sector basis, with each regulator being able to take a different approach if required, to meet the needs of each sector. On Report, the noble Baroness cited the arrangements in place in the financial services sector. The basisof the approach in that sector stems fromparagraph 13(4) of Schedule 17 to the Financial Services and Markets Act 2000, which states that the Financial Services Authority may make rules requiring a company to establish such procedures as it considers appropriate for the resolution of complaints that may be referred to the ombudsman scheme. In respect of this legislation, the Financial Services Authority has determined and published the procedures that each company must have in place for the investigation and consideration of complaints. That document sets out a general requirement on firms to operate appropriate and effective internal complaint-handling procedures, and outlines in some detail what that should look like. I believe that the intention behind the approach taken in the financial services sector is entirely consistent with the approach that we have set out in the Bill—the need for businesses to handle complaints effectively in the first instance. The Financial Services and Markets Act 2000 confers a power, not a duty, on the regulator to prescribe complaint-handling procedures to be followed by businesses in that sector. The Financial Services Authority has made use of that power to require regulated businesses to adhere to requirements relating to complaint-handling procedures. The Bill confers on the regulator a power to prescribe complaint-handling standards. We believe that that is sufficient to ensure that complaints are handled effectively, and it is also in line with the Government’s better regulation principles, as it allows each service provider to meet those standards in the way that each provider determines is most suitable for the company, rather than prescribing the procedures that must be followed. Regulators are established as independent bodies and must be allowed to function accordingly. We must take into account the simple fact that a regulator has a duty to protect consumers in its sector and totake consumers’ interests into account in its decision-making. With the introduction of redress provisions, which industry will have to fund—an important consideration—information about the nature and volume of complaints will be placed in the public domain. The existence of a redress scheme to which service providers are required to belong by statute is something new for the sectors concerned here. The budgets for the consumer bodies in the energy and postal services sectors are negotiated directly with Government, and include funding for the handling of complaints. This has provided little incentive for some service providers to give the matter the appropriate attention. With the introduction of these measures, service providers will have to do more to resolve disputes first-hand. Typically, the funding structure for redress schemes is based on a case fee for each complaint referred to the scheme, and that will act as an incentive for service providers to take complaint-handling more seriously. This new statutory requirement will encourage industry to act in a different way and review its internal procedures for handling complaints. Regulators are tasked to ensure that the market operates effectively. In relation to complaint-handling, we are adding to their existing armoury and giving them the power to make regulations to prescribe complaint-handling standards that would be binding on providers. A regulator would be failing in its duty to consumers and would be accountable for any decisions not to take appropriate action in the face of any compelling reasons to do so. We believe that the vast majority of businesses want to act responsibly. The pressure to attract and to retain customers is a powerful and effective incentive on business to act with integrity and responsibility. While we understand the motivation behind the amendment—I listened carefully to the points made by the noble Lord, Lord Razzall—we feel that the approach that we have chosen is in line with better regulation principles. I hope this explanation provides some reassurance of the merit of our approach.