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On Report, the noble Baroness cited the arrangements in place in the financial services sector. The basis of the approach in that sector stems from paragraph 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 Billthe 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 Governments 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 to take consumers interests into account in its decision-making. With the introduction of redress provisions, which industry will have to fundan important considerationinformation 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 amendmentI listened carefully to the points made by the noble Lord, Lord Razzallwe 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.
Baroness Wilcox: My Lords, I feared this would happen. The mighty energy companies will be left to kick this into touch. They have in place a hopeless complaints systems; it is almost impossible for an ordinary consumer to complain about and to fight a wrong meter reading. Now the little energy group that knew what it was doing will be subsumed into the mighty NCC. The NCC will be a huge organisation and will not have the expertise to deal with complaints. My amendment would have been one more way to ensure that these mighty energy companies, which can well afford to do it, established a complaints procedure through which it would be possible for an ordinary consumer to take complaints through himself.
Instead, we have a Bill that is at the other end of the scale. Redress happens when everything has gone wrong, when one has gone as far as one can go and is right at the end of the line. This would have been such an opportunity for us to ensure that, at last, these energy companies would put in place a good complaints system that people could use. We have missed the opportunity and I am very sorry about that. I beg leave to withdraw the amendment.
(1) The Secretary of State shall by regulations made by statutory instrument designate any body of persons as an approved body to which people engaged in estate agency work, including both the sale and lettings of residential property, must belong.
I shall not repeat the arguments that I made before. Suffice it to say, there is a major problem, which has been recognised by all; the Ministers noble friends Lord Grocott, Lord Davies and Lord Dubs have all tried to address the problem of bad estate agents. The history of the Office of Fair Trading is not a good one; the OFT has shown a great deal of inertia and a lack of appropriate action on this. There is enormous consumer dissatisfaction with estate agents, and it looks from the reports of the Ombudsman for Estate Agents that about one in four is likely to be the subject of a complaint.
What do the Government do about this? Nothing. They bring in a redress scheme, such as the one that has just been heavily condemned by my noble friend Lady Wilcox with regard to another sector of the industry, but they are not attacking the necessity to license and regulate estate agents. It is absurd and hypocritical that the only unregulated sector in the property-buying business is the estate agents. Mortgage lenders, financial advisers, conveyancers, solicitors and surveyors are regulated; estate agents are not. Unless the Government accept this amendment, they will be condemning the consumer to a further period of being open to be cheated by estate agents and losing thousands of pounds. I beg to move.
Lord Truscott: My Lords, this is now the third time that we have discussed this amendment in one form or another. The noble Earl, Lord Caithness, has strong views on the need for the positive licensing of estate agents but, as I have explained before during the passage of this Bill, the Government do not agree.
I do not intend to repeat the arguments again, as they have been made a number of times. The amendment is not a small addition to the Bill. It would be at odds with government policy in this whole area. The Governments intention in this part of the Bill is to
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Expanding the circumstances in which the OFT can consider the fitness of estate agents will enable it to remove rogue agents from the market more easily. In addition, we are confident that compulsory membership of redress schemes will help to drive up standards, as well as compensate victims of misconduct. Improving the negative licensing regime, as outlined, will tackle problems in the industry without driving up costs for consumers. However, if this does not prove to be the case, we will look at the issue again.
The Earl of Caithness: My Lords, what a missed opportunity. What a sad smokescreen the Government are putting up to try to convince people that they are protecting the consumer. They are doing nothing of the sort. The policy became clear in the Ministers last letter to me: it will be left to Europe to sort it out. That is where the action now is. I have no doubt that, just as we are having the energy report attached to the home information packs forced on us by Europe from 1 June this year, we will be standing here discussing this in a few years time saying that this is what Europe is doing to us on estate agents. The Government have sadly missed the opportunity, which is bad for the consumer. I beg leave to withdraw the amendment.
The noble Earl said: My Lords, once again, we have discussed this amendment before. On Report, I had support from Members from all sides of the House: from the noble Lord, Lord Best, on the Cross Benches; from the noble Lord, Lord Dubs, and the noble Lord, Lord Borriewhom I am delighted to see in his placeon the Labour Benches; and from the noble Lord, Lord Lee of Trafford, on the Liberal Benches. On that occasion, I withdrew the amendment because the Minister said that he would take it away to have another look at it. He has done so, but he has not moved at all. However, it is clear that action needs to be taken. The argument that he used is justified in one sense because the Bill is based on the OFTs report. However, that was a limited report, and it is not our
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Lord Lee of Trafford: My Lords, I support the noble Earl, Lord Caithness. The phrase for this afternoon is missed opportunity. It has been used by the noble Baroness, Lady Wilcox, and by the noble Earl, Lord Caithness, and I repeat it. We rehearsed the arguments at length in Committee. Essentially, we believe that those who lease are left naked under the Bill. Those people are, almost by definition, generally less able to afford the proper professional advice that they would normally be entitled to when entering into a leasing transaction, and therefore the redress scheme should apply to the leasing area. In addition, in recent years, we have seen substantial growth in major inner-city flat developments. Many of those flats have been bought by investors who hope to achieve capital appreciation and who, in the course of that appreciation, let the flats. Agents are involved in the letting process, and the redress scheme will not cover them. We support the noble Earl on Amendment No. 6 and will vote with him if he chooses to press it.
