The Government has published a response to the consultation Reforming Competition and Consumer Policy – Driving growth and delivering competitive markets that work for consumers, which sets out the Government’s vision for reforms to improve consumer protection and promote competition.
ADR providers like us were eagerly awaiting the response from the government following the consultation. Unfortunately there is little in the report in terms of making ADR compulsory or cutting down on the 8 week deadlock complaints timetable but rather a pledge to make all ADR providers in the consumer arena be regulated, which seems unworkable.
While the report contains interesting ideas about competition law and subscription services, the section on ADR doesn’t really propose any actual changes to consumer ADR other than increasing regulation of ADR providers.
The issue for consumers we come across continually is traders, particularly in motor sales and repairs and builders, refusing to use ADR when proposed by consumers.
One suggestion was that ADR should be compulsory in these areas, but this has not been endorsed by the government.
BEIS does extol the virtues of ADR and says that more needs to be done to encourage it, but that is nothing new. They say that “Government has already indicated that it intends to examine radical new ways to mainstream ADR for all types of disputes, including consumer disputes, so it operates as an integrated part of the justice system.” The overall aim of increasing ADR is admirable but it is unclear how this will be done.
The detail is as follows:
The government says that it “recognised that take up and awareness of ADR in the consumer sector is low. Government will continue to work closely with regulators, consumer advocates, ADR providers, consumer enforcement bodies and businesses to help promote the benefits of ADR and ensure ease of access.”
The government decided it would not reduce the 8 week period for a business to respond to a complaint. The report says that the “Government will not impose a standardised four-week limit for businesses to resolve complaints informally prior to ADR. Government will continue to engage with regulators individually and through the Consumer Forum to explore the case for reducing the current informal upper time limit of eight weeks for businesses to resolve complaints before taking a dispute to ADR, while also ensuring appropriate safeguards are put in place for complex cases.”
The government looked at the quality of ADR services and decided that all businesses providing ADR in the consumer environment will have to be regulated by a competent authority. Government intends to require all businesses that offer dispute resolution services in consumer markets to be approved under the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015.
Government also intends to improve the quality and oversight of ADR services by strengthening the existing accreditation framework to ensure a common set of standards are applied and that providers can be held accountable by the Competent Authority.
The government looked at making ADR mandatory in certain sectors like motor and building contracts but decided not to do this.
“Government believes dispute resolution services play an important role in helping people get the support they need at the right time to get the best outcomes for their issue. The Ministry of Justice’s recent Call for Evidence sought views on how dispute resolution services can provide an effective route to redress without the need for court-based litigation. BEIS will work with the Ministry of Justice to help inform and support their policy development and analysis and ensure that there are more routes to redress for business and consumers to solve disputes outside of court.”
The increased regulation proposed is problematic. It is unclear if it would cover, for example, individual mediators dealing with small claims or higher value claims going through the Courts? Would this cover mediation providers registered with the CMC but not registered as ADR providers?
A mediator might be instructed to deal with a legal dispute going through the Courts which involves the installation of a kitchen, for example. Is it suggested that they would have to be regulated? I anticipate that the idea is to prevent traders putting forward ADR providers to resolve disputes where they are not truly independent or regulated by a competent authority, but we are not aware of this happening or causing a problem for consumers.
Supporting consumers and traders to resolve more disputes independently
https://www.gov.uk/government/consultations/reforming-competition-and-consumer-policy
Government believes a well-functioning Alternative Dispute Resolution (ADR) system supports consumers by facilitating quicker and cheaper access to redress for individual disputes without the need for going to court.
