Clause 63 - Contract terms which may or must be regarded as unfair

Consumer Rights Bill – in a Public Bill Committee at 12:15 pm on 6th March 2014.

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Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills) 12:15 pm, 6th March 2014

I beg to move amendment 70, in clause 63, page 36, line 25, at end insert—

‘(1A) Where a contract includes a term which is included in either Part 1 or Part 2 of Schedule 2 of this Act, the trader must draw to the attention of the consumer these terms and their rights to challenge these under this legislation prior to purchase.’.

Photo of Sir David Amess Sir David Amess Conservative, Southend West

With this it will be convenient to discuss the following:

Clause stand part.

Amendment 99, page 50, line 11, in schedule 2, after ‘realisation’, insert ‘or management or delivery’.

Amendment 66, page 51, line 10, in schedule 2, at end insert—

‘(14A) A term (including those within the scope of paragraph 22 of this Schedule) which has the object or effect of permitting a trader to increase the price of, or alter unilaterally any characteristics of goods, digital content or services during any minimum contract period or before the end of a contract of a specified duration without a valid reason or where it is reasonably foreseeable that the consumer would not be free to dissolve the contract without being disadvantaged.’.

Amendment 64, page 51, line 37, in schedule 2, at end insert—

‘(21) A term which requires a consumer to pay a charge for or be liable for an element of a good or service that another party has also been charged for in the course of the same transaction.’.

Amendment 65, page 51, line 37, in schedule 2, at end insert—

‘(22) A term which seeks to restrict the ability of a consumer to access information to enable them to ascertain whether the contract they are being offered could undermine their statutory rights.’.

Amendment 67, page 51, line 37, in schedule 2, at end insert—

‘(23) A term which has the object or effect of enabling a trader to increase the price of the contract unilaterally without a valid reason and where the consumer is unable to—

(a) enter into a new regulated mortgage contract or home purchase plan or vary the terms of an existing regulated mortgage contract or home purchase plan with the existing mortgage lender or home purchase provider; or

(b) enter into a new regulated mortgage contract or home purchase plan with a new mortgage lender or home purchase provider.

The terms “regulated mortgage contract” and ‘home purchase plan’ have the same meaning as in the Financial Services and Market Act 2000 (Regulated Activities) Order 2001 as amended.’.

Amendment 68, page 51, line 37, in schedule 2, at end insert—

‘(24) If the contract is for a financial service, a term that directly causes financial detriment to the consumer such that it can be seen to reasonably alter the capacity of the consumer to pay the costs of the contract.’.

Amendment 69, page 51, line 37, in schedule 2, at end insert—

‘(25) Where the service provided is for an additional assistance service as set out in section 51, a term providing for charges unless the original provider of the service has approved this service and range of costs for its provision within which this charge is included.’.

Amendment 100, page 52, line 17, in schedule 2, at end insert—

‘23A Whether a consumer is able to dissolve a contract, in the case of contracts provided by any Government department or local or public authority, shall be decided by whether a reasonable person would consider that dissolving the contract should be possible.’.

Schedule 2 stand part.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

I know a number of Members can hardly contain their excitement. We come to the behemoth of amendments. I will try to talk the Committee through the individual amendments as quickly as possible.

Amendment 70 sets out our concern to make sure that when any unfair contract terms are used in a contract—whether including those in our amendments or not—consumers should be told about them. Unfair contract terms are not always unfair, but it is right that there is some legal redress to challenge them, because they could well be unfair. What do we mean by unfair? Unfair terms would cause detriment to a consumer. Inclusion on the grey list is about saying that, in some circumstances, these types of conditions or restrictions on sales would be unfair to consumers and that it is right that we should challenge them because that is what good consumer protection does.

Photo of Rob Flello Rob Flello Labour, Stoke-on-Trent South

Also, if the contract is subsequently amended and one of the amending terms is on the grey list, that should also be drawn to attention.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

My hon. Friend is right. We know the benefits of clarifying and simplifying unfair contract terms, because we understand that the consequence of having them is about £1.7 million worth of detriment to consumers every single year. We also know that it will save money for businesses in terms of having contracts that are clearer and therefore less open to challenge. Some of the vexatious challenges—the word that the hon. Member for Spelthorne is so keen on again—will, I hope, be minimised by having a clear list of grey terms.

