My Lords, I welcome the noble Baroness, Lady Hayter, to our discussions. I am glad to return to her examples, especially hairdressers, where, as noble Lords can imagine, I spend a great deal of time. I will take the amendments in turn. I am conscious that this is a new area in the debate and quite complex, so I hope that noble Lords will bear with me. We may even be interrupted by a Division.
Amendment 14 would apply the Small Business Commissioner’s complaints-handling function to allegations of unfair treatment or unfair contracts. Tackling unfairness is at the heart of our proposals for the commissioner. The complaints-handling function is designed to cover questions of fairness, specifically over payment issues, because we have found these issues to be most pertinent. Over half of respondents to my department’s discussion paper cited some evidence of unfavourable treatment by larger businesses. The majority of these responses provided evidence of late payment, and many also provided evidence on wider payment issues.
We may be moving tentatively towards agreement that the commissioner must be effective and efficient. It is right to focus the complaints-handling function on payment, which is the issue of unfairness that our stakeholders tell us causes the greatest detriment to small businesses. However, the commissioner will provide general advice and information to small businesses on how to negotiate effectively and avoid problems. This is a more proportionate way of addressing any problems that small businesses have with contract terms that they think are unfair.
Amendment 24 would enable the courts to declare an unfair contract term to be void, on the commissioner’s advice. The commissioner is not intended to alter or undermine the fundamental rights of two businesses to agree commercial transactions on such terms as they see fit. In tackling unfair payment practices, the commissioner will consider a complaint on the basis of what is fair and reasonable in the circumstances of each case. This reflects the fact that there are complex issues at play in businesses’ payment arrangements, and that each business will know best what works for them. The commissioner will hear from the parties to a payment issue and can give recommendations to encourage their resolution. The commissioner will have powers to publish a report and name the respondent to a case where appropriate. Our approach here is to encourage culture change through persuasion and building confidence and capability in small businesses. We want the Small Business Commissioner to be an effective alternative to the court. It is worth stressing that the commissioner is intended to fit within the existing landscape of dispute resolution services and not to undermine the independence of the courts, a critical British principle which we have discussed already.
On the subject of unfair terms, it is worth remembering that, through the annual reporting duty, the commissioner has another important function: to gather evidence on the issues facing small business, and on whether payment practices are improving as a result of our reforms.
The commissioner may make recommendations to government where he or she considers that there are changes that could be made.
One area in which we have been seeking evidence is in relation to whether there is a gap in protection, such that certain consumer rights, including those in relation to challenging unfair contract terms, should apply to small or micro-businesses when they buy goods or services. This was the main thrust of the presentation given by the noble Baroness, Lady Hayter. I thank the noble Baroness for returning to the charge and for her amendments proposing that micro-businesses be considered consumers for the purposes of the Consumer Rights Act 2015 and the 2015 alternative dispute resolution regulations when they are purchasing goods or services for use within their commercial activities.
In relation to the Consumer Rights Act, I can reassure the noble Baroness that we have been giving it considerable thought over the last few months. Our call for evidence ran from 24 March to 30 June and the Government hosted two stakeholder sessions in May and June. We have not yet published a government response to this. We are still considering the evidence, which poses some interesting questions, such as whether there is a distinction between micro-businesses and other small businesses when they purchase goods and services; whether there are specific problems faced by small businesses when they contract with the regulated sectors; and whether some aspects of consumer protection could actually be less helpful to small businesses than their current rights. We currently expect to publish a response later in the autumn. It is clear from the evidence that there is no consensus on this issue but we are still actively considering the case for change and, if so, how that might be achieved. I hope noble Lords will understand that I cannot pre-empt the government response at this stage. However, I am sensitive to the frustration that this might cause the noble Baroness and I hope she will be reassured that we are taking this issue very seriously and not putting it on the back burner.
The second part of the amendment seeks to extend the requirements in the alternative dispute resolution regulations to micro-businesses. The regulations that implemented the ADR directive introduced a range of new measures to facilitate consumer to business dispute resolution. These included the introduction of certain standards for ADR providers and the establishment of competent authorities responsible for approving ADR bodies as being compliant with these standards. Under the regulations, when a consumer and a business are unable to settle a dispute, the consumer has the right to be given details of an approved ADR provider and be told by the business whether it is willing to use ADR in an effort to settle the dispute. This is the only mandatory requirement on businesses in the ADR regulations and it is this requirement that the amendment would extend to business to business disputes.
The important issue here is that ADR providers have been assessed and approved by the competent authorities as having reached the standards in regulations to enable them to deal with consumer-to-business disputes. They have not been approved to deal with business-to-business disputes, which can be far more
complicated than the faulty kettle or leaking washing machine that we have discussed in the past. I do, however, have a list, which I can make available to the noble Baroness. The risk of this part of the amendment is that businesses could be given details of an approved ADR provider which is wholly unsuitable or even unable to deal with their particular dispute. There is a real risk that the amendment could lead to confusion and increased costs for business.
The noble Baroness asked about coverage. Around 25 ADR providers have been approved to deal with consumer-to-business disputes. In the UK there are already several large and well-established ADR schemes in regulated sectors such as financial services, energy and telecoms. In other sectors, growing numbers of businesses voluntarily participate in ADR schemes as part of their commitment to customer care, and some trade associations offer ADR services as part of their membership benefits. This was the vision. This is what we hoped would happen. You now see approved ADRs in everything from travel and retail to home improvement, energy, the ombudsman services and the more general providers.
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We welcome more companies entering the ADR market as it will increase choice and drive down the cost. To gain and keep certification, ADR providers must comply with strict requirements and will be monitored by the awarding body. I apologise for the promotion of this service, as it were, but it is as well to explain what is going on so that we can understand what, if any, gap there is. As part of the Small Business Commissioner’s function to provide general advice and information to small businesses, there will be easy access on the website—which I am going to write to the noble Lord, Lord Hodgson, about—to information about ADR providers that have been assessed as being able to deal with business-to-business disputes.
Amendment 48 proposes safeguards for small businesses entering into hire-purchase or conditional sales agreements. Would the Committee like me to go through the detail? It provides for information to be provided to small business before such contracts can be concluded. With the leave of the Committee, I will write a letter setting out the detail.
This is an important area. I have tried to give a positive response. I hope in the circumstances that the noble Baroness will feel able to withdraw her amendment.