Government has already indicated that it intends to examine radical new ways to mainstream ADR for all types of disputes, including consumer disputes, so it operates as an integrated part of the justice system. As proposals for this wide-ranging and fundamental reform are developed, government consulted on more immediate plans to increase the rate of individual consumer disputes being satisfactorily resolved by strengthening and expanding the scope of ADR. Responses helped to consider the best way to take forward reforms to benefit businesses and consumers engaging with ADR services. Government will progress the following:
BEIS will continue to work with the Ministry of Justice, regulators, consumer advocates, ADR providers, consumer enforcement bodies and businesses to:
provide more support to consumers in individual disputes with businesses by increasing the uptake of dispute resolution services, thus avoiding the need to go to court and improve the quality and oversight of alternative dispute resolution services
Supporting consumers enforcing their rights independently
Government believes a well-functioning Alternative Dispute Resolution (ADR) system supports consumers by facilitating quicker and cheaper access to redress for individual disputes without the need for going to court.
Government has already indicated that it intends to examine radical new ways to mainstream ADR for all types of disputes, including consumer disputes, so it operates as an integrated part of the justice system. As proposals for this wide-ranging and fundamental reform are developed, government consulted on more immediate plans to increase the rate of individual consumer disputes being satisfactorily resolved by strengthening and expanding the scope of ADR.
Government sought views on 3 specific groups of improvements:
a. improving consumer awareness and signposting
b. increasing the quality and oversight of ADR
c. improving the take-up of ADR by businesses in non-regulated markets
Improving consumer awareness and signposting
Most businesses try hard to resolve consumer complaints. However, when consumers and businesses cannot agree, it should be easier and simpler for consumers to understand their rights and choose to pursue the best redress option.
Although consumers currently have access to a variety of public and privately funded advice providers, consumers can still find it difficult to understand their redress options, make the right choice for them and navigate the routes to resolving their problem, particularly if they are vulnerable. This includes finding out whether ADR is available, how it works and what other options are available.
The consultation asked the following question on this topic:
Q. What more can be done to help vulnerable consumers access and benefit from Alternative Dispute Resolution?
Responses raised a number of ideas in response to this question, which broadly split into two distinct areas. Firstly, the need for improved provision of signposting, advice and support to enable consumers to benefit from ADR. Secondly, systemic issues within the ADR landscape that prevent, or can deter, consumers from accessing services.
Public recognition of ADR is low. This is in part likely to be due to a lack of understanding as to how it works, and what it can do to help consumers resolve problems they face, but also because information, advice and support is decentralised and, outside of the regulated sectors, the voluntary nature of ADR creates large gaps in markets where it is unavailable.
This serves to make the ADR landscape complex and difficult to understand, with multiple schemes in some sectors and none in others. Many respondents argued that access to a single entry and advice point would make ADR easier to understand and navigate.
Many respondents also noted that ADR providers themselves could do more to respond to the needs of vulnerable consumers directly, through engaging with and seeking opportunities to promote their services through organisations that vulnerable groups use.
In terms of the process of ADR, several responses advocated for ADR schemes to publish vulnerable consumer policies. These might include designing processes that support the identification of vulnerability, training for staff to ensure this is embedded and use methods of recording vulnerability once it has been identified.
Summary
Government will continue to work closely with regulators, consumer advocates, ADR providers, consumer enforcement bodies and businesses to help promote the benefits of ADR and ensure ease of access.
Speeding up access to ADR
In regulated markets, the majority of disputes are resolved within four weeks, but most regulators have typically set an informal upper limit of eight weeks for businesses to resolve complaints before consumers are entitled to take a dispute to ADR.
Government recognises that there are some complaints that are complex and may take businesses longer to resolve and that referring a complex case into the ADR process prematurely before the facts are established could introduce delay later in the process. Government sought views on whether regulators should aim to set a significantly lower threshold for consumers to exercise their right to access ADR and if so whether exceptions could or should be made to allow more time to resolve complex cases.
The consultation asked the following question on this topic:
Q. How can regulators and government balance the need to ensure timely redress for the consumer whilst allowing businesses the time to investigate complex complaints?