We welcome the principle behind this. Our amendments try to suggest some other terms and behaviour that we think come up frequently enough in contracts that it is right to give the same protection of legal challenge. These are terms of which both consumers and businesses should be aware. Whatever the challenge, we think it is important that consumers are aware. We had the discussion on Tuesday about information and the importance of consumers being empowered so that they can make good choices. If you are offered a contract with one of these terms, it is right that it should be drawn to your attention prior to purchase, given that it is set out in law. That does not mean that you might not continue to go ahead with a contract. You might have other reasons to  do so, but you would be an informed consumer. Amendment 70 is about terms and conditions—the small print; the wording that all of us might look at and sigh. It is always worth while knowing that a contract might contain something disadvantageous.

Photo of Rob Flello Rob Flello Labour, Stoke-on-Trent South

In previous discussions we touched on the wonderful little box at the bottom that says, “Tick to say you have read the terms and conditions.” That becomes even more important if some of the terms and conditions are on the grey list.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

My hon. Friend is making more work for the implementation group, and rightly so. He is absolutely right. “Buyer beware” is one of those phrases that gets bandied about, but beware of what? That is what we are trying to get at in this amendment.

I turn to the list of unfair activities. We recognise that the grey list is admirable, but we think that there are one or two omissions. I was very pleased to hear the Minister say this morning that the issue raised by Amendment 64 is unfair on consumers and needs to be tackled. The issue is what we are calling double charging: the practice we are seeing worrying evidence of in the estate agent industry—and in the pension brokerage industry—whereby two parties are charged for the same transaction for the same service. That seems to present an immediate conflict of interest as to in whose interest the service provider is acting.

I feel strongly about double charging, especially when it comes to estate agents, because I can see first hand the impact it is having on the property market in my local community, Walthamstow, in London. I hope that, given how positive she was about the idea that there is a problem that must be tackled, the Minister will agree to the amendment, because I fear that if it is rejected we could see a huge detriment to the English and Welsh housing market. Once estate agents have spotted a good way of making a fast buck, the idea that others will not follow does not reflect what we have seen in the past.

Let me explain to the hon. Member for Wycombe what is happening, as in his community he might not yet have seen what is happening elsewhere.

Photo of Steven Baker Steven Baker Conservative, Wycombe

I object to the notion that I might not have seen what is happening in my community. As it happens, a solicitor came to see me only last Friday about just this issue.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

It gives me no pleasure, but in a way I am glad to hear that. I had been concerned that, a bit like with payday lending, we were starting to see the problem in London where the pressures on the cost of living are particularly acute, and that we would then see it spread out across the country. It gives me no pleasure that it has already spread to the hon. Gentleman’s constituency, but it proves the point that we are not talking about one or two rogue agencies in London taking advantage of an overheated property market—it is a practice that is going to spread. I am grateful for the hon. Gentleman’s correction.

For the benefit of other Members who might not yet have seen the practice—including Members from Scotland, who, given what I have heard about the Scottish property market’s different structure of protection for consumers,  might not be aware of what we are seeing—estate agents are selling properties through sale by tender. They charge the seller a fee, often smaller than one might expect for an estate agent’s service, but include in the provisions of the contract for the sale by tender a requirement for the buyer to pay a fee, usually of 2% to 2.5% of the price of the property—I do not know whether it is higher in Wycombe.

That is a substantial change in estate agents’ behaviour. The traditional format is that the seller pays commission to the estate agent for having marketed the property. Such a change means that people who are buying properties are having to factor in the fee on top of their offer. Automatically, the seller is going to get less money because factoring in a fee of 2% to 2.5% means adding £10,000, sometimes £15,000, on to the price of a property in the London market. That is a substantial figure. I do not know whether the hon. Member for Wycombe has seen the same house-price inflation that we in London have seen in the past couple of months, but the sums are huge.

The practice clearly cuts out a section of buyers for properties, which further restricts the rights of the seller by limiting whom they can sell to. The contracts also feature a clause restricting the ability of the seller to speak to the buyer and therefore to know what price might be offered in a sealed bid situation. The only person who knows the true price of the property is the estate agent, who takes the fee. The agent in Walthamstow, Douglas Allen—or Arran Estate Agents, as it is now operating—tells me that, miraculously, it achieves 102.5% of the price of the property, so the fee does not affect the price people are getting. Obviously, if the agents set the price, they can set the terms of the contract.