Lord Razzall: My Lords, as the noble Baroness, Lady Wilcox, is not rising to her feetpresumably she is the prisoner of a fortunate jailer on this topicI shall supplement the remarks made by my noble friend Lord Lee. I must declare an interest as a director of a holding company that owns estate and letting agencies. What my noble friend said is entirely correct. In Committee and on Report, I failed to understand the Governments answer to the point made by a number of noble Lordsparticularly the noble Earl and the noble Lord, Lord Leethat the practices that the Bill is designed to improve the regulation of in relation to estate agents apply not only equally but even more to letting agents. Letting agents often operate in markets that are rather different from the average house build, house owner, house sale, house purchase markets that estate agents deal with. This is a wonderful opportunity for the Government to bring control of letting agents in line with the controls that they are bringing in for estate agents.
The only significant argument from the Government is that they are keeping this under review and will look at the position of letting agents. The problem with that approach is thatin particular with a Government obsessed with having Home Office Bills in the Queens Speech, almost to the exclusion of everything elseif the opportunity is missed to include control and regulation of letting agencies in this Bill, I defy any Minister to have the confidence to believe that there will be another opportunity in the next decade; when the matter is discussed before the relevant Queens Speech, they will always be told, Oh, you had your opportunity in 2007. You didnt put that in then so dont think you can have the parliamentary time to have it now. For that reason, I urge the Minister, even at this late stagenotwithstanding the fact that he appears to have the support of the Conservative Front Benchto listen to the wise words of the noble Earl and to accept his amendment.
Lord Truscott: My Lords, the noble Earl, Lord Caithness, will recall that on Report I undertook to consider this matter further. I have now reviewed the arguments, but have concluded that this course is not possible under this Bill. I have written to the noble Earl, Lord Caithness, to explain the reasons for that.
As that letter explains, the aim of the Bill is to implement the recommendations in the OFT report on the estate agency market in England and Wales. It was never our intention comprehensively to overhaul the 1979 Act. The OFT report did not consider the case for extending the 1979 Act to include lettings and property management. Consequently, the Government do not have the required evidence base to extend the Act in that way. In addition, there has been no consultation with industry about this proposal, in line with normal government practice.
Furthermore, amending the definition of estate agency work in Section 1 of the 1979 Act would require careful consideration to ensure that the policy objectives were achieved and all the necessary consequential changes were made, and to check for any unintended consequences. Even if all the necessary research and consultation had been done, it would not be possible to undertake this detailed and time-intensive work at this point in the Bills passage.
In response to points made by the noble Lords, Lord Lee of Trafford and Lord Razzall, and the noble Earl, Lord Caithness, I can assure noble Lords that the Government will continue to monitor the private-rented sector and the property sector more generally, including direct sales by property developers, to determine whether there is market failure. At some point there may be a need for new legislation in the property sector. I do not share the view of the noble Lord, Lord Razzall, that we cannot come back to this issue, as I pray and hope that our Government will be in power for a long time and we will have many opportunities to revisit the subject. Nevertheless, it is right that these matters are considered on the basis of proper evidence and consultation.
I hope that the noble Earl, Lord Caithness, will understand that the Government have gone as far as they can to meet his concerns. I reassure him that the Government will continue to keep a close eye on the issues that he and other noble Lords have raised in the debate today.
The Earl of Caithness: My Lords, the Minister said that he hoped that I would appreciate that the Government have gone as far as they can to meet my concerns. I do not think that the Government have gone anywhere to meet my concerns. They have stayed absolutely still. They have put up the usual brick wall. They have the usual word at the top of the brief for the Minister on the amendment: Resist. I remember it well; I lived with it for 10 years.
The Government, not we, instructed the OFT. The fact that they got their instructions wrong and, as a result, got a lousy report that did not cover another important part of the industry is not our concern. It
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I agree with the noble Lord, Lord Razzall, whom I thank for his support, and the noble Lord, Lord Lee, that it is very difficult to get legislation. There is no way that the Government would introduce a Bill solely to regulate the letting agents. That would have to be part of a bigger Bill; the DTI would have to dress it up and include it as Part 8 of a wider Bill. The chances of that are very small, so I think that we ought to test the opinion of the House.
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