Many of the responses agreed that there is a strong case for reducing the currently informal upper time limit for businesses to resolve complaints before taking a dispute to ADR from eight weeks to four weeks. Furthermore, a reduction in the time limit would incentivise businesses to improve their complaints handling processes and deal with simple cases more quickly.
However, some responses highlighted the potential problems that come with reducing the upper time limit to resolve complaints before taking a dispute to ADR, including preventing businesses from properly investigating claims and placing additional burdens on business. Many of these responses felt a ‘one size fit all’ approach would not work as some sectors have a large number of cases with complex products and services that take time to investigate fully.
Several responses highlighted ways in which a balance could be struck such as a mandatory quality check on a case that has passed the four-week mark, a reiteration of a consumer’s right to access ADR after four weeks, a statutory definition or guidance on what would be consider a complex case and splitting the case handling process into clear milestones with time limits attached to each one.
A general theme across all the responses was the importance of good communication and delivering the right outcome for consumers as soon as possible. The general consensus was that a ‘one size fits all’ approach is unrealistic and there should be a general push to improve the quality and speed of complaints handling with as much consistency across all regulated sectors where possible.
Summary
Government will not impose a standardised four-week limit for businesses to resolve complaints informally prior to ADR. Government will continue to engage with regulators individually and through the Consumer Forum to explore the case for reducing the current informal upper time limit of eight weeks for businesses to resolve complaints before taking a dispute to ADR, while also ensuring appropriate safeguards are put in place for complex cases.
Quality and oversight of ADR services
Government signalled its intention to improve the quality and consistency of ADR services in consumer markets, to further increase business and consumer confidence in ADR.
This would include strengthening the accreditation process ADR providers must comply with, for example by embedding in the regulations additional criteria around the neutrality, efficiency, accessibility, and transparency of service provision.
The consultation asked the following questions on this topic:
Q. What changes could be made to the role of the ‘Competent Authority’ to improve overall ADR standards and provide sufficient oversight of ADR bodies?
The majority of respondents to this question highlighted the importance of a Competent Authority in setting, applying, and monitoring standards as well as promoting the benefits of ADR in helping to solve disputes. Many these respondents felt overall ADR service standards should be improved and more oversight put in place to monitor performance.
A number of respondents pointed to the work Ombudsmen do, including the Ombudsman Association, to improve standards for ADR services and complaints handling more broadly. Many highlighted the value of having an Ombudsman or equivalent body in each sector with a consistent and clear set of standards. If this was not possible, then ensuring all bodies are assessed against similar standards would improve ADR as a service. Similarly, the Consumer Codes Approval Scheme was often highlighted as a good example of where a set of standards is universally applied and regularly assess with a high level of scrutiny.
A general theme in the responses to this question was around ensuring standards were consistent, clear, universally applied and enforced with appropriate sanctions to incentives and drive performance.
What further changes could government make to the ADR Regulations to raise consumer and business confidence in ADR providers?
Some respondents felt more robust initial accreditation processes and increased reporting requirements would bring improved accountability practices, particularly in the non-regulated sectors. A small number recommended specific checks such as a ‘fit and proper persons’ test.
Improved transparency and demonstration of independence were highlighted as areas where more could be done to improve business and consumer confidence in ADR. Suggestions included a formal requirement to publicise annual reports, creating uniform Key Performance Indicators (KPIs), and stronger governance processes.
The ADR Regulations currently allow ‘Competent Authorities’ to approve any and as many ADR bodies as they see fit within a given sector. Most of the regulated sectors have one or a small number of ADR providers whereas the non-regulated sectors tend to have many more. A number of respondents highlighted that this proliferation causes confusion for the consumer and drive overall standards down through a ‘race to the bottom’. Others, however, highlighted the benefits of competition to drive innovation and lower prices for businesses, if appropriate safeguards and basic minimum standards were put in place and upheld.
Summary
Government intends to require all businesses that offer dispute resolution services in consumer markets to be approved under the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015.
Government also intends to improve the quality and oversight of ADR services by strengthening the existing accreditation framework to ensure a common set of standards are applied and that providers can be held accountable by the Competent Authority.