The practice seems deeply unfair. I have spoken to a number of people locally who have been affected by it, and the fact that other estate agents in other parts of the south-east are doing it is a worrying trend. The property ombudsman calls it a “worrying emerging commercial practice”, but is not sure about the legal position of charging fees to buyers, given the inevitable conflicts of interest—in whose interest are agents acting?

Estate agents themselves openly admit that they expect buyers to factor the fee into the price, therefore openly accepting that they are acting in conflict with the interests of the seller. Yet there is nothing that stops them doing that. The amendment would. It would make such a contract term legally challengeable and allow the property ombudsman to address such practices, by saying that charging two different parties on the same transaction could be unfair.

That is why I have tabled the amendment. Given that the Minister has said that she did not believe that the practice was appropriate, I hope that she will support our proposal. It is something that we feel strongly about, especially in view of our other concerns about the regulation of estate agents. The grey list will refer to a number of practices in the housing market, and we are deeply concerned about asking, say, Powys county council trading standards to be responsible for looking at all of that, because such practices are growing like wildfire around the country.

The Minister says that she retains full confidence in the ability of Powys county council to deal with the 500,000 estate agents in the UK. However, such practices  are spreading and the law is not clear about whether they are illegal or merely immoral—some feel that with estate agents, morality does not always come into it—so we should give consumers the protection that the amendment to the grey list would offer.

Amendment 65 follows on from that. The contracts restrict consumers’ ability to find out information about the prices that they might be offered, because they prohibit buyers from speaking to sellers. Buyers and sellers cannot set out what they would pay for a property and thus what would constitute a fair price. The Bill gives consumers the clear protection that they should pay a fair price, and we believe that a contract term that restricts a consumer’s ability to find out whether they are paying a fair price for a property or service is unfair. The list should be amended to allow legal scrutiny of whether such a restriction is fair on consumers.

Amendment 66 speaks to a debate that we had on Tuesday about variations in a contract. I am thinking, in particular, of Bank of Ireland mortgage holders who discovered that their contracts had been varied but they were still locked into them. The amendment is designed simply to give consumers the right to challenge any variation that is forced on them as an unfair contract term.

Photo of Rob Flello Rob Flello Labour, Stoke-on-Trent South 12:30 pm, 6th March 2014

This is of particular interest, because one of the things that came up in today’s Business, Innovation and Skills questions was lenders who tell someone who wants to remortgage or take out a new mortgage, “You cannot do that, because we want to lend only to brand new borrowers.” Someone who faces being trapped and having their conditions changed cannot even go out to the rest of the market and find a better deal, because the market is so manipulated by lenders that nobody else will lend to them. They are wrapped into a horrendous situation, where they have no choice but to accept a term that locks them in because they cannot go anywhere else.

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills)

I completely agree with my hon. Friend, and amendment 67 is about such mortgage prisoners. I know that that is something that he wants to talk about. Amendments 66 and 67 have been suggested by the Financial Conduct Authority’s consumer panel, which recognises that it is no good telling people to look for an alternative contract if they would incur a large financial penalty in doing so or if they would be unable to find an appropriate equivalent, in the case of mortgages or advice. The amendments are designed to ensure that consumers could seek legal address. Such contract terms might not always be deemed unfair, but people should be able to challenge that in court.

Amendment 68 is about financial services. As hon. Members know, I am particularly concerned and vexed about financial services, because of their potential consequences for people. [Interruption.] I say to the hon. Member for Spelthorne that I cannot help it; I see him and I am vexed, so I keep using that word. The amendment particularly concerns contracts that create debt for a consumer and are sold in such a way as to perpetuate debt. I am pleased that the Government have accepted the Opposition’s argument that the payday lending industry has perpetuated debt in the way in which has lent to people. By pushing people into debt, it has made them more likely to need its products again and again.

We believe that it is unfair to sell a product that appears superficially to be about helping people financially, when the contract is designed to push them into debt so that they will buy the company’s products repeatedly. For one payday lending company, 24% of its profits came from 34,000 customers who had to borrow month after month. People could not make ends meet because they had got stuck in a spiral, because the terms of the contract—the high rates of interest—pushed them into debt every time. That sort of practice and behaviour is not confined to payday lending. It can also be seen with debt management companies. I pay tribute to the work of campaigner Lee Sherriff in Carlisle, who has been a diligent advocate when addressing the provisions in debt management contracts. When someone goes to a service to deal with debt, some companies apply charges that by their nature perpetuate the debt. Making that an unfair contract term would not mean that all debt management contracts had those problems, but it would allow legal challenge of some proposals.

I know that my hon. Friend the Member for North Tyneside feels strongly about this subject because she has seen people in this position. I will give the Committee an example of the charges we have seen. Clear View Finance debt management had a clause in the contract that allowed the company to recover 90% of the contract’s cost for its legal fees. No sensible person could have looked at that contract and thought that that would lead to anything other than further debt for someone who was already in debt and had gone to a debt management company. It is a manifestly unfair situation and it would be right to enable organisations to deal with that. People in this position tend to end up at Citizens Advice and we know that that organisation is sympathetic to the need to reform debt management companies, as well as deal with the original causes of debt. I will leave my hon. Friend the Member for North Tyneside to say more about that and the consequences.

Amendment 69 is on copycat websites, a subject we have also discussed previously, in particular those that masquerade as official Government websites. The Government have said that they are dealing with the issue. However, when somebody has been mis-sold a service because they believe they are using an official site, that should in itself be considered an example of unfair behaviour and be open to legal challenge. As we heard from my hon. Friend the Member for East Lothian, she and I have had very different experiences in challenging these websites, their fees and the claim of mis-selling for our constituents. My constituent’s bank agreed to take back the money whereas my hon. Friend’s constituent’s bank did not allow her to refund the money that she had paid to the same website, I am not advertising it; I am trying to warn people about it. The idea of making that an unfair contract term is another way to give better legal protection.

Amendment 99 is about the way in which the schedule sets out that if something is dependent “on the trader’s will alone” that might be an unfair contract term. The Bill refers to public services with the provisions in clause 2 about the particular businesses covered. We are interested to know where this proposal would come into play in the delivery of public services, such as social care, child care vouchers or the provision of tuition fees. We welcome the Government’s views on how they see the concept of the management or delivery entirely in  the service provider’s hands. How would the unfair contract term about delivery apply in those circumstances? There might not be alternative services or the change in services might cause problems for consumers.

Amendment 100—I promise we are near the end—is about the same issue: contracts that last indefinitely. The legislation says that it is unfair if a contract lasts indefinitely for a consumer. We want to understand where that would apply in the public sector. For example, for a social housing tenant or somebody who is procuring a care budget, the legislation says that unfair contract terms would not apply if the contract can be dissolved. We want to understand better what concept of dissolution the Government have when it comes to services provided by the public sector.

For example, if someone has ongoing specialist care needs and might directly purchase them through a personal care budget, they could not be expected to wind them up in order to seek an alternative contract. Would they ever be able to dissolve that contract without substantial detriment to themselves? Given that the Government have set out that the Bill will cover businesses within local government, national Government or the public sector, a better definition is needed of what it means to dissolve a service, because there are so many services for which dissolution would not be practical. The contrast between that situation and choosing an alternative broadband provider or builder is stark. The amendment is tabled to try to understand that.

I hope that I have briefly explained the omissions from the grey list that our amendments reflect. I look forward to the Minister’s comments, because there are substantial points to consider about how unfair contract terms can be interpreted. I end by repeating that we are not suggesting that all the circumstances in question are unfair, but given that the Bill sets up the legal process for judging that, it would be an omission not to include provision for challenge by consumers on a number of matters, because of the evidence of detriment that occurs to them in certain circumstances. If the Minister believes that the issue is covered in alternative areas of the Bill or other legislation, we would be interested to hear about them as well.

Photo of Mary Glindon Mary Glindon Labour, North Tyneside

I want to give an example of a situation such as my hon. Friend referred to, at an organisation that is fairly new in north Tyneside. It is an advice organisation that came to my attention when some of the people using the service had to be referred to the caseworker in my office to finish off their cases and get them their money from the jobcentre. My caseworker has met one of the people who run the organisation, and what concerns me is that it helps people to get money that is owed to them in the form of benefits. It claims to be a not-for-profit organisation, yet obviously it has staff who need to be paid.