Improving the take-up of ADR by businesses in non-regulated markets
In the regulated sectors, it is generally mandatory for traders to participate in ADR schemes. For sectors where participation is voluntary, there is little engagement, particularly amongst SMEs.
Government sought views on whether to make business participation mandatory in the motor vehicles sector (to include the supply of new and used vehicles and servicing and repair) and in the home improvements market (such as roofing, glazing, plumbing work, or the fitting of flooring, kitchens, or bathrooms). Unresolved problems in these markets can have a significant impact given their cost and importance, particularly for vulnerable consumers.
The consultation asked the following questions on this topic:
Q. Do you agree that government should make business participation in ADR mandatory in the motor vehicles and home improvements sectors? If so, is the default position of requiring businesses to use ADR on a ‘per case’ basis rather than pay an ADR provider on a subscription basis the best way to manage the cost on business?
The majority of respondents to this question agreed there is a strong case for making business participation in ADR mandatory in the motor vehicles and home improvements sector. Others went further and felt mandatory ADR should be extended to all or other sectors where levels of consumer detriment are high. A number of respondents highlighted that enforcement of this, particularly in sectors with a high number of sole traders or SMEs such as home improvements, would be challenging.
On managing costs, responses were mixed – a number of the responses felt a subscription model would cover some of the fixed costs associated with providing ADR with more bespoke and proportionate case handling fees. Subscription models, typically offered by organisations such as trade associations and Ombudsmen, often offer more than just ADR such as business education which help businesses and consumers learn from cases and improve their practices.
In contrast, many respondents felt a ‘per case’ model would allow businesses, primarily SMEs, to manage costs and put the largest burden on businesses who resisted solving disputes directly with consumers. Some respondents identified that a ‘per case’ model offers greater flexibility and choice for smaller businesses when ADR is needed to solve a dispute. However, some respondents raised the concern that this freedom may be abused by ADR providers looking for the cheapest option, which may be of a lower standard.
Q. How would a ‘nominal fee’ to access ADR and a lower limit on the value of claims in these sectors affect consumer take-up of ADR and trader attitudes to the mandatory requirement?
Responses to this question were varied – a number of respondents saw the value of a nominal fee in helping deter frivolous or vexatious claims which could be crafted to ensure redress is still cheaper than the courts but also supports the initial administration of a complaint, with fees returned to the consumer if the claim is successful.
However, several respondents felt that a ‘nominal fee’ is a significant barrier to redress, especially in instances where consumers are financially vulnerable or on low incomes. Some respondents highlighted that the concept of a ‘nominal fee’ conflict with the Ombudsman principles of providing free ADR to consumers.
Q. How can government best encourage businesses to comply with these changes?
Responses to this question offered a number of different options to drive compliance ranging from government-backed initiatives through to increased education and awareness.
Increased awareness campaigns for both consumers and businesses were regularly highlighted as an effective way to drive up compliance. Increased engagement through Government-sponsored campaigns and incentives were cited as key to spreading the message on the benefits of using ADR as an alternative to court. This includes creating clearer guidance and signposting for consumers and businesses to ADR providers.
Other respondents felt that government resources and initiatives could be used to encourage compliance. For example, encouraging and directing consumers to pick businesses that are approved by a Consumer Code or Trustmark/Kitemark-like scheme through GOV.UK. A small group of respondents felt that financial penalties and strong enforcement tools would be the primary driver of compliance alongside educational programmes.
Summary
Government believes dispute resolution services play an important role in helping people get the support they need at the right time to get the best outcomes for their issue. The Ministry of Justice’s recent Call for Evidence sought views on how dispute resolution services can provide an effective route to redress without the need for court-based litigation. BEIS will work with the Ministry of Justice to help inform and support their policy development and analysis and ensure that there are more routes to redress for business and consumers to solve disputes outside of court. Can