I have had a glimpse of one of the organisation’s adverts. It says that it will give people advice and help them with tribunals and getting owed benefits. At the bottom it says in small writing that for every lump sum gained—and we must remember when they say lump sum, they mean arrears of benefit—it will take 15p in the pound. That is benefit money, paid by the taxpayer into the Treasury and then disseminated to Departments.

Although the organisation claims that it is a not-for-profit organisation, it is performing a service that could be performed by citizens advice bureaux, or indeed by MPs in our own offices, as in the case I described of a gentleman who was owed money. He got £3,000, £500 of which had to be paid to the advice service. In the end it was my caseworker who hastened the case and got things sorted. He is now sorry that he went to this advice service, and he advises anybody he meets not to do so and to use free advice services instead.

Having looked into the matter, I am not sure how far what that advice service does is legal, but it seems to me that it could be a grey area that should be on the grey list. I do not want people to lose benefits, which they might need to pay rent, for example, because in the end benefits are meant to cover the basic costs of living. It is not money that is over and above what helps someone to live. Losing 15% of back benefit is a serious situation to put people in, and could throws them into more need. Although the service employs people, I find it troubling. Is there anything that we can do in the Bill to limit the starting up of such service, and to find out whether they operate properly for vulnerable residents in north Tyneside?

Photo of Steven Baker Steven Baker Conservative, Wycombe

When I read this schedule and consider the Opposition’s amendments, I am very much reminded of how degenerate some businessmen are. In business myself, I always found that the best approach was to leave one’s customers delighted, get referrals and go on successfully. I am amazed by the sheer scale of the ways that business people find to fail their customers and leave them dissatisfied. It is quite remarkable.

It puts me in mind of Hebrews, chapter 7, verses 18-19:

“The former regulation is set aside because it was weak and useless (for the law made nothing perfect), and a better hope is introduced, by which we draw near to God.”

I wonder whether the amendments are a better hope by which we might draw near to, in this case, the perfect contract.

The whole Committee should join me in complimenting the hon. Member for Walthamstow on the quality of the work she has so obviously put into these and other amendments. I have not read Habermas, but I am glad she recommended him to me. If I have understood correctly, it seems from her earlier remarks that the philosophy of Habermas is evident in the notion that people must be fully informed in order to make a properly empowered decision when they enter into a contract. I am considering buying a new motorcycle, and I had not really thought about whether I needed to be fully empowered with all this additional information before doing so: I thought I would ride a selection and buy the one that suited me best. However, thanks to her, I have realised the sheer scale of the risks I will be taking in entering into such a contract.

There is a sense of futility in trying to bring so much information to people’s attention in advance. We were warned by your co-Chair, Mr Amess, not to divert too far into philosophy, so I hope the hon. Lady will not be too disappointed if I restrict my remarks to the issue before us, not least because I am perhaps far less well equipped than she is to consider such matters. However,  there is a grave danger that we could overwhelm consumers by trying to nail down in advance everything that might conceivably go wrong.

On looking at any one of the unfair terms listed in schedule 2, it is clear that there must be a long history of related case law, and it is difficult to foresee how a degenerate business person might have failed a customer in such a way. Let us consider paragraph 3 of schedule 2:

“A term which has the object or effect of making an agreement binding on the consumer in a case where the provision of services by the trader is subject to a condition whose realisation depends on the trader’s will alone.”

I confess that I will be taking on trust the Government’s insistence that this is a necessary provision, because I cannot conceive what might have been done to make it necessary. Perhaps the Minister will give a couple of examples that explain such a term, although I hope she will not go through each and every term in the list; otherwise, we might be here for some time—perhaps in time to see realised this better hope by which we draw near to God. However, if she could deal with that example, I would be extremely grateful.

The hon. Member for Walthamstow made a very good point about estate agents and double charging. However, I want to raise with the Minister the opposite point. A solicitor who came to see me observed that when solicitors act for both the mortgage lender and the borrower, it might be in everybody’s interests that they perform that service once for both sides of the contract. That seems an odd situation—one would expect to have two independent solicitors verifying the terms on behalf of each party—but in a sense, the mortgage lender’s and the borrower’s interests are closely aligned. It might well be that double charging by solicitors, in the case of mortgage conveyancing, is a place where efficiencies can be realised. It might actually be quite a good thing. I make no judgment—I just observe that the solicitor’s argument was that it could be a good thing that is in everybody’s interests.

If I have understood correctly, the hon. Member for Walthamstow has tabled amendments that, if accepted, would simply tell the consumer what is going on, which seems a very good thing. I would not want us to restrict traders’ ability to double charge in circumstances where it might be appropriate and in everybody’s interests to make those efficiencies. Have the Government considered that point?

Photo of Stella Creasy Stella Creasy Shadow Minister (Business, Innovation and Skills) 12:45 pm, 6th March 2014

I promise not to discuss with my hon. Friend his communicative acts. The amendments relate to additions to the schedule of unfair contract terms, so it would be open to the scrutiny he is suggesting. As has been noted, there are indeed cases where one might want to split the fee for the same transaction. However, where the estate agent is charging a commission fee to both the buyer and the seller, and putting those two actors together, that is unfair. The amendment would enable that to be challenged. I have constituents who are trying to resist paying that fee, both for the seller and buyer, because they feel it is unfair. There is no clarity for them about how they can challenge the idea that they should both pay for the same transaction. That is different example from a payment made in the course of a sale, when somebody might pay for conveyancing and for the services of a solicitor. Those are two different types of service. I hope that clarifies  the context in which we think there should be an avenue for legal challenge and why we want it in the list, so that a judge to decide what is right.

Photo of Steven Baker Steven Baker Conservative, Wycombe

I am flattered to be described as the hon. Lady’s hon. Friend. I am not sure whether she is crossing to this side of the room or I am crossing to hers. Am I required to become more collectivist, or is she required to become more committed to private property rights? I am not sure, but she did describe herself earlier as a left libertarian. I have often thought of myself as on the free-market left, so perhaps there is more common ground.

The more serious point is that I am glad that the hon. Lady has explained that she wants to make provisions to enable challenge. I think that is a sensible point. However, I feel ill equipped—this is the point I made earlier to the Minister—when I look at any number of the unfair terms in question and see that they require so much expertise to understand what might previously have gone wrong. I feel slightly ill equipped to know whether the scope of the amendments tabled by the hon. Member for Walthamstow is appropriate and whether they are necessary. She clearly feels that they are, but I am interested to know from the Government’s point of view, with all the expertise available to them, whether that is the case.

The hon. Lady made an interesting point about bringing public services into scope. I will make two points. The first is a broad one: there is a certain cruelty in making promises that cannot be kept. We are still living beyond our means to the tune of about £100 billion a year, as you know, Mr Amess. I worry that the state, in drawing people into public services, takes the most vulnerable people in our society and gives them the hope that everybody else will be satisfactorily and effectively compelled to pay for services for them, and then it turns out that it is not possible to sustain that. In considering what is fair in public services, we might look at the sustainability of public finances and the quality of the pledges that we as politicians make to our electorate. Perhaps that point is a little broad.

The other point is on tax credits. As Members of Parliament, we have all had people come to see us at the end of their tether about the need to refund tax credits to HMRC. Large sums of money have had to be refunded. If we were to extend the Bill to public services in the round, we might well find that quite a degree of good would come of it if the state was forced to behave as a trader would behave and contract with the public in a way that could be enforced. However, I am also rather reluctant to suggest that the state should become more like a business, because businesses are founded on social co-operation whereas the state is founded on coercion. Perhaps that is too philosophical.

I am grateful to the hon. Lady for explaining that the amendment is about making provisions to enable certain terms to be challenged. However, the complexity of the terms that have been put before us leaves a humble aerospace and software engineer such as myself, who has always aspired to do good business and not bad, finding it difficult to understand the sheer scale and scope of such degenerate conduct. I hope that the Government have got the list right.

Photo of Rob Flello Rob Flello Labour, Stoke-on-Trent South

I am pleased to follow the hon. Member for Wycombe. I am not sure if he was having a go at his coalition colleagues about pledges that were not kept, but we will leave that hanging.

The hon. Gentleman was conflating double charging and splitting charging. The point is about saying that splitting charges is fine, but double charging—charging twice or more for the same thing—is not fine. I like his description of “degenerate” businesses. Sadly, there are far too many businesses that leave morality at the door in the pursuit of the holy pound, or the unholy pound. The problem is that we have a culture in which, if there is a way for a business to add an extra charge somewhere, or find a way to put a few more quid on to something—I tend to refer to that, in a deliberately derogatory way, as the “Ryanair factor”, perhaps because I have no time for that particular carrier at all—sadly, far too many businesses will jump at the chance. The amendments are incredibly important in order to restrict the ability of businesses to act immorally; sadly, far too many of them do so.

Photo of Steven Baker Steven Baker Conservative, Wycombe

On the point about conflating double charging and splitting, if someone is providing a service at a cost, and they wish to make 5% over that cost, how does that work? Do they charge 5% to both customers, or 2.5% to each? I think the truth is that they will charge the amount that people will pay for each transaction. I do not want to return to the conversation we had earlier about what a just price is, but if people are prepared to pay 3% each on top of their costs, it is probably a just price for both parties. I do not think it is a mistake to conflate the two.

Photo of Rob Flello Rob Flello Labour, Stoke-on-Trent South

The hon. Gentleman will not be surprised to know that I fundamentally disagree with him. The situation we are describing is where the buyer and the seller do not really have a choice and are being forced to pay whatever they are being forced to pay.

Photo of Andy McDonald Andy McDonald Labour, Middlesbrough

Is the situation not mercifully simple? We are talking about a property transaction, where a solicitor is acting for a purchaser and mortgagor. They have unity of purpose, and the building society, as was—the bank now—will approve that lawyer to act for it only if it is confident that they will do that job. The ultimate payer is paying the single fee. In the situation that is being described to us, we have estate agents potentially double charging when they have a direct conflict of interest. They cannot have two clients when they are negotiating the sale of a property. It is wholly and distinctly different from the situation of a conveyancing lawyer acting for a buyer and a building society.

Photo of Rob Flello Rob Flello Labour, Stoke-on-Trent South

My hon. Friend makes almost the exact point that I was going to make. That is a better comparison. If there is a solicitor whose charges are, let us say for the sake of fantasy, £100, and they try to charge both parties £100, that is clearly wrong. That is exactly what the amendments are designed to address.

How can locking someone into a financial product, whether a mortgage or any other product, that they cannot get out of without ridiculous penalties, or indeed at all, be morally right? How can we stand here in the  21st century and allow someone to be bonded to a contract that they can never get out of, or one that will be so costly to get out of that effectively they cannot get out of it?

I have been pondering that matter and comparing it with the situation when I took out my mortgage. It was a fixed-rate mortgage, and I knew that there would be penalties if I came out of it for the first five years. That was clear and up-front. I knew what the penalties were, and I had calculated what the cost to me would be if interest rates moved against me. That is a world of difference from a situation where someone enters a contract or mortgage and is never able to choose to move. As I said in an earlier intervention, if I was then looking to move my mortgage somewhere else and found that lenders were interested only in new mortgagors and were not prepared to take me on as a re-mortgagor, that would put me in an even more difficult position in trying to avoid contracts that are, frankly, immoral.

A related issue that is covered by the amendments is online insurance brokers. A family member of mine recently had some experience with them; I think the online broker was called One Call. They went through the process of picking the best quote, or the quote they thought provided the best value for money, and picked a particular policy. It was a good-value quote; it was not the cheapest, but it seemed to cover everything they wanted.

Some months later, the family member changed cars and went back to the broker to see what the situation was for insuring the new car, only to find that a great raft of charges would apply. There were charges for changing the policy and even for considering a change in the policy. Therefore, they decided to go with another insurer, only to discover that although they could do that, not only was there going to be a large deduction from the refund due on the insurance premiums from One Call, but they would have to wait two months to get their money back. Those hidden charges are tucked away, and only if they had gone trawling through all the small print would they have been able to make a decision about whether that was the right choice.

Those are the unscrupulous, immoral things that businesses are doing. They are finding ways to squeeze a few quid out of customers who want to go elsewhere because they cannot get policies that suit their needs. To hang on to that money is immoral, and the amendments would address such matters. I do not know whether my hon. Friend the Member for Walthamstow wishes to press them, but if she does I will support them. If we hear reassurance from the Minister that either the amendments will be adopted or the Government will bring forward their own amendments, that may change the picture somewhat, but things need to be done. Businesses across the piece are ripping people off, and that has got to stop. That will happen only if the Bill is amended to make it stop.

Ordered, That the debate be now adjourned.—(Mr Gyimah.)

Adjourned till this day at Two o’